Supplier problems and an IT upgrade at model railway and Scalextric owner Hornby (HRN:AIM) have resulted in its first half statutory pre-tax loss widening from £0.5 million to £4.5 million, sending the shares down 2.1% to 93p.

The £53 million cap’s European operations were severely disrupted by its reorganisation plan and a delay in getting products into European stores from its Chinese supplier.

The implementation of a new IT system also caused sales in the UK to fall sharply over the summer.

Today’s news was expected as Hornby warned of the ongoing supply problems and a ‘weaker general retail environment’ back in September. It then issued a profit warning on 10 November.

HORNBY - Comparison Line Chart (Rebased to first)

Sales are down 7.9% to £22.3 million in the first half, but Hornby says current trading has improved considerably with year-on-year growth of 9% in September.

Numis analyst Andrew Wade has a ‘buy’ rating on the stock, saying the improvement in UK sales and group restructure will lead to long-term growth.

Hornby is expected to make a pre-tax loss of £2 million in the year ending March 2016 before bouncing back to a profit of £2 million the following year.

‘While the disruption the group has experienced this year is disappointing, we believe the changes being made are moving the business onto much firmer foundations, providing a solid platform for growth,’ says Wade.

Numis’ target price is 110p, implying 18% upside.

Issue Date: 08 Dec 2015