Team GB had an excellent summer of sport this year, with athletes excelling in both the Olympic and Paralympic Games in disciplines such as swimming, cycling and athletics. As a result of this performance, and the fact that the Games were held on British soil this year, the country was swept into a frenzy of enthusiasm, with sales on items such as party food, drink and merchandise rising despite the fact that Britain was still officially in recession until a few months after the summer of sport ended.
Unfortunately, not all British companies managed to profit from the public’s enthusiasm for the Games, with some losing out heavily as the anticipated boost for UK businesses failed to materialise.
Toy manufacturer Hornby is one such business which over-estimated the volume of merchandise required, with the result that it has been forced to post substantial losses in its half year sales report. In the six months to the 30th September, Hornby totalled £541, 000 in pre-tax loss, which compares extremely badly to the same period in 2011 where the company achieved a profit of £959, 000.
While Hornby did warn forecasters in September that the chance of the company making an annual profit at all was highly unlikely, the news has come as something of a blow to fans of the iconic British brand.
Although the London 2012 merchandise produced by Hornby did not sell as well as expected, causing many retailers to cancel repeat deliveries during the Games themselves, the event did allow for a 3 per cent growth in revenue at a time where the UK market was very disappointing for the toy manufacturer. Excluding Olympics merchandise, UK sales dropped by 15 per cent in the period concerned.
As a further blow to the company, sales dropped by 30 per cent in the rest of Europe.
Hornby puts this down to “very substantial disruption to supplies caused by a major rationalisation programme being implemented by one of our largest suppliers in China.
“This was particularly frustrating as demand for our products in Europe continues to be encouraging,” a spokesperson continued.
Yet despite the large drop in demand by consumers in the UK, Hornby remains optimistic in its outlook for the remainder of the financial year. One point working in the firm’s favour is that the £16 million worth of debts accrued during the years of the recession do not need to be paid back immediately, as repayments will begin in 2014 and 2015. This will allow the company to rethink its business plan and find new ways of appealing to its traditional British marketplace.
Chief executive Frank Martin says; “The business is undoubtedly facing short term challenges.
“However, we have a coherent strategy to continue to drive the business forward.”
This optimism may well fuel Hornby onto bigger and brighter things, as traditional toys are making a comeback this Christmas – something which will hopefully allow Hornby to boost its sales in the second half of the financial year. The firm also owns the Corgi, Airfix and Scalextric brands, which it hopes will boost revenues in time to post, if not a profit, then at least a respectably low loss in six months’ time.
Do you think that traditional toy makers have any place in a market increasingly dominated by tablet computers and electronic gadgets aimed at children, such as the LeapFrog and Leap Pad? Should Hornby stick to its roots of producing models and building toys for children, or should it diversify into a more technologically driven mentality in order to remain a popular staple of the British toy manufacturing industry?
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