Hornby, I am your father! Toymaker jumps after Star Wars deal

‘The force is strong with this one,’ is what Darth Vader could have said of Hornby (HRN.L) on Friday, as shares in the toymaker jumped after it posted a fall in full-year profits but said a new Star Wars deal would boost sales.

Hornby, best known for its Scaletrix racing sets and Corgi models, reported a 21% fall in pre-tax profits to £4.1 million, down from £5.2 million in 2010.

The £46 million firm blamed the fall in profit on problems with suppliers in China and severe weather in the UK last December. Yet Frank Martin, chief executive, said the business was now in ‘great shape,’ and that the supply issues had been resolved.

In a statement, he announced that the firm had secured worldwide rights to produce Scalextric products based on Star Wars, hailing the US films as the ‘most successful licence franchise of all time.’

Hornby expects its products based on the vehicles and spacecraft of the Star Wars movies to become ‘highly collectable, particularly in the US market.’ Martin added: ‘This will help to build our presence in the USA and lay the ground for future growth.’

Hornby shares surged 16p, or 13%, in morning trading to hit a six-month high at 131p. The toymaker has fallen 7% in the past year, underperforming its index, the FTSE All Share, and its sector.

Following the results, Numis upgraded its rating for the stock to ‘buy’ from ‘add,’ with a target price of 150p. Andrew Wade, analyst at Numis, said the results were broadly in line with the broker’s expectations ‘at the end of a challenging year.’

‘However, with supply issues apparently resolved, strong European order book, Olympic product sales accelerating, and a significant new license win, the outlook is encouraging,’ he added.

In the statement, Martin said sales of Hornby’s London 2012 Olympics range were accelerating, pointing out that one year before the games, the toymaker was ‘seeing a significant increase in sales.’

Wade said that as well as delivering a post-Olympics fillip, the Star Wars license demonstrated ‘the power of Hornby's brands to excite both customers and licensees.’

Hornby – a holding in Jeremy Whitley’s Aberdeen UK Smaller Companies fund – also declared a total dividend of 5p per share.

Neil Johnson, chairman, lauded the Star Wars deal as ‘a major coup,’ adding that the firm’s association with the franchise would drive incremental Scalextric sales for many years to come, particularly in the United States.