Corporate: Toymaker Hornby's profits caught in slow lane 27 January 2012

Toymaker Hornby has issued a profits warning citing the “challenging economic environment” for its difficulties.

The company – which is famous for its train sets and Scalextric models – confirmed sales during the pre-Christmas period fell short of last year’s performance.

And it highlighted ‘high-ticket’ items such as Hornby and Scalextric sets as the products most adversely afflicted.

Although group sales remain ahead of the same period last year, the company admitted pre-tax profits are ‘likely to be below current market expectations’.

The announcement sent the company’s share price falling by some 20% and chairman, Neil Johnson, said: “The challenging economic environment impacted UK sales negatively pre- Christmas.

“In anticipation of continuing difficult trading conditions, we have adapted our business to offer a wider range of products at lower price points in categories complementary to our core business.

“It is however proving extraordinarily difficult to predict sales accurately in these turbulent markets.”

Hornby – which also owns the Corgi and Airfix brands – insisted it has still recorded good sales growth in its European subsidiaries.

And the company – whose net debt stood at £8.5m on December 31 – said it had taken steps to broaden its product base.

This year it will launch a range of London 2012 merchandise, Scalextric ‘Star Wars’ sets and Hornby has also signed an agreement with Mind Candy for its Moshi Monsters brand.

By Andy Pearce