Hornby's financial updates to the Stock Market

[Stevelewis]

Share price now under 24p!

Now  its  22p  at  3-05PM

[Bulleidboy100]

Now  its  22p  at  3-05PM

It's now below 20p - freefall?

[Stevelewis]

It's now below 20p - freefall?

19.75  then up to 19.94 just now

[No Decorum]

Quote from the Linkedin CV of the Hornby "On Line Marketing Manager":

 

"Being mind-full of the customer journey and implementing strategies to drive loyalty, trust, and growth, in-line with customer needs".

 

Discuss!

 

(But keep it civil please).

Someone from Hornby remarked that the HQ was moving to a “vibrant hub”. I recall thinking that a vibrant hub is what you get when you abandon brass bearings.

[The Stationmaster]

Does anyone know the quantity of model railway stockists in this country, or how that number has changed over the last five years, say? From that number, how many are so-called 'box-shifters' – or those that primary trade from their website?

 

I would take a guess that the number of model railway stockists is declining and the vast majority of sales are internet-based. I'm not necessarily defending Hornby's strategy, but if the majority of sales are done online, why wouldn't they do that themselves to preserve their margins, instead of essentially 'paying' someone else for the privilege?

But they do, I'm fairly convinced, lose more than they gain.  Firstly they lose the opportunity of smoothing their levels of stock holding and selling at a  reasonable rate of return because in order to clear stock and live up to the online sales image they get drawn into Black Friday and fire sale type situations where they under-sell massively  (that might well be something involved in that stock value write down as well?).

 

Secondly by ignoring/under valuing/under serving the retail trade they create an impression that they aren't interested in either that trade or its customers and that they are also happy to rip-off the retailers by offering atrocious trade terms which some can't even afford.  Great fun to sound all trendy and modern talking about direct selling online - quite another thing when that approach undermines not only their retailers but also their customers and their own business by under selling.  Once people get used to under selling they expect it.

 

In addition their treatment of the retail trade undervalues their brand - which they regard as one of their greatest assets.  Nobody is likely to shout the praise of Hornby too loudly when he can make a better return selling Bachmann even if the standard of product is rising and meeting what the market is asking for.  And of course actually getting in what you order also makes a difference for retailers - especially if your order is 'trimmed' but you then see Hornby selling teh stuff directly online.

 

Incidentally as far as the future is concerned there is already a fairly large shareholder sitting in the wings fronted by banks etc, I wonder who it is?

[Adams442T]

It's now climbed (15.20) to the dizzy height of 21 p!   Can this be our own Andy Y making a bid to capture the market?

[7013]

People keep posting the share price, at what point do the backers pull the plug? If the share price keeps falling like this surely they will be lucky to survive the next 24 hours. I know little about how it all works but it is almost like watching a huge ship slowly sinking. I am sure Hornby are doing their best to sort things out and I certainly hope they do but it must be worrying for their employees at the moment. We modellers bemoan this and rant about that but in truth there are people who may be jobless soon with mortgages/ rent to pay and families to feed etc. Their welfare should be first and foremost.

[coachmann]

Hornby is a well known toy brand name and is synonymous with toys. It sounds fine selling direct from ones own hub, indeed it works for many companies, but Hornby needs to be in the public view....in shops...on sale.... in order to generate impulse buying. Images on forums and in the printed press are one thing, but I know from my own experiences what the sight of an actual model in a model shop can do to ones self-discipline....It melts! I'm pretty sure Hornby management did it's own Beeching when they cut off the branches feeding the trunk. As for shares falling, Hornby might take comfort from the fact that they are in everything all over the globe due to yesterdays announcement in the USA and the tumbling oil price.  As for its own in-house products, I doubt that Humbrol can recover after at least five years of unreliability and I'm sure folk have been forced to 'discover' a trustworthy model paint elsewhere.

Edited February 11, 2016 by coachmann

[highpeakman]

A point conveniently forgotten, when people bemoan the demise of the local stockist.

 

We know that Hornby were almost bust and would have closed down in the very late 1990's.

We also know that the moving of production to China and a switch to concentrating on high spec models aimed at the adult modeller and collector market, changed their fortunes for the better.

As such they rode a very successful wave for around seven years from the turn of the century, until the crash of 2007/08.

 

During that time, the major British based box shifters also had a boom period and I'm sure most will agree, became the dominate force in model railway retailing in the UK.

It was also a period when independent model shops were disappearing at an increasing rate of knots.

For good or for bad, bricks and mortar retailers have been in decline for a very long time, long before Hornby effectively demoted them in their own marketing strategy.

 

I agree, it's not the direct internet sales channel that's to blame, but rather how they've mismanaged their relationship with the independent retail trade, in light of the change in the relative importance of those sales channels to Hornby's total sales effort.

 

 

 

.

 

 

I agree that, in this day and age, we have to accept that most purchasing of higher value items is done on the web. It's just a fact of life and that's that. However while I do buy items online I, and I think quite a few other people, still make use of local model shops to buy a lot of "detail" items. It's often easier to look at shop displays than to browse through web stores. Judging by my last visit a week ago it can add up to quite a lot of money! I suspect that margins are greater on that type of item as well.

 

I currently have 3 locos on order (DJM, Bachmann and Hornby) through two local shops as they have been pleasant and helpful to deal with and while not matching the box shifters they have offered (without prompting) prices close enough to make possible to use them. I do go out of my way to use them if I can. Local shops DO have something to offer as long as they also offer good service, support and help their customers in turn. It seems that Hornby has made that quite difficult on occasion in the last year though. Shops and some smaller online traders can compete, not always on price, but in other ways which can be very worthwhile. The suppliers need to back them though with good support (Are you listening H?). Then everyone wins.

 

Unfortunately this attitude is not true of all model shops as there are (admittedly rare) examples of very high prices with indifferent service being offered as an alternative. Then I am puzzled as to how that one keeps going and am not surprised that some go out of business. Yes, I am aware that some very good shops have also gone under because of difficult trading conditions alone but it is not the only reason that shops close.

Edited February 11, 2016 by highpeakman

[micklner]

Hornby is a well known toy brand name and is synonymous with toys. It sounds fine selling direct from ones own hub, indeed it works for many companies, but Hornby needs to be in the public view....in shops...on sale.... in order to generate impulse buying. Images on forums and in the printed press are one thing, but I know from my own experiences what the sight of an actual model in a model shop can do to ones self-discipline....It melts! I'm pretty sure Hornby management did it's own Beeching when they cut off the branches feeding the trunk. As for shares falling, Hornby might take comfort from the fact that they are in everything all over the globe due to yesterdays announcement in the USA and the tumbling oil price.  As for its own in-house products, I doubt that Humbrol can recover after at least five years of unreliability and I'm sure folk have been forced to 'discover' a trustworthy model paint elsewhere.

The big problem is what shops ? They have virtually all gone I live on the outer edge of NE London , there are no model/toy shops within miles of where I live . Internet or nothing these days and i cant see them ever coming back.

[underbank]

The other thing is that Hornby have lurched from one direction to another over recent years.  What on earth were they doing selling branded train sets in Marks & Spencer?  That's just another kick in the teeth to their retailer network.

 

They should have taken a leaf out of Peco's book.  Peco only sell to bricks & mortar shops.  They won't sell to online retailers or ebayers - they will only sell to shops with a shop front/window.  Nor do they sell cheap/discounted online directly.  They've maintained a retailer network who feel valued and who make a good return from being a Peco retailer.  Moreover, they still make their stuff in the UK.  Our local model shop persuaded customers to buy Peco track, points, point motors, etc., rather than Hornby for the very reason that it was made in the UK rather than China and he'd price match them so that people wouldn't buy Hornby due to price alone.  Obviously, shops can sell their Peco stock online but there's no massive competition, so prices stay at sensible levels and both the manufacturer and retailer make a fair profit.

[Willie Whizz]

It's now below 20p - freefall?

 

Sounds as though investors - very sensibly in my view - are declining to try to "catch a falling knife" at this point.

 

Having backed more than one loser on the Stock Market in my time (though only in a very small way, and most certainly no longer a 'hobby' I can afford!), I would suggest (though this does not constitute 'financial advice'!) that anyone seriously contemplating buying should wait a while.

 

If the company as an entity (as opposed to its brands and products) survives, it remains unlikely the share price is going significantly further back in the other direction any time soon, so time is on your side and you can afford to wait and see, without foregoing too much of any potential longer-term gain.  If the company fails, you have probably lost your whole investment in very short order, as 'ordinary shareholders' are the very last in the queue to benefit from a liquidation, and usually find that after the Bank, the Accountant/Liqidator, the VAT Man, HMRC and the business's trade creditors have had their share of the debris, there is almost certainly sweet FA left for you.

[The Nth Degree]

Regarding share price, remember there is a buy price and a sell price. Everyone so far has been quoting the sell price, so you would have to hold stock already. Buying stock is usually priced higher - in Hornby's case, at this price level, it is 2p per share higher.

[Dunsignalling]

He didn't say afford, he said justify. Not the same thing

I don't really understand (or like) the use of the word justify in this context.

 

I can't "justify" replacing my current DSLR, simply because the one I have does almost everything I need and I don't use it enough to really "justify" having bought it in the first place, let alone spending £1500 quid to upgrade to one that will would be equally under-used. 

 

"Justification" doesn't come in to it, it's nothing more than a value judgement or a choice of priorities  - if I were an early-adopting gadget freak, I could "justify" it to myself in a heartbeat.   

 

When considering purchasing a model locomotive, the only criteria is whether I think I will derive sufficient enjoyment from it to "justify" spending £x - you either want one badly enough to pay that much or you don't. "I can't justify buying one" is just a rather coy way of creating an illusion of some moral high ground.

 

The previous poster stated that he had trouble "justifying" spending £80 on one Peckett loco whilst, in the same sentence, indicating that he might well be willing to spend £120 on two.

 

What kind of logic is that?

 

John

 

EDIT: Sorry, I misread Ozexpatriate's post and have basically repeated it in a rather more long-winded manner.

Edited February 11, 2016 by Dunsignalling

[fragmeister]

Hornby might want to take the Last Chance To Buy bit on their home page and bury it for a while.  It might not convey the right message.

Edited February 11, 2016 by fragmeister

[lapford34102]

Another take on the issues from an Airfix retailer here- down page

http://www.britmodeller.com/forums/index.php?/topic/234997311-Hornby-grim-day-for-the-share-price/page-2

The problems, seemingly quite a number across the operation, have been gone over at length. The question is where do they go from here and here I'd echo those who have expressed concern for staff,

 

Hopefully someone with a better understanding  of  the model business than the present management seem to have can take the helm.

 

Stu

 

[Richard E]

Share price does not determine the viability of a business, it reflects market opinion as to the value relative to other businesses.

 

We need to bear in mind that this is a company traded on AIM, a market where one is more likely to see niche stocks, speculative flotations and companies that are in their dying throes having relegated from the more major indices (although that is relatively rare).

 

Numbers of trades so far this month have taken trading to it's highest level since June 2015, although the value of trades is miniscule now when compared to last June. Trades yesterday amounted to £87m - yes, several times the companies worth (which was £17.45m as at last night) so there is some heavy arbitrage trading taking place or some very dubious booking of trades. The last half hours trades are all at the sort of level that one might expect from a private individual trading, not the big Institutions for their own books.

 

It is interesting to note that one of the City Investment firms is increasing it's exposure to the company in respect of holdings in investment portfolio's for discretionary clients (i.e. taking a punt on recovery) whilst another firm is reducing it's holding. And I have now identified three institutions that, between them, hold nearly 65% of the shares in issue.

[Dunsignalling]

One thing I am not clear on - How on earth do you come to the position of having to write off £1m worth of stock?

 

This is a genuine question.  Many years ago, I worked for a Garden Centre and we had to write off a certain amount of plant stock because, quite simply, it died!  Models don't die!

No, but there is a difference between writing off and writing down.

 

The value Hornby had their stock on the books for and what they can actually get for it, aren't necessarily the same thing.  

 

The latter will always emerge eventually and that seems to be what has occurred here.

 

John

[Ian J.]

Shares closed today @ £0.23

[Talltim]

I don't really understand (or like) the use of the word justify in this context.

 

I can't "justify" replacing my current DSLR, simply because the one I have does almost everything I need and I don't use it enough to really "justify" having bought it in the first place, let alone spending £1500 quid to upgrade to one that will would be equally under-used. 

 

"Justification" doesn't come in to it, it's nothing more than a value judgement or a choice of priorities  - if I were an early-adopting gadget freak, I could "justify" it to myself in a heartbeat.   

 

When considering purchasing a model locomotive, the only criteria is whether I think I will derive sufficient enjoyment from it to "justify" spending £x - you either want one badly enough to pay that much or you don't. "I can't justify buying one" is just a rather coy way of creating an illusion of some moral high ground.

 

The previous poster stated that he had trouble "justifying" spending £80 on one Peckett loco whilst, in the same sentence, indicating that he might well be willing to spend £120 on two.

 

What kind of logic is that?

 

John

 

EDIT: Sorry, I misread Ozexpatriate's post and have basically repeated it in a rather more long-winded manner.

It's justifying it to yourself, a "value judgement or a choice of priorities"

[Hroth]

Hornby might want to take the Last Chance To Buy bit on their home page and bury it for a while.  It might not convey the right message.

OTOH, we might get another email announcing an addition to "Last Chance To Buy":

 

R0001 Hornby Hobbies: ONLY £12.25 Million!  (Was £17.45 Million)   Last one in stock!

[Train wasp]

I wonder if people are moving away from oo gauge and moving in to o gauge and n gauge. I've started buying o gauge locos due to the increase in ready to run loco being available in o gauge.

[andyman7]

OTOH, we might get another email announcing an addition to "Last Chance To Buy":

 

R0001 Hornby Hobbies: ONLY £12.25 Million!  (Was £17.45 Million)   Last one in stock!

 

OTOH, we might get another email announcing an addition to "Last Chance To Buy":

 

R0001 Hornby Hobbies: ONLY £12.25 Million!  (Was £17.45 Million)   Last one in stock!

Gallows humour at it's best

[Clearwater]

Share price does not determine the viability of a business, it reflects market opinion as to the value relative to other businesses.

 

We need to bear in mind that this is a company traded on AIM, a market where one is more likely to see niche stocks, speculative flotations and companies that are in their dying throes having relegated from the more major indices (although that is relatively rare).

 

Numbers of trades so far this month have taken trading to it's highest level since June 2015, although the value of trades is miniscule now when compared to last June. Trades yesterday amounted to £87m - yes, several times the companies worth (which was £17.45m as at last night) so there is some heavy arbitrage trading taking place or some very dubious booking of trades. The last half hours trades are all at the sort of level that one might expect from a private individual trading, not the big Institutions for their own books.

 

It is interesting to note that one of the City Investment firms is increasing it's exposure to the company in respect of holdings in investment portfolio's for discretionary clients (i.e. taking a punt on recovery) whilst another firm is reducing it's holding. And I have now identified three institutions that, between them, hold nearly 65% of the shares in issue.

I agree. It's a pretty illiquid stock where the info provided to the market is poor. Hence the large movements when there is news flow.

There looks to be two competing dynamics going on as investors scrabble to think what Hornby is actually worth. Firstly, I think investors are expecting, at the very least, a further rights issue. In a rights issue, investors pay the company for more shares but given the value of the company remains broadly the same, the price should theoretically fall. Some investors are trying to reflect that in their price. Equally some are thinking what is the inherent value of the brand and building their own models (financial in excel) as to what they think a small niche manufacturing business with a loyal customer base is worth. They are also trying to factor in the additional loss lead over and above the December statement. Those investors think the company, post dilution is worth way more than the £30m or so implied by the current share price and debt outstanding (note rather like a house the enterprise value of the company is the sum of the equity and the debt position)

 

David

[The Stationmaster]

The other thing is that Hornby have lurched from one direction to another over recent years.  What on earth were they doing selling branded train sets in Marks & Spencer?  That's just another kick in the teeth to their retailer network.

 

They should have taken a leaf out of Peco's book.  Peco only sell to bricks & mortar shops.  They won't sell to online retailers or ebayers - they will only sell to shops with a shop front/window.  Nor do they sell cheap/discounted online directly.  They've maintained a retailer network who feel valued and who make a good return from being a Peco retailer.  Moreover, they still make their stuff in the UK.  Our local model shop persuaded customers to buy Peco track, points, point motors, etc., rather than Hornby for the very reason that it was made in the UK rather than China and he'd price match them so that people wouldn't buy Hornby due to price alone.  Obviously, shops can sell their Peco stock online but there's no massive competition, so prices stay at sensible levels and both the manufacturer and retailer make a fair profit.

Apart from their own online business Hornby's situation has long been that they will only sell to bricks & mortar shops although that has not necessarily always been strictly enforced (until other retailers have complained).  However their toy trade wholesaler will sell to anyone with the right financial references and I don't think that has changed in recent times.