The train now not arriving ... Hornby's Chinese suppliers are running late
MODEL train maker HORNBY expects to lose at least £1million in Christmas sales because of chaos at a Chinese supplier.The company shifted all manufacturing to the Far East in the late Nineties to slash costs.
But it was forced yesterday to admit a restructuring at its biggest supplier in the country would delay key Christmas deliveries. Shipments of key model trains — such as a new B17 steam locomotive — will now not arrive until February at the earliest.
Chief exec Frank Martin said: “We now have five alternative suppliers but the level of shipments is being affected.
“It’s going to be some time before more collectable products such as the B17 arrive.”
The issues with supplier SANDA KAN have affected sales in Hornby’s European markets throughout the summer.
Half-year results yesterday showed sales on the Continent plunged by almost a third.
And the group — which also owns SCALEXTRIC and AIRFIX — fell £541,000 into the red in the six months to September. Hornby also shelved its half-year dividend — and was forced to reassure over its finances, revealing BARCLAYS had offered a new bank loan.
But Mr Martin insisted it still did not make sense to bring production back home to Britain.
He said: “Average wages in China have gone up three times in the past seven, eight years — but the minimum wage is still only around £2,000 a year.”
Mr Martin added that Christmas would be tough — and “later” than normal — as customers hold back on presents until the last minute.
He said: “It won’t be the best Christmas we have had in the past five years.”
Yesterday’s warning came just two months after Hornby said full-year profits would be derailed by weaker than expected sales of London 2012 souvenirs.
But Mr Martin insisted shareholders should “not be worried”.
He said: “We have short-term challenges, but we are working through them successfully.”
Matthew Taylor, analyst at NUMIS, said: “Its stable of brands suggests the group should return to profitability in due course.
“But more tangible evidence of stability may be required for the shares to stage a meaningful recovery.”