The manufacturer of Scalextric and model railways faces severe financial worries
Former Top Gear host James May is leading calls to save toy manufacturer Hornby after the company announced it was facing a fight to survive.
Shares in Hornby dropped by 62% after the company predicted mounting losses after a “disappointing” start to 2016, the BBC reports.
Recent trading in the UK has been below expectations, the firm said, with “substantially” wider underlying pre-tax losses for the year now anticipated.
Hornby has revealed a £1m write off after review of its stock and balance sheet. Hornby is now expecting a pretax loss of £5.5 to £6m. The Guardian reports that the company now runs the risk of breaching banking covenants as soon as next month.
It currently has debt of approximately £9m with Barclays and if Hornby does breach banking covenants then the bank could call in the debt.
The share price closed at 31p – down by 50p.
Hornby began in 1901, when Frank Hornby first applied for the patent that would become Meccano and the model railways for which the company is best known.
The company also owns many other classics of the toy market – including Scalextric, Airfix and Corgi.
Richard Ames, the chief executive of Hornby has said the firm has a “long and supportive relationship” with the bank and has begun dialogue on the potential breaching.
“Undoubtedly this is a disappointing result, but we have a strong portfolio of brands that we are determined to see flourish,” Mr Ames added.
Following the announcement that the company was facing an uncertain future, May tweeted that “We must save Hornby. Buy a train set today. Every home should have one.”
The demise of Hornby is far from assured, however, with analysts pointing toa slight reversal in the recent trend of digital toys dominating the market.
Robert Haigh at Brand Finance, a monitor of consumer brands, told The Guardian.
“The toy industry has experienced profound change over the last three decades, with digital media and video games being the most transformative force. Interestingly, we had seen sales of ‘traditional’ and construction toys strengthen recently, and Hornby enjoyed fairly good sales in the runup to Christmas.
“Its long-term prospects are by no means bleak, and there is enduring demand for the types of toys it creates. However, in order to create sustainable brand value growth and increase revenues, it will have to focus attention both on marketing investment and a broadening of its range," Mr Haigh said.