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7 June 2013 | Paul Snell
Hornby has begun to diversify its supply base to mitigate supply chain disruption which the model manufacturer has blamed for a fall in profit.
In annual financial results published today, the company known for its model railway products, reported revenue had fallen by 10.9 per cent compared with the previous year, from £64.4 million to £57.4 million for the financial year ending in March 2013.
Profit margins at the company, which also owns Scalextric and Airfix, were also down on 2012 figures and in part blamed on disruption to the model railway supply chain. The business estimated 10 per cent of the products it had ordered had not been delivered in the year. It attributed the supply shortfall to the decision of the company’s largest Chinese supplier to close its primary factory and switch production to another with less experience of making its products.
As a result, the business is trying to diversify its vendors. The Chinese supplier now accounts for 15 per cent of total production, down from 75 per cent. Hornby is also moving some of its sourcing from China to India – to tackle rising wage costs and labour availability problems. It is also bringing some production to the UK.
“Hornby's procurement team is also helping to develop manufacturing expertise in India and this year brought some of our Humbrol paint production back to the UK,” the results said.
In an accompanying statement chairman Roger Canham said: “We continue to work hard on managing our supply chain. I am encouraged with the progress we have made, and we have continued to broaden the range of suppliers we work with. Our aim is to use this time of transition as a major opportunity for the business to build a robust platform for future growth.
“While the performance of existing and new vendors remains the single largest risk for the business, I am satisfied that as we move forwards through this year that the risk will begin to decline.”