22nd Nov 2018 10:37
LONDON (Alliance News) - Model train firm Hornby PLC on Thursday said it has ended its "aggressive" discounting strategy, as it reported a narrowing of its interim loss.
Shares were 5.5% higher on Thursday morning at a price of 34.30 pence each, some way off their peak in the mid-2000s of over 250p.
For the six months to September, Hornby's pretax loss narrowed to GBP3.2 million from GBP5.7 million year-on-year. On an underlying basis, its pretax loss was GBP3.0 million, from GBP4.6 million a year before.
Revenue came in at GBP13.8 million, lower than GBP17.0 million a year prior.
Hornby has also cut its net debt, with the figure at GBP1.8 million from GBP4.7 million year-on-year, though the figure has risen since March.
The end of discounting has led to a fall in sales, bigger than expected, but margins have subsequently increased to 39% from 36% a year before.
Hornby said: "The removal of these discounts has allowed us to start to regain the trust with our retail partners and customers which in turn will allow us to rebuild our sales over the long term.
"An important part of this process is making sure all our retailers can compete on a level playing field. We are in the process of peeling back the strategy of offering lower pricing to larger retailers as an easy way to inflate short term sales."
Hornby's Chief Executive Lyndon Davies said: "Having slammed on the brakes as hard as we could to prevent further damage to the brands from discounting, the trust in the supply chain is starting to move in the right direction.
"Perhaps most importantly, our loyal employees are beginning to believe in the business again. There are some incredible products in the pipeline that will finally get us back on the front foot and give us the ability to take back the market share we have given away."
Hornby, acknowledging "staff below the board level who have not had their fair share of rewards", has begun a profit share scheme for all employees, including a 5% bonus for getting break-even. From then, 15% of all operating profit will be shared between employees.
Related Shares:
Hornby