Hornby

Hobby products specialist Hornby (HRN) has delivered an 82% jump in pre-tax profits at the interim stage, largely driven by an improved performance from its suppliers in China.

With the supply chain issue sorted, strong demand for its products helped sales into Europe leap 50% to £6.9m, with Germany proving particularly buoyant. In the six months to 30 September, total revenues increased 11% to £28.4m, as pre-tax profits rallied to £959,000. 

In the UK, sales edged ahead just 4%, largely due to delays in customers ordering in the build-up to Christmas. Hornby is doing well, with higher numbers of orders derived from in-store concessions, but it argues that the retail landscape is shifting towards e-commerce sales via specialist online retailers. This means that buying decisions are being made much later into December.

Hornby model railway products showed growth, with sales of its new, lower-price-point 'Tornado' locomotive encouraging. Scalextric revenues dipped, though this was against a good comparative when Toy Story was in vogue. The range of Star Wars products is expected to boost demand next year.

The Olympics are also proving to be a useful driver for Hornby, particularly as its range of products is being sold to a wider retail base. This range has buoyed interest in its Corgi die-cast toys, but the long-established brand is also expected to benefit from the June 2012 launch of children's ITV series Olly the Little White Van, for which it has the toy manufacturing rights. Increased distribution of its Airfix model kits also helped this division.

Due to consumer caution, broker Numis has scaled back its full-year pre-tax forecast by £400,000 to £7m, producing EPS of 12.9p. A strong pipeline, an Olympics year and its raft of well-known brands make Hornby a business that is worthy of attention. Buy/Hold.