Hornby acquire remaining Oxford shares.

[AY Mod]

As reported late last week but I haven't seen any mention here.

 

Hornby plc

("Hornby plc", "the Company" or "the Group")

Acquisition of Remaining 51% of LCD and Related Party Transaction

 

Hornby PLC, the international models and collectibles group, announces that it has acquired the remaining 51 per cent. of the issued share capital of LCD Enterprises Limited ("LCD") which it does not already hold (the "Acquisition") from Lyndon Davies, CEO of the Company, and his wife Catherine Davies, who together own this remaining stake.

 

LCD holds majority interests in the Oxford Diecast Group, which supplies diecast model vehicles and railway products to the collector, gift and hobby markets in the UK, Hong Kong and North America

 

Summary of the Acquisition

On 8 December 2017 the Company completed the acquisition of 49 per cent. of the issued ordinary share capital of LCD, for a consideration of £1.6 million payable in cash pursuant to the LCD SPA.

 

LCD holds majority interests in the Oxford Diecast Group, which supplies diecast model vehicles and railway products to the collector, gift and hobby markets globally

On 20 February 2020, the Company entered into the Amendment and Restatement Agreement, a conditional agreement pursuant to which the LCD SPA was amended and restated such that the end of the Lock-In Period relating to certain rights of the Company and Lyndon Davies and Catherine Davies, was extended to 8 December 2023, being the sixth anniversary of completion of the LCD SPA

 

Hornby plc has agreed to acquire the remaining 51% per cent. of the issued share capital of LCD, for a total cash consideration of £1.3 million, to be funded by the Company from cash in the bank.

 

For the financial year ended 31 December 2020 LCD reported a net profit after tax of approximately £0.2 million. At the time of completion of the Acquisition, LCD is expected to have total assets of c.£5.1 million, and liabilities of c.£2.4 million resulting in (unaudited) net assets of £2.7 million.

 

Pursuant to the Acquisition, the Group will acquire LCD's inventories and other assets, as well as liabilities which include an outstanding loan amount owed to Lyndon Davies totalling £600,000. Upon the Acquisition, the Group will settle this £600,000 loan (the "Loan Repayment").

Strategic Rationale

 

The Company believes that the Oxford Diecast Group's portfolio of brands and industry knowledge are complimentary to its existing brand portfolio and that opportunities exist for the two businesses to work collaboratively together to grow both businesses.

 

The Group is well placed to leverage the value of the LCD inventory and to further develop the brand's intellectual property, which includes a range of scale models that complement the Hornby product ranges.

 

Related Party Transaction

 

The Acquisition and Loan Repayment constitute related party transactions pursuant to Rule 13 of the AIM Rules for Companies (the "AIM Rules"). The Acquisition and the Loan Repayment also constitute substantial transactions pursuant to Rule 12 of the AIM Rules.

 

The independent Directors of the Company, which excludes Lyndon Davies who is considered a related party to LCD, consider, having consulted with the Company's nominated adviser, the terms of the Acquisition and the Loan Repayment to be fair and reasonable insofar as the Company's shareholders are concerned.

 

Hornby Plc

Lyndon Davies, CEO

Kirstie Gould, CFO

[Edge]

Will this just apply to the Oxford die cast car range, or will it include the OxfordRail range as well?

[AY Mod]

5 minutes ago, Edge said:

Will this just apply to the Oxford die cast car range, or will it include the OxfordRail range as well?

 

Both ranges were owned by the same business, LCD Enterprises Limited.

[Markwj]

May be too early to say but as it’s a recognised brand I would expect Hornby to continue with the Oxford diecast branding but maybe take the railway range into the main Hornby range (like they did with Lima). Wonder what will happen with the mk3 tooling?

mark

[Quarryscapes]

Looks like the end for OxfordRail as a brand then, I'd expect all the model railway stuff to now appear as Hornby. 

[Kris]

Given the history that Hornby has for purchasing other brands this does not seem to be a change in strategy. The road models particularly offer something to Hornby that is outside of their current range. 

[PJT]

Just wondering... does this mean that Hornby effectively now has a dedicated manufacturing facility in China (and if so, I wonder what the capacity is)?  I seem to remember at some point in the past Lyndon Davies having his photo taken outside 'Oxford Rail's own factory'.  I also seem to remember there was a discussion at the time as to whether 'Oxford Rail's own factory' was a bit of a play on words, but I can't remember what the outcome was.

 

Pete T.

 

[Legend]

12 minutes ago, PJT said:

Just wondering... does this mean that Hornby effectively now has a dedicated manufacturing facility in China (and if so, I wonder what the capacity is)?  I seem to remember at some point in the past Lyndon Davies having his photo taken outside 'Oxford Rail's own factory'.  I also seem to remember there was a discussion at the time as to whether 'Oxford Rail's own factory' was a bit of a play on words, but I can't remember what the outcome was.

 

Pete T.

 

 

If they have their own factory It certainly didn't stop delays . The mk3s seemed to take an eternity to get here.

 

Bad news, I suspect, as a low cost competitor has been taken over , but hardly surprising . I thought the writing was on the wall for Oxford Rail when Lyndon Davies was appointed Hornby CEO

[spamcan61]

41 minutes ago, Quarryscapes said:

Looks like the end for OxfordRail as a brand then, I'd expect all the model railway stuff to now appear as Hornby. 

Sounds likely, but to quote from the press release:-

 

"The Company believes that the Oxford Diecast Group's portfolio of brands and industry knowledge are complimentary to its existing brand portfolio and that opportunities exist for the two businesses to work collaboratively together to grow both businesses."

 

my bold. So we shall see what pans out. It makes little sense to me to have Oxford Rail continuing as a separate business or brand.

[G-BOAF]

I wonder what width they will decide is correct for the underframe fairings on the Mk3s???

 

It does appear to be a good move by Hornby, especially as Oxford have been supplying vehicles for Hornby for a while (Skale Auto range), and given Bachmann's aquisition of EFE, Hornby lacked an 'in-house' diecast range.

However it does mark less major independent player in the hobby. Interesting times ahead. Good that Hornby has the cash and outlook to grow.

[Free At Last]

Should I now expect a cancellation email from Hattons for my pre-order of the Oxford Rail Cowans Sheldon 15T Crane.

[Phil Parker]

1 hour ago, Quarryscapes said:

Looks like the end for OxfordRail as a brand then, I'd expect all the model railway stuff to now appear as Hornby. 

 

I'm told not. The two brands will run side by side as both are growing their own markets.

[The Stationmaster]

Interesting and clearly more to it than the figures shown in the (limited) accounts for 2020 at Companies House for LCD Enterprises and Oxford Diecast .   The purchase is logical for Hornby as Oxford is basically a profitable company and therefore will now further contribute to Hornby group's bottom line by acquiring the remainder of Oxford/LCD.  

 

As far as factories are concerned be not misled by what companies outside China might say about 'owning' factories there because they don't, the factories belong to China (in some form or other and it is illegal for foreigners to own factories) although some of what is in them might well be owned (e.g tooling) or possibly have been in part financed (e.g plant) by non Chinese businesses.    I expect there could be a difference in respect of Oxford's involvement in ownership of a factory (producing diecast vehicles) in Hong Kong but they'll own nothing on the mainland, including the premises where a photo was taken of an Oxford sign (which was at that time producing model railway items for various other people).

 

The future of Oxford Rail is a fascinating area.  At present it would appear to be a subsidiary operating on very low overheads hence able to offer low prices albeit with a very limited range under its own name plus an unknown level (if any?) of commissioned work for other brands.  If it could continue to be operated on that basis within Hornby Group I can see some logic in keeping it as a separate niche brand because it doesn't really impinge on any of Hornby's market areas and it is effectively an asset in the UK marketplace like the various continental brand names which Hornby owns (but seem to have fairly completely integrated in production terms).

[Chris M]

I hope they don’t drop the N gauge cars! It’s good to see that Hornby has the cash to do this considering where they were a few years ago.

[newbryford]

31 minutes ago, Free At Last said:

Should I now expect a cancellation email from Hattons for my pre-order of the Oxford Rail Cowans Sheldon 15T Crane.

 

So will Oxford have tiered dealers as well?

Does this mean no more Oxford stuff from Rails in the future?

[Nearholmer]

1 hour ago, Legend said:

thought the writing was on the wall for Oxford Rail when Lyndon Davies was appointed Hornby CEO

Looks like he just used Hornby money to buy his old business from himself and wife, thereby paying-back to himself a £600k loan that he’d made to his company.

 

One can only hope it makes as much commercial sense to the Hornby enterprise as it would look to do to him as an individual.

 

Edited August 2, 2021 by Nearholmer

[BR Blue]

38 minutes ago, newbryford said:

 

So will Oxford have tiered dealers as well?

Does this mean no more Oxford stuff from Rails in the future?

Good questions.

[Nova Scotian]

1 hour ago, Phil Parker said:

 

I'm told not. The two brands will run side by side as both are growing their own markets.

I know this would be cynical, but I think Hornby could have the option to move some of their own products over to the Oxford Rail brand.

 

Few different ways you could do this, but the easiest would be to either can "Railroad" entirely, or move some of the better products out of it. You'd segment your brand, railroad being the toughest and lowest fidelity, followed by Oxford Rail taking over some of the better railroad products plus incorporating their own.

 

- Railroad by Hornby

- Oxford Rail by Hornby

- Hornby

- Hornby Dublo

 

What's fun about this is that with the emerging diecast capabilities of factories used by Hornby, we could see a Dean Goods with a diecast boiler under the Dublo range?

 

Wonder if there's a way to combine the best of the two adams radials models, although quite possible they'll just pick one.

[Class 158 productions]

Maybe some colour matched mk3As will appear? 

[PJT]

51 minutes ago, Nova Scotian said:

What's fun about this is that with the emerging diecast capabilities of factories used by Hornby, we could see a Dean Goods with a diecast boiler under the Dublo range?

Possibly.  Why not?  The Oxford Rail N7 already has a die cast boiler and, a few easily fixable detail faux pas to one side, it's a great model in my opinion with the scale equivalent of the renowned haulage ability of a real N7.

 

Pete T.

 

 

 

[melmerby]

1 minute ago, PJT said:

Possibly.  Why not?  The Oxford Rail N7 already has a die cast boiler and, a few easily fixable detail faux pas to one side, it's a great model in my opinion with the scale equivalent of the renowned haulage ability of a real N7.

 

Pete T.

 

Several of Hornby's offerings in the last 10 years or so have had diecast boilers etc. (pre the Hornby Dublo nostalgia pieces.)

 

2 hours ago, The Stationmaster said:

 

As far as factories are concerned be not misled by what companies outside China might say about 'owning' factories there because they don't, the factories belong to China (in some form or other and it is illegal for foreigners to own factories)

 

Are you sure?

There is plenty of info on the web from specialists in business in China suggesting that foreigners can own factories but the land they are on is always on lease from the state.

(Assuming the regs haven't changed recently)

[rembrow]

3 hours ago, Phil Parker said:

 

I'm told not. The two brands will run side by side as both are growing their own markets.

There has already been some transfer of items. A couple of years ago there were additional proposed resin ready to plant buildings in the Oxford range. These then appeared as Hornby Skaledale items, and dropped out of the Oxford range. I believe Oxford no longer market rtp buildings.

[Mike Harvey]

4 hours ago, G-BOAF said:

I wonder what width they will decide is correct for the underframe fairings on the Mk3s???

 

It does appear to be a good move by Hornby, especially as Oxford have been supplying vehicles for Hornby for a while (Skale Auto range), and given Bachmann's aquisition of EFE, Hornby lacked an 'in-house' diecast range.

 

Corgi Toys is a very substantial diecast brand already owned by Hornby.

[G-BOAF]

2 minutes ago, Mike Harvey said:

Corgi Toys is a very substantial diecast brand already owned by Hornby.

This is true. I forgot about Corgi...

 

So why on earth did Hornby purchase Skale-Auto models from Oxford Diecast? Rather than manufacture their own through Corgi?

[The Stationmaster]

54 minutes ago, melmerby said:

Several of Hornby's offerings in the last 10 years or so have had diecast boilers etc. (pre the Hornby Dublo nostalgia pieces.)

 

Are you sure?

There is plenty of info on the web from specialists in business in China suggesting that foreigners can own factories but the land they are on is always on lease from the state.

(Assuming the regs haven't changed recently)

From what I've read and been told all the factories involved in the model business are Chinese owned and Chinese controlled where there is an element of non-Chinese investment.   There is as i understand no problem - but sometimes difficulty - in foreigners investing in some Chinese businesses but control ultimately always lies in Chinese hands.     The factory where the Oxford Rail sign appeared in a photo was definitely not owned by Oxford according to  what the Chinese people who owned that business said to somebody vsting from the UK who asked what had happened to the sign?.