Hornby's financial updates to the Stock Market

[Trains4U]

Hornby as a brand will never disappear - it is far too valuable. (and that includes the other brands as well)

 

In the unfortunate event that Hornby's management is unable to rescue the company from it's current position - I wouldn't be surprised if another manufacturer, possibly US or Chinese, buys a majority shareholding and takes it out of public ownership.

[Nile_Griffith]

Lots of good points raised. I will re-iterate the comments that it is important to remember that "Hornby" is more than just the model railway business and as such until a more accurate report of how these figures have been derived is available, it is hard to comment on where the business in part of as a whole may be heading.

 

However it wouldn't be to far a stretch of the imagination to see the business broken up and sold on. Is it possible to set up crowd funding scheme to buy a business I wonder???????

[The Nth Degree]

Hornby PLC has 39,160,000 shares issued, each one of those is worth less than 40p currently. It is possible that the whole PLC could be bought for a little over £15M at todays prices. The brands alone are worth more than that.

[rovex]

Hornby PLC has 39,160,000 shares issued, each one of those is worth less than 40p currently. It is possible that the whole PLC could be bought for a little over £15M at todays prices. The brands alone are worth more than that.

 

So if we start saving now thats only £540 for each RMwebber, I'll get my cheque book

[Oldddudders]

So if we start saving now thats only £540 for each RMwebber, I'll get my cheque book

I believe that for someone called Rovex to buy Hornby would be eminently just. 

[Richard E]

shares down over 54% as I write at 37p each. The trouble is that Management have now lost credibility with the market and it will now be a long and very painful struggle to get back to where they once were. The forecasts from Management were highly inaccurate. The breach of the banking covenant now forecast for next month may see the group seeking further cash from investors who, given the management track record (sorry), may be unwilling to support them.

 

It is the third profit warning in five months from the group.

 

It is going to be a worrying time for all concerned with the company and there may, inevitably, be repercussions throughout the hobby.

 

EDIT: To add to the above there is a £1m loss being taken as a result of a full stock take and a review of the European operations. The depressed post Christmas sales will account for £2.5 to £3m of loss, half of which is identifiable as UK sales losses.

Edited February 10, 2016 by Richard E

[Clearwater]

I don't think Hornby's loan from Barclays is material from Barclays' perspective. Their total risk weighted assets (of which loans form a proportion) is £382bn.

 

 

Whilst the loan docs will threaten dire consequences, such as the nth degree points out demanding immediate repayment, if the company cannot meet that payment then their is little value in demanding it. In fact, itis likely detrimental to recovery of the loan, to make such a demand. Therefore in terms of how a bank thinks about covenant breach: The loan will likely be proviosoned for loss

Management of the loan will transfer to a work out team whose job is to maximise loan recovery

They will work out a plan which may include sale of the business to a new owner, a split and sale of valuable parts etc etc. Their guiding goal will be getting the bank it's money back

The plan may or may not include raising new risk capital for the business

 

The bank is unlikely to wish to take direct control of the business itself. Their business is not making model trains. However, they will use the threat of taking control as a lever on management to develop a realistic business plan. Personally I think the Hornby brand has value however we've repeatedly seen management take on new ventures with limited visibility as to their profitability . As such, their credibility is damaged.

 

David

Edited February 10, 2016 by Clearwater

[rovex]

The problem with breaching your banking covenants is, that it can be the beginning of the end - at least for the current company, and could lead to the banks appointing administrators!!!

[57xx]

So if we start saving now thats only £540 for each RMwebber, I'll get my cheque book

 

Have you seen some of the threads on here? Nothing would ever reach CAD let alone manufacturing due to the constant circular arguments over what products to make and what details should be included.

[cheesysmith]

I do think the management should take blame for the situation they are in, but I'm sure they will find someone else to blame or cite market forces beyond their control. They have failed to take advantage of opertunaties offered. For example, the TTS sound loco's have been a big hit, with shops selling out of them. So Hornby, where are more of such models, maybe some TTS sound chips with speakers for people to install themselves? They themselves are doing themselves no favours, when they release a new model, to widespread good reviews, then 2 or 3 months down the line undercut everybody and sell models off cheaply to raise cash. This strikes me as a company desperate for cash flow. With the spending power of the buying public limited at the moment, why not try going for the cheaper end of the market, which is what railroad was intended for and seams to be morphing into slightly cheaper versions of newer models. Or use the air fix brand to release railroad wagons (the older tooling that is mainly self coloured plastic that clips together' eg the HAA), as self assembly kits? People will still find ways to buy the expensive loco's, maybe in fewer numbers, but the cheaper end of the market can provide the cash flow needed, maybe at smaller profit margins, but would keep the company going until the situation improves.

 

The impression I get is of a management that has sorted out the Chinese factory problems in their supply chain, and are now sat woundering why everything is still going wrong, without any new ideas of what to do and missed opertunaties.

[Joseph_Pestell]

Hornby PLC has 39,160,000 shares issued, each one of those is worth less than 40p currently. It is possible that the whole PLC could be bought for a little over £15M at todays prices. The brands alone are worth more than that.

 

If I win the rollover lottery tonight........

[Joseph_Pestell]

The problem with breaching your banking covenants is, that it can be the beginning of the end - at least for the current company, and could lead to the banks appointing administrators!!!

 

Emphasise the word "can". Lots of companies out there that have breached loan covenants and are still with us. Usually not in the bank's interest to rock the boat at this point.

[tetsudofan]

Well, I've done my bit to help out. Couple of days ago ordered and paid for a British Monarch from the Last Chance Saloon.

 

Keith

[Joseph_Pestell]

Well, I've done my bit to help out. Couple of days ago ordered and paid for a British Monarch from the Last Chance Saloon.

 

Keith

 

That's not a nice way to talk about Prince Charles.

[pointstaken]

Wait and see ?

 

Dennis

[locoholic]

I wonder if this will affect the flow of products from China? Manufacturers are not going to be willing to ship stuff if they're not confident they'll get paid for it.

[Dunsignalling]

Hornby as a brand will never disappear - it is far too valuable. (and that includes the other brands as well)

 

In the unfortunate event that Hornby's management is unable to rescue the company from it's current position - I wouldn't be surprised if another manufacturer, possibly US or Chinese, buys a majority shareholding and takes it out of public ownership.

Should that occur, I think a break-up of the group into smaller, more focussed units will become a distinct possibility.

 

John

[Quarryscapes]

Bachmann could buy the railway segment of the business, absorb all the decent modern scale stuff into their range and keep the Hornby brand for all the tired aged toy train tat they are still churning out. Youngsters still get their GWR 0-4-0 train set, modellers get their decent locos and stock. To my eyes that would be a very good development, but what do I know. 

[scottrains29]

However, subsequent trading since the start of the New Year has been in stark contrast, with a disappointing response to January product promotions combined with poor underlying sales resulting in negative year on year revenue growth and sales for the month being substantially below expectations.

 

Hardly a surprise, I haven't seen any good promotions for modern Diesel/electric stock from Hornby this year. I bought quite a lot from their black Friday sale. I would like to see Hornby listen to customers more, rather than produce what they think we want. Modern diesel/electric stock is in high demand yet Hornby seem to concentrate far more on steam. Just look at the collectors club models, they are ALL steam era. I also wish they would hurry up with their loco detection system, before people start to give up and use other detection systems. Certainly money to be made here.

[APOLLO]

What a way to run a Railroad (!!!).

 

As far as I am concerned, with my recent purchases of Hornby, quality / subject is NOT the problem. All the locos etc I have bought last few years are top notch runners, no other problems at al either. The problem, to me, is marketing coupled with sky high RRP (which no one pays - well, I don't).

 

Recent products bought - (most of which were found via the bargains thread here on RMWeb).

 

2 weeks ago from Amazon - £67 Master of the Glens P2 set, loco, 3 coaches, track with siding, controller & transformer, beautifully boxed and delivery included. What a wonderful loco, just had to have one of these.

 

K1 £65 from Hawkins Bazaar - The yellowy weathered one - again a superb runner, will soon be re-weathered

 

Crosti £85 from Locomotion. Another superb runner,

 

2Bil £52 from Kernow - for a future small project.

 

Railroad Brush 2 (class 31) from a local model shop for £40. Bought two, one to repower a dead Lima - bargain.

 

The RRP on the above are far, far higher. Either Hornby made too many / misjudged the market or whatever - I am very pleased with them all.

 

Of course it can't go on like this. (but it may for a while).

 

Brit15

[Dunsignalling]

Hardly a surprise, I haven't seen any good promotions for modern Diesel/electric stock from Hornby this year. I bought quite a lot from their black Friday sale. I would like to see Hornby listen to customers more, rather than produce what they think we want. Modern diesel/electric stock is in high demand yet Hornby seem to concentrate far more on steam. Just look at the collectors club models, they are ALL steam era. I

If the demand was that good, they wouldn't have been included in the Black Friday Sale.

[Dazzler Fan]

+

 

Some of these posts show Hornby is in panic with direct selling,

discounts and dumping stock on shops to inflate their Balance

Sheet.

Production in China has gone sour on them, paying in Dollars,

and with the Pound falling against the Dollar since August 2008.

They have had 7 years to reverse their policies and failed

to make the necessary change in the source of their production.
Dapol are in a good position, Hornby could have been too.

The house will fall when deposits are required on their China

Orders cannot be financed.

 

Noel

Edited February 10, 2016 by Dazzler Fan

[Paddy]

Hornby PLC has 39,160,000 shares issued, each one of those is worth less than 40p currently. It is possible that the whole PLC could be bought for a little over £15M at todays prices. The brands alone are worth more than that.

 

If that is correct then the value of the company is about 25% of turnover - sounds like a good opportunity for someone...

 

Paddy

[Clearwater]

If that is correct then the value of the company is about 25% of turnover - sounds like a good opportunity for someone...

 

Paddy

Who knows? Remember Turnover is vanity; profit is sanity!

[DJM Dave]

Wow, having just walked in the door being out of Internet connection since early today I've come across this......

 

Yikes.

 

Doesn't anyone at margate / wherever it's based now, know that unleashing a shed load of product before Christmas at xxx prices to the trade, take a while to soak through, then if you combine it with a 5 week month (January) where most people have spent out for Christmas it's going to spell trouble.

 

Couple this with losing sales longer term on new but duplicated items, Adams Radial for instance, cuts profit on your substantial investment.

 

Losing models to third parties isn't going to help ( yup, guilty as charged m'lud), and this looks to be getting even worse for them this year as more 'bread and butter' models are getting picked up by smaller and not so small manufacturers.

 

Selling the Crown Jewels in property is short term it's too, as once it's sold, great you have the money, but bad if you put it in the pot only to see it go completely due to 'inaccuracies' in your cash projections.

 

The way stockings are treated, apparently, isn't good, with bad trade terms, then getting undercut by no stock being available to them but is for direct sales.

As for direct sales, it's all well and good doing this as you make money in the short term, but in the long term ( if indeed the current people in charge are thinking that far ahead and not just looking at their shorter contracts and bonuses), you taint the pool and must either get rid of direct selling, or adopt it fully, and blow stockists out.

 

Now, some of us manufacturers think differently and will support our lifeblood ( you the modeller and the stockists, such as Mike and Gareth) wherever possible. This is the only way, in my opinion, to be. Look after the stockist, give them a fair margin, and give them the stock to sell.

 

Do this and simply put, you will thrive, do it the Kent way, and you'll nose dive as seen today.

 

I'll be watching the share price though, with a view to becoming a part owner of that brand....... Mind you, if we all started a crowd source.........

 

Worth remembering that in the last 2 years some manufacturers have fallen into the pay for goods up front with factories in China rather than the line of credit they have ( this has affected me too, to a degree) and it will hurt bigger players more who sell or expect to sell 4/5000 loco's at a time.