- Hornby shares are down 40% from their peak so far this year
- The trading statement says business was good
- But there are – as with so many – logistical problems
- Hornby (HRN) Acquires Remaining Share Of LCD Enterprises
Hornby (LON: HRN) shares have dropped 40% from their high of this year, and the trading statement released today hasn’t made them soar back. The basic news is that business is good but that there are those logistical problems which are affecting near everyone. To some extent, those problems aren’t under the control of the management so there’re no specific actions they can take to alleviate them.
Hornby, of course, gained massively from lockdown. The business was very much a mess immediately before but that we were all stuck at home led to a boom in business. As Hornby itself has said, orders were as if it was Christmas every day. That meant that the company was able to climb up out of its hole.
Varied management bust-ups and shouting matches didn’t entirely help, but the bounce in business meant that they could be overcome.
The latest trading update from Hornby says that the company will report a profit for the year just ended (their financial year is to March 31). This follows that return to profit in the previous year. Sales in the final quarter were ahead of the previous year, meaning that both revenues and margins will be in line with expectations.
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That, of course, is why the Hornby share price hasn’t moved much on this news. If all is as we all thought it was going to be then there is none of that new news which changes share prices.
There is one word of warning in there, though. Logistics are difficult. Near everything is made abroad, and the chaos in the container shipping industry has not made things easier. This hasn’t led to lower sales, but it has led to not being able to increase sales to meet the demand that seems to be there.
What could be an interesting – if unwanted – piece of information more generally is that Hornby is complaining of a shortage of both drivers and fuel in this final quarter of the financial year. Higher costs of fuel, of course, we knew about, but actual shortages perhaps not.
More and more detailed information will be released along with the full annual results. These are expected in June. We would also expect to gain a trading update at that time, and it will be possible to see whether the logistics problems have been sorted by then.
The proper little nugget of information in there is that Hornby expected to be able to sell more if supply could be confirmed. That is, those logistics problems have held back results. Given that we expect the logistics problems to be temporary, this is a positive sign for Hornby shares. On the other hand Hornby also had less cash at hand at this year end than last – that means negative cash flow. Given that there’s a £9 million debt to refinance on the horizon, that can be taken to be not such good news.
A next likely mover of the share price is an announcement that they’ve found a new CEO – that or the full results and associated trading update.