Hornby's financial updates to the Stock Market

[Clearwater]

Thanks Richard - more of my experience has been with private ly held companies where share charges are common. A quick check on companies house shows some property charges and fixed and floating charges over the business.

 

David

[rovex]

In addition it is likely that the Directors have had to give the bank their personal guarantees for the borrowing backed by second mortgages on the directors homes and a charge over any shares held personally by the Directors.

 

 Although very common in private companies, I would have thought this was unlikely in a quoted plc!

[14Steve14]

Hopefully all those from here that have recently bought shares in Hornby are now seeing a return for trying to help save the company. Share prices are on the up.

[Richard E]

On reflection I agree that some form of Director guarantee is unlikely. I haven't dealt with PLC banking for about 30 years now, not since moving into stockbroking in August 1987 just in time for Black Monday!

 

I see the mortgage deed executed by the company covers 9 properties in Kent.

 

The directors view of forward exchange rates appears optimistic at $1.51 for 2015/6, whilst that was close for most of 2015 this year has seen it fall to an average of around $1.44.

 

The Accounts indicate a sale of the Margate site in mid 2016, we can only hope that is still on track (sic).

 

It is revealing looking at the directors shareholdings, Ames only had his performance bonus shares and had not put any of his own money into the company unlike others.

 

The ERP system is costed at £646k in the accounts. There was an additional £811k in costs in setting up the new warehouse operation. The profit in the company comes from just three of their business units, one in Spain and two in the UK.

 

The accounts imply that the tools and moulds belong to Hornby as they paid out £3.5m for them in 2014/15. Of course, if the bank exercise their rights under the debenture these become the property of the bank and any successor would need to purchase them from said bank.

[Forester]

 

There are many mistakes in this history. The biggest is investing in new expensive IT tools at the wrong time + recruiting new staff at a time when a more austere approach was required. Where was the CFO during all this? How comes he is still there?

 

I must say I disagree with you on IT.

 

The essentials necessary to ensure Hornby's survival after Sanda Kan were to build a new Chinese production line and to put in 21st century IT.

These are the very foundations necessary to compete in the current tough world economic climate that will be with us for at least another decade.

 

This has been done - not necessarily brilliantly, and certainly very expensively, but completed all the same. Had Hornby not done this all might have looked well from the outside but the company would simply have followed all the other great British companies to extinction through lack of investment.

 

What we now have is a company with solid foundations to build on, but a huge pile of debt. Agreed this was absolutely not the moment to mess with the marketing side of things and they paid a heavy price for that mis-timing.

 

But the difficult and expensive stuff has been done. What is needed now is a bit of PR, and U-turn on undercutting retailers prices, more reliable delivery, and a stream of new products, both detailed, Railroad and Starter to return to profit and reduce the debt.

 

I believe there's a good chance the bankers will look beyond the current apparent chaos and see the solid foundations now in place. I hope so anyway.

[Willie Whizz]

Hopefully all those from here that have recently bought shares in Hornby are now seeing a return for trying to help save the company. Share prices are on the up.

 

Buying shares in Hornby does not directly "help save the company".  Once the shares have been issued and paid for in the first place, a company gets no further direct benefit from any subsequent sales and purchases of those same shares, which is merely a transaction between an investor who thinks they will do well in future and one who has lost faith they will (or has another good reason to sell).  Indeed they become something of a "cost" to the company, in that dividends may have to be paid out of the profits being earned.

 

Of course, the value of the share price is often a general indicator of the perceived trading health and future prospects of a business - and indeed may be a benchmark by which the senior executives' remuneration packages are set!

[Mike Storey]

 

It is revealing looking at the directors shareholdings, Ames only had his performance bonus shares and had not put any of his own money into the company unlike others.

 

 

Not entirely the case - there is a "relation" to him - J Ames - noted in the 14/15 accounts, who held c.36,000 shares.

[Ron Ron Ron]

Hopefully all those from here that have recently bought shares in Hornby are now seeing a return for trying to help save the company. Share prices are on the up.

 

If they bought at the bottom, the only return they'll get is if they cash in now and sell, while the share price has stabilised for the moment.

It's also likely there'll be no dividend payments again this year, so no return to be seen there.

 

As Willie Whizz says, buying the shares will have not directly helped Hornby one jot.

Instead, it has put a nice profit into the hands of those speculators who took a punt last week and bought at the bottom and who will now be selling at 34p plus.

 

 

On another note, by my reckoning there's only 6 weeks left to the end of Hornby"s FY.

Unless there's some news in the mean time, we'll have to wait until mid-June for the results (4 months time from now).

 

 

.

[runs as required]

I've been up to the ears in grandchildren over half term - so I've only come upon this thread today (though I saw the story in the papers).

 

My reference to our grandchildren - ages 15 down to 8, mostly boys - is relevant because not one has shown any noticably sustained attraction to Hornby products (including Scalextrics - I wonder what proportion of Hornby's business is trains?). What depressed me is that I spent a lot of time trying unsuccessfully to lure the kids away from screens.

 

I cannot honestly see where the likes of Hornby can respond to a 'must have' wish list for an under 30-year-old cohort.

 

dh

[JSpencer]

I must say I disagree with you on IT.

 

The essentials necessary to ensure Hornby's survival after Sanda Kan were to build a new Chinese production line and to put in 21st century IT.

These are the very foundations necessary to compete in the current tough world economic climate that will be with us for at least another decade.

 

This has been done - not necessarily brilliantly, and certainly very expensively, but completed all the same. Had Hornby not done this all might have looked well from the outside but the company would simply have followed all the other great British companies to extinction through lack of investment.

 

What we now have is a company with solid foundations to build on, but a huge pile of debt. Agreed this was absolutely not the moment to mess with the marketing side of things and they paid a heavy price for that mis-timing.

 

But the difficult and expensive stuff has been done. What is needed now is a bit of PR, and U-turn on undercutting retailers prices, more reliable delivery, and a stream of new products, both detailed, Railroad and Starter to return to profit and reduce the debt.

 

I believe there's a good chance the bankers will look beyond the current apparent chaos and see the solid foundations now in place. I hope so anyway.

We will have to disagree on that one. Buying IT tools is a bit like buying a car. It's best to do so when you have the resources that allows you to do it. They could have delayed that 2 years and had something more recent (and spent 2 years thinking about what tools would adequately fulfil certain roles).

Technology is not the solution to all problems, a lot of it is getting re-organised to suit the current environment. Many companies die a slow death because they fail to adapt. Hornby seems to have over invested IMHO. Too much too soon with no time to recover the costs.

[Richard E]

Not entirely the case - there is a "relation" to him - J Ames - noted in the 14/15 accounts, who held c.36,000 shares.

There is no proof that this was Richard Ames money although I would agree that it is a family member holding the stock. If it was his money then there could be an issue for the FCA to investigate since it would be an attempt to profit 'on the sly' and that is illegal under the City Code to which I have already referred. The person holding the shares is still bound by the City code as applied to 'Relevant Persons' (those who have access to price sensitive information) even if they are not on the board, or, possibly, employed by the company since they are deemed to have the same access to information as the Board members or can be influenced by them.

 

When I was subject to the code any shares in the company for which I worked and which were held by an immediate family member were subject to exactly the same dealing rules so there is no point, apart from Income tax/Capital Gains tax reasons, to have the shares held by a third party. And with no dividends being paid and, in this case probably no profit on the shareholding, even those benefits disappears.

 

EDIT - I'd also expect the CEO to hold rather more than 36,000 shares as well, after all that is small change for him. Please note that I am excluding the SPS shares from this as they are part of his remuneration package, not a commitment by him with his own money.

Edited February 18, 2016 by Richard E

[andyman7]

I've been up to the ears in grandchildren over half term - so I've only come upon this thread today (though I saw the story in the papers).

 

My reference to our grandchildren - ages 15 down to 8, mostly boys - is relevant because not one has shown any noticably sustained attraction to Hornby products (including Scalextrics - I wonder what proportion of Hornby's business is trains?). What depressed me is that I spent a lot of time trying unsuccessfully to lure the kids away from screens.

 

I cannot honestly see where the likes of Hornby can respond to a 'must have' wish list for an under 30-year-old cohort.

 

dh

This has come up already in this thread, but I don't think anyone expects Hornby Group's product range to necessarily appeal to all children - but it is important that for those it does appeal to, there is a suitably targeted range of products that can sustain not just an initial purchase, but also follow up sales. My grown up son never got the bug and has other interests, my younger son is absolutely enthralled with planes, trains and buses and has the making of a lifelong enthusiast.

[Nearholmer]

" Buying IT tools is a bit like buying a car."

 

That makes high-spec IT tools sound so benign - pay money; get in, drive; nice new SatNav that wasn't built-in to the previous model, but which can be mastered in about ten minutes. Simples.

 

But,they aren't like that - pay money; teach all your staff to drive all over again, from scratch, because this is like moving from a horse and cart to an Apache helicopter; discover (ideally before buying, but often after), that the real way to get benefit is to restructure vast swathes of your business processes to take advantage of what it can do; do that, but find it is a lot harder than you expected; get confused, have to pay expert chauffeur help you drive it for the first few months; find nice new SatNav thingy, but discover that it takes about a century to configure and learn to use it; decide you need a minor tweak to make it fit your needs, rather than vice-versa, and realise that to get that you need to buy an "add on" that allows the car to also act as a combined harvester, which you didn't really want, and makes it far harder to park; decide to fit a roof rack you bought in halfords, because the original car maker one costs £12M to do the same job, but discover that to make it fit you will have to dismantle the entire car, and rebuilt it from scratch using BSW threaded bolts, rather than metric ones .........

 

Business implodes while your eye is off the ball; take-up drawing Dilbert cartoons instead.

 

K

Edited February 18, 2016 by Nearholmer

[JSpencer]

" Buying IT tools is a bit like buying a car."

That makes high-spec IT tools sound so benign - pay money; get in, drive; nice new SatNav that wasn't built-in to the previous model, but which can be mastered in about ten minutes. Simples.

But,they aren't like that - pay money; teach all your staff to drive all over again, from scratch, because this is like moving from a horse and cart to an Apache helicopter; discover (ideally before buying, but often after), that the real way to get benefit is to restructure vast swathes of your business processes to take advantage of what it can do; do that, but find it is a lot harder than you expected; get confused, have to pay expert chauffeur help you drive it for the first few months; find nice new SatNav thingy, but discover that it takes about a century to configure and learn to use it; decide you need a minor tweak to make it fit your needs, rather than vice-versa, and realise that to get that you need to buy an "add on" that allows the car to also act as a combined harvester, which you didn't really want, and makes it far harder to park; decide to fit a roof rack you bought in halfords, because the original car maker one costs £12M to do the same job, but discover that to make it fit you will have to dismantle the entire car, and rebuilt it from scratch using BSW threaded bolts, rather than metric ones .........

Business implodes while your eye is off the ball; take-up drawing Dilbert cartoons instead.

K

Agree, my comment was in terms of expense, however in terms of user design, I am glad IT people don,t design cars!

[jjb1970]

Rolling out an ERP is a good example of the J curve effect. I worked for E.ON when they introduced SAP and transferred all their various financial, HR, work planning etc processes to SAP. To call it a difficult transition would be an understatement however after the initial pain and once people adjusted to the new world it was a staggeringly powerful tool and once you've seen how a package like SAP can work you'd not want to go back to what went before. Another employer rolled out a ERP and almost went bankrupt because of the delays in invoicing and collapse of their cash flow despite being 250 years old and with a global reputation for technical excellence illustrating the dangers.

[autocoach]

Agree, my comment was in terms of expense, however in terms of user design, I am glad IT people don,t design cars!

Apple is poised to announce their entry into the automobile business. The charging cable connection will of course not match any standard used by other manufacturers....

 

This has nothing to do with Hornby.  However as a former IT Consultant working for a large software company I can remember constantly being urged to find new ways to increase the product installation/implementation billable hours. When the client got wise I was dinged for lack of salesmanship.

[melmerby]

Apple is poised to announce their entry into the automobile business. The charging cable connection will of course not match any standard used by other manufacturers....

 

 

Knowing Apple they will probably propose that their vehicles drive on the left in the USA!

 

Keith

Edited February 18, 2016 by melmerby

[ruggedpeak]

I must say I disagree with you on IT.

 

The essentials necessary to ensure Hornby's survival after Sanda Kan were to build a new Chinese production line and to put in 21st century IT.

These are the very foundations necessary to compete in the current tough world economic climate that will be with us for at least another decade.

21st century IT? They might have got the same ROI investing in 21st century astrologers.

 

Nothing Hornby do needs anything more than MS Office and a pad of paper and some pens. IT sales is just snake oil. There are plenty of academic studies showing how investing in the latest IT destroys value and can bankrupt companies.

Edited February 18, 2016 by ruggedpeak

[Mike Storey]

This has come up already in this thread, but I don't think anyone expects Hornby Group's product range to necessarily appeal to all children - but it is important that for those it does appeal to, there is a suitably targeted range of products that can sustain not just an initial purchase, but also follow up sales. My grown up son never got the bug and has other interests, my younger son is absolutely enthralled with planes, trains and buses and has the making of a lifelong enthusiast.

 

Most excellent. But beware. I was the younger son who kept his interest in model trains (even if only passively for a decade or so), and even though my older brother drove trains for all his working life. However, now he is retired, he is turning into a far better railway modeller than me. Although of course, I will never admit that, so that's just between you and me, right?

[Nearholmer]

(Jjb1970 - you aren't obliquely referring to a major technical consultancy based in the Surrey-ish area are you?)

 

Before I get caught too far OT,.........

 

The cars and IT comparison all makes sense if you have a look at technology-lifecycle literature ((basic intro https://en.m.wikipedia.org/wiki/Technology_life_cycle ), because it is pretty clear that software-and-telecommunication-based systems, viewed as a technology-family, have nothing like reached boring maturity.

 

I keep trying to think where the comparable point in car development would be ........ Maybe in the USA, fifteen years post Model T, so about 1930. The arrival of cars was busily "disrupting" all sorts of aspects of life, opening-up new possibilities, killing-off rural passenger trains etc, but the cars themselves were pretty incapable and clunky by modern standards, and the infrastructure was struggling to get out of the horse and buggy phase.

 

So, my iPad is probably a Ford Model A, chugging down a barely-surfaced road, and SAP is one of those big old trucks with solid tyres, and a gearbox without synchromesh, returning c4mpg.

 

Actually, this is relevant to Hornby, because, aside from lots of little local difficulties, they are faced with this "disruptive technology", right in the middle of their market, luring innocent children away from Airfix kits, and into Minecraft.

 

Kevin

[Caledonian]

A bit late in the day I know but I may be able to offer a possible explanation for that curious £1 million write-off on stock.

 

Locally, I'm fortunate to have reasonably close access to two model shops of the usual kind - and the usual trouble getting anything much out of Hornby, and also a Hornby concession in a well-known department store. 

 

This is quite literally tucked away in a corner of the toy department and whilst easily accessible is a bit tight on display space. That said it does display a good sized stock of Hornby's current catalogue, as well as Airfix and Scalextric. But, and its a big but, there's no room to accommodate additional stock. We therefore have an annual ritual where on the arrival of the first batch of new models, any stock remaining from the previous year's catalogue is immediately discounted and moved to the bargain shelves in order to make room for the new. Multiply this by the other concessions up and down the country...

 

Pity there's so much Western stuff discounted locally - locos aside there's currently a huge selection of GWR shunters' trucks going cheap.

[Joseph_Pestell]

 

 

 

Pity there's so much Western stuff discounted locally - locos aside there's currently a huge selection of GWR shunters' trucks going cheap.

 

GW shunters' truck like buses - none for ages then two come at once.

 

[Dunsignalling]

Knowing Apple they will probably propose that their vehicles drive on the left in the USA!

 

Keith

Rather like the old joke that Heavy goods vehicles in Ireland were to switch to driving on the right from midnight and that, if it proved successful, cars would do the same a week later. 

 

John

[highpeakman]

I previously posted some comments about my personal experience of MRP/ERP systems and the difficulties it gave my company many years ago.

 

In view of some of the comments that have followed I do think it is necessary to clarify a couple of points about my view on such systems.

 

Hornby have admitted that changing to a new system has caused some problems and major expense which from my own experience is understandable however I will not judge Hornby at this stage for taking a decision to go down that route. True it may have caused a problem but that comes under the heading of "hindsight is a wonderful thing" and a useful point to criticise the company when not involved in the actual individual decision making process at that particular company and not party to any of the information leading to it. Or, indeed, possibly not having any knowledge of such systems or the existing systems they try to replace.

 

I do not believe that IT is a bad thing, indeed it obviously is not (we are all posting on RM web because of IT and driving modern cars using a great deal of IT, etc, etc.).

 

I commented previously and I fully accept that a good, properly implemented, working ERP system is a great management tool and, if used wisely, can save a great deal of money and help solve delivery problems. Something that Hornby needed to get under control. Also, as Hornby have, with multiple different product lines, selling in several countries, manufactured in different countries, with different exchange rates then such a system, again properly implemented, would be invaluable in controlling that. Especially if it is replacing multiple, varied and complex older individual systems that sometimes cannot be made to talk to each other- something again I have experience of.  There are certainly many bad IT implementations but there are also many very good ones - 

 

I think it is just too easy, when you are not part of the management of the company, to write judgement especially if not party to any of the information within the company that led to that decision being taken. Perhaps a valiant effort that did not work out as planned - us outsiders just do not know.

[Martin_R]

Rather like the old joke that Heavy goods vehicles in Ireland were to switch to driving on the right from midnight and that, if it proved successful, cars would do the same a week later. 

 

John

I think you missed a couple of words out......Heavy goods vehicles in Ireland were to switch to driving on the right from midnight and that, if it proved successful, any remaining cars would do the same a week later