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Hornby shares dive on Olympics slump
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by Gavin Lumsden on Sep 25, 2012 at 16:35
(Update) We already knew the magnificent summer of sport had been bad for retailers but now it turns out the worst affected companies may have been those selling Olympics memorabilia, toys and other tat.
Shares in Hornby (HRN.L) crashed by a third today after the maker of Scalextric and model trains warned that the major retailers it supplied had cancelled repeat orders for its products after a glut of Olympics merchandise proved impossible to shift.
Combined with supply problems at one of its main suppliers in China, Hornby reckons it will make no profits in the current financial year. In 20011/12 it made underlying profits before tax of £4.5 million. Its shares slumped 29p or 33% to 59.5p valuing the company at just £24 million.
The slump in Olympics related sales is a setback for Hornby, which earlier in the year had anticipated strong demand for 2012 themed collectibles of London trains, mascots, taxis and buses. Unfortunately, retailers also bought huge quantities of stock from other suppliers and were forced into flogging the goods cheaply before cancelling further orders from Hornby.
In a double dose of bad news Hornby also warned it would face 'substantial' disruption to supplies from one of its biggest manufacturers in China, which was rationalising its facilities. In a statement it said:
'Against a backdrop of continued depressed consumer spending, a combination of lower than expected sales of London 2012 merchandise and the supply chain disruption referred to above the performance of the group will be constrained signficantly in the current financial year.'
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Hornby has struggled with falling profits and share price in recent years. Its shares peaked at over £3 in 2007 and were once sought after when shrewd investors such as Toscafund's Martin Hughes held them. A sign of the times is the fact that one of its top shareholders today is the Henderson Fledgling Trust , an investment trust that specialises in smaller companies that have fallen on hard times and off most investors' radars screens by dropping out of the FTSE Small Cap index.
Hornby points out that it has a strong balance sheet with net debt reduced to £7.8 million from £14.3 million a year ago. With the dividend previously well covered by earnings it is possible the shares will attract bargain and income hunters. But for now it looks like a corporate car crash.
Hargreaves warns Maltby mine may close
In other company news Hargreaves Services (HASE.L) tumbled 19% or £1.29 to 565p after the the coal supplier and transporter warned geological problems at its Maltby coal mine in south Yorkshire had worsened and that it may have to close the mine. The sell off leaves Hargreaves valued at just over £150 million.
BAE Systems (BAES.L) fell 4.8p or 1.4% to 330p on reports the company could agree to reduce its shareholders’ stake in the enlarged group that emerges from the proposed merger with EADS, the European civil aviation giant.
Standard Chartered (STAN.L) fell 24.5p or 1.7% to £14.56 after the Financial Times reported that Singapore state investor Temasek may sell its 18% stake in the bank that was mauled by a US regulator over alleged Iran sanctions breaking.
FTSE closes higher, US consumer confidence surges
The FTSE 100 closed 25 points or 0.4% higher at 5,863, ignoring comments by Bank of England policymaker Paul Fisher that the UK’s capacity to make goods and services had been harmed by the financial crisis.
In America the S&P 500 added five points or 0.4% to 1,462 after the S&P/Case-Shiller home report showed a modest improvement in US home prices. This was accompanied by a Conference Board survey of consumer confidence showing public sentiment surging in September, with the survey's main index rising from 60.6 in August to 70.3, well ahead of analysts' expectations.
The mood in Europe remained cautious, however, after Greece’s finance minister told Reuters that his country would need extra €13-15 billion (£10.4 billion to £11.9 billion) to finance a two-year extension to its bailout. Yannis Stournaras was confident this could be achieved. The Euronext 100 gained three points or 0.5% to 667p
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