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Hornby Financial Update.


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On 02/01/2020 at 12:04, JohnR said:

Steve Flint tweeted out a teaser from the announcement earlier today. 

 

Its Simon Kohler saying we need to think outside the box....

 

On 03/01/2020 at 02:40, Ron Ron Ron said:

Simon Kohler in the teaser video linked to on the previous page.

 

"I want you to clear your minds.

I want you to forget any preconceptions of what model railways is all about.

I want you to think outside the box."

 

So, not what we would normally expect?

A completely different interpretation of what model railways should look like, or be about?

It doesn't come in a box?

...or it does still come in a box, but it's not the usual format of plastic and metal toy that runs around a loop of track?

Maybe it's no longer a scale model that is just supposed to look good....and run around a loop of track?

 

What are those preconceptions, that Simon is referring to, of what model railways are all about?

Turn on, tune in, drop out? (Not sure if that has currency in the UK.)

 

On 03/01/2020 at 03:10, The Stationmaster said:

The $64,000 question is surely 'whose preconceptions?'.  Yours, or mine, or SK's, or trainset market, hi-fi model market, or the 'fact' that trains run on track.

Now that all is revealed do we presume that it meant "steampunk"?

 

Or as Mike succinctly put it, the "brave" choice Hornby made?

 

Edited by Ozexpatriate
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  • 1 month later...
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A new snippet from the financial area.  On 21 February Hornby announced that it would be issuing and placing 41,666,666 shares at 36p each in order to raise and additional £15 million of capital.  The 37,177,974 shares for firm placing were wholly taken up as were the remainder although they are conditional placing  (but presumably will become firm once various things are completed).  Interestingly the share price had dropped a little in the days immediately preceding the placing but has since risen by 2.5p per share.

 

https://otp.investis.com/clients/uk/Hornby/rns/regulatory-story.aspx?cid=1477&newsid=1374286

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1 hour ago, Clearwater said:

Good spot Mike!  Will roughly clear the debt on the balance sheet again...suggests still cash negative.  Suspect the owner will be buying most of the shares.

The majority shareholder (i.e. Phoenix, with 74.66% of the company's shares) has taken around a similar percentage of this issue as a firm placement.

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1 minute ago, robmcg said:

Does this mean that Hornby has less exposure to the third-tier lender who is currently subjecting the company to less than ideal debt-conditions?


Sort of.  It’ll reset their net bank balance to zero meaning they will have created new headroom to their bank limits.  Ie they can run at a cash loss again for another couple of years or so.  Now I assume that the business plan will show them making net cash again... 

 

Anecdotal signs are positive - looks like the Rocket sets are selling well plus some of the other souvenir stuff for 2020.  I’d expect to see the Rocket and ApT in the catalogue more in the future as they sweat that tooling (whichshould help with cash flow).  However, to make £35m, you need to sell an awful lot of £200 RRP items nevermind the smaller ticket items.

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1 hour ago, Mike Storey said:

I wonder how the coronavirus has/will affect their production for the last/next few/several months (notwithstanding the usual hiatus with the CNY)? This could have been a fortuitous hedge against that.

The answer is - as with all other production in China - really something of an unknown and is not being always sensibly presented in the (British) press with even articles in the financial section of  'The Daily Telegraph' somewhat misrepreseenting things.  At the moment all we are facing is effectively an extension by a few weeks of CNY and a far slower build up to normal production (where there is any build up at all).  

 

However what is happening is that some manufacturers relying on components coming from China are now cutting back production because, presumably, their stockpiles to take account of the CNY hiatus are vanishing.  Equally shipping schedules are apparently being reduced - obviously because shipments are much slower in building up after CNY than is normally the case.  But still everybody in the media seems to overlook the simple fact that there would in any case have been a 2 or 3 week gap in production if the virus problems hadn't happened.

 

What we simply don't know is how, and at what rate, any particular factory will be able to return to full production and in the lack of any concrete information putting numbers against that are little more than speculation.  It seems we can probably expect delays and that, as far as consumer goods are concerned, they will be longer than the normal period associated with CNY  - but that too is really speculation rather than concrete information.

 

What we can say however as far as Hornby is concerned is that some development work will no doubt be going ahead at normal pace because it is carried out in the UK.  and equally with this injection of capital they are ina. stronger financial position than they would have been without it.  We'll probably know no more until various Annual Report etc information emerges.

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There is thread dealing with the wider effects of the virus in China so I don't intend to repeat that here but some things need to be said in the light of comments above.  And let us not forget against what is or isn't happening that there is obviously the human cost in China but there is an awful lot more being read into the commercial situation than the reality of things suggests.  All factories seem to have extended CNY closure over the full three weeks (= one week lost), labour is returning slowly and didn't seem to start until another week after that, with considerable movement restrictions (= a second week lost).  We don't know how long it usually takes to build up to full production in various industries but we can surmise it must be a couple of weeks for some and probably less for others but it obviously depends on there being a full labour force available.

 

As it stand now shipping has slipped 2 maybe 3 weeks behind normal CNY resumption and quantities have reduced,.  No ship owner will run with an economically too small cargo, they can't afford to do that in an industry where margins are already cripplingly tight and there is considerable over capacity -  so any effect will very quickly hit cargo shipping quite hard.  Oddly it is reported in one UK 'paper that food is rotting in reefers which cannot berth in Chinese ports - quite how food rots in a reefer (refrigerated ship) I can't quite work out, nor does the fact that they can't berth make much sense.  In other words there is undoubtedly some sloppy reporting.

 

Many commodity prices are down, by very small percentage points, and that includes gold. But some prices were already falling before this outbreak became world news.  Oil prices are down but they are passing the northern hemisphere seasonal peak and still not as low as 2017 levels.  So the economic effect is mixed and stock markets are now a little more jittery.  some cruise operators, particularly Carnival group are suffering a drop in bookings but don't yet seem to be responding with price cuts.

 

So its a mixed picture overall and has 'Legend' has noted above (and I previously said in the relevant thread) the effect on businesses outside China could be a factor many people haven't thought about - if you have less to sell, or cannot sell services, your business might suffer financial problems.   But the very l;east of that is going to be the model railway world when far bigger players on the High Street and on shopping malls rely on imported consumer goods.

 

The relevant thread is here -

 

 

 

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34 minutes ago, Lantavian said:

So, about those Hornby financial results, then.......

 

Quite so - I have moved several posts about Covid-19 into the ongoing topic - https://www.rmweb.co.uk/community/index.php?/topic/151157-the-impact-of-the-health-situation-in-china/

 

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10 hours ago, Lantavian said:

So, about those Hornby financial results, then.......

 

I feeling is that with the new capital and safety against 'bad debt' for want of a better phrase, if Hornby begin to trade profitably in the 1-2 year timeframe then all will be well.

 

It speaks to me of good management of a company which could easily have gone under.

 

To me the biggest unknown is the uptake of products the company chooses to develop, manufacture, market and sell.

 

I am personally very thankful for the beautiful models they do produce.

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4 hours ago, robmcg said:

 

I feeling is that with the new capital and safety against 'bad debt' for want of a better phrase, if Hornby begin to trade profitably in the 1-2 year timeframe then all will be well.

 

It speaks to me of good management of a company which could easily have gone under.

 

To me the biggest unknown is the uptake of products the company chooses to develop, manufacture, market and sell.

 

I am personally very thankful for the beautiful models they do produce.

Overall Phoenix have potentially laid out a lot of money on Hornby this year - not just their share of this additional capital but they had already increased the size of their secured loan facility by 50%, to £9million, back in January.  That loan facility was extended to be available  'to capitalise on the positive momentum in the business and increase investment in technology and products for the coming year'.

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They have recapitalized the company twice in almost as many years and are still increasing their loan facility, that wouldn't normally be very positive unless they were funding a huge expansion. I guess what is positive is that Phoenix see it as worthwhile to keep going rather than pulling the plug.

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4 hours ago, jjb1970 said:

They have recapitalized the company twice in almost as many years and are still increasing their loan facility, that wouldn't normally be very positive unless they were funding a huge expansion. I guess what is positive is that Phoenix see it as worthwhile to keep going rather than pulling the plug.

It's interesting looking a bit further into Phoenix and one point I noticed is that they say they only pay half of what they think a company is worth (when buying a share of it).   If that is applied to Hornby Group it would appear on the face of it that they are currently valuing the company at over 70-80p per share whereas its high was 38.5p earlier this week (and is currently at 34.5p).  Clearly by investing over the years they will have got a decent spread on the average price of the shares they own but that fits very much with their policy of going for long term investments.

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  • 2 months later...

Please excuse me if I have missed any obvious public statement about Hornby's progress to date under the sad current circumstances, but has there been anything said about Hornby's tactics and strategy?

 

Also is there any likelihood of a statement in the next few weeks or months?

 

We all wish Hornby well and I personally am very interested in progress on the many and various 2020 projects, naturally expecting delays and possible re-setting of programs.  

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Indeed I've placed a few orders as it seems new items may take a little longer to arrive and other items in stock temp me to do some modelling in lockdown.

 

Great the sales are up - but given the obvious current situation - I,ve experienced dispatch and delivery being a little slow (regardless of shop). So - personally - I am not placing additional orders just yet until they arrive and I suspect others may do the same. This is not a gripe, just an observation that further sales might end up being a little slower coming. I have seen one shop on facebook saying no telephone calls for now while they catch up with the backlog (keeping in mind that the people packing need to keep social distancing - just in case).

 

So additional sales may tale off sharply as additional orders are delay or become not needed post lockdown and new stock is slower to arrive.

Edited by JSpencer
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8 hours ago, robmcg said:

Please excuse me if I have missed any obvious public statement about Hornby's progress to date under the sad current circumstances, but has there been anything said about Hornby's tactics and strategy?

 

Also is there any likelihood of a statement in the next few weeks or months?

 

We all wish Hornby well and I personally am very interested in progress on the many and various 2020 projects, naturally expecting delays and possible re-setting of programs.  

There's an interview with SK in one of the Virtual SWAGday threads although what it really does is confirm what has already been said - Airfix kit sales went through the roof just before lockdown (and no doubt are still doing well and model railway stuff is also selling well at present).  Sales up to the start of March were on/slightly above target.

 

Basically people of a hobby inclination looking to get further into or back into hobby mode with time on their hands and boredom to relieve.   Typical market situation in an economic downturn as it happens when folk can't afford to go out so turn to hobbies instead.  Now they can't go out to pubs and for meals so are doing the same.

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9 hours ago, The Stationmaster said:

There's an interview with SK in one of the Virtual SWAGday threads although what it really does is confirm what has already been said - Airfix kit sales went through the roof just before lockdown (and no doubt are still doing well and model railway stuff is also selling well at present).  Sales up to the start of March were on/slightly above target.

 

Basically people of a hobby inclination looking to get further into or back into hobby mode with time on their hands and boredom to relieve.   Typical market situation in an economic downturn as it happens when folk can't afford to go out so turn to hobbies instead.  Now they can't go out to pubs and for meals so are doing the same.

 

I have idea what a Virtual SWAGday  is, but point taken. Thanks.

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7 hours ago, mdvle said:

It was on Sunday, and has been at the top of the main RMweb page for over a week now


TBH when I first looked in the original thread, it was just a load of cobblers about pasties, cakes, and invites. Seemed more aimed at those in the know rather than informing others about what to do and what to expect. 
 

As it turned out, the weather here was less conducive to sitting in front of the computer, and better suited to bring outside cycling and barbecuing. FTW. 

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