Hornby's financial updates to the Stock Market

[Widnes Model Centre]

.

 

From what I understand (and I may well be very wrong) Hornby now employ a third party to do all their stock control (receiving, warehousing and despatch) so the problem, and costs, are down to them.

 

Obviously, Hornby should be controlling their contractor.

 

.

 

 

You are correct that the third party is responsible for the above. As you say Phil, Hornby should have control, they appear not to have such control. Other retailers will agree, we often have deliveries which amount to around £20 worth of goods in a large box. Cost of picking, packing, transport, invoicing etc? The next day we can have a much larger delivery. Last week I had a courier deliver a very small package tracked and signed for, the cost of goods inside £1.11p I think it was. Even the courier was laughing.

[Mel_H]

Two announcements in quick succession to the Stock Market this morning (Monday 10 April 2017):

 

The first, from Hornby, at 0700hrs:

 

Hornby plc 

("Hornby" or "the Company")

 

10 April 2017

 

Requisition of General Meeting

 

Hornby announces that on 7 April 2017 it received a letter from Ian Alexander Anton enclosing a notice pursuant to sections 168 and 303 of the Companies Act 2006 (the "Act") requisitioning a general meeting of the Company's shareholders (the "Requisition").  The Requisition is signed on behalf of ROY Nominees Limited and HSBC Global Custody Nominee (UK) Limited (Account 883031), together representing the beneficial owners of c.20 per cent. of the paid-up capital of the Company carrying voting rights at general meetings of the Company. 

 

The Requisition requires the Company to call a general meeting for the purposes of considering ordinary resolutions to remove Roger Timothy Canham from office as a director of the Company with immediate effect and to appoint Ian Alexander Anton as a director of the Company with immediate effect.

 

The Board of Directors currently intends, in accordance with section 304 of the Act, to call such a general meeting within 21 days of the date of receipt of the Requisition and to hold such general meeting on a date not more than 28 days after the date of the notice convening such general meeting.

 

Shareholders are advised to take no action at this time. Further announcements will be made in due course.

 

The second, from the protagonists, at 1100hrs:

 

10 April 2017

Statement re: Announcement by Hornby plc

This statement is in response to the announcement made by Hornby plc (the "Company") dated 10 April 2017.  

As reported, and in the best interest of fellow shareholders, Alexander Anton has called for a General Meeting of the Company.  He is joined in this action by New Pistoia Income Limited ("New Pistoia"), the second biggest shareholder with a 20% holding in the Company.  The proposal requests shareholders to back Mr Anton to replace the current Chairman, Roger Canham.

After five years under the current Chairman, during which the Company has lost £31 million (according to the Company's Nomad), and shareholders have lost enormous value, it is time for a change.  Mr Anton and New Pistoia believe that the current strategy is ineffective, will continue to destroy value and is not aligned with creating wealth for all shareholders.  This strong conviction has come after considerable research into the Company's current situation and management practices. Furthermore, Mr Anton and New Pistoia believe that the control currently exerted over the Company by the Company's largest shareholder, Phoenix Asset Management ("Phoenix") with 34% of total shares in the Company, where Mr Canham is also Chairman, is not in accordance with principles of good corporate governance and therefore is not in best interests of the wider shareholder base.

Mr Anton has a strong track record in addressing challenging corporate issues and forcing through positive change at underperforming businesses.

Following discussions over the course of a number of months with Phoenix and the Company that have ultimately proved fruitless, Mr Anton and New Pistoia have found no alternative but to request that a General Meeting is called to raise and discuss his proposal with all shareholders.

Alexander Anton commented further:

"The last five years under Mr Canham have been disastrous for Hornby's shareholders. I believe it is time for new leadership as, in my experience, positive change nearly always requires fresh perspective." 

"I am confident that Hornby's fortunes can be turned around and value can be created for shareholders if changes are made."

"Now is the time to act otherwise shareholders face further losses.  I ask shareholders to vote in favour of the proposed Board change." 

 

Edited April 10, 2017 by Mel_H

[Joseph_Pestell]

This does not sound good at all. But I have to agree with them that Hornby can't carry on as it has.

 

There has been a real failure (and not just in the last five years) to make the most of the iconic brands that they own, both here and overseas.

 

As for the way in which they have treated their UK retailers in the last few years, don't get me started! I am surprised that there are any retailers still willing to do business with them.

[JSpencer]

This reminds me of a presidential election!

 

Reading this and other news, either Mr Canham has actually succeeded in righting the ship and someone else is trying to jump in and take all the credit for it (bit like Trump saying he reduced the deficit 13 billion in one month even though everything was still under Obama's fiscal year).

Or Mr Anton has some creative policies that will set Hornby sailing fast across the open seas. In which case I hope he will tell everyone what they are and back these up with actual facts and maths. He will also need to prove why Mr Canham's efforts have not gone far enough.

 

Being a political battle though, this argument will be more likely won by spin and theatre than actual facts. In any war, the truth is always the first casualty.

I personally want to see that they can (amongst other things) demonstrate they have market knowledge. If I say HST, MN, Type 37 English Electric or FW-190, Hellcat, Swordfish, King George V, Halifax, they know what I'm talking about and to which brands these names are part of.

[Legend]

Oooer. There appear to be two competing views as to the way forward. Just what Hornby needs at the moment! I suppose as a shareholder the last 5 years has been pretty disasterous and therefor Roger Canham has to take responsibility for that. I had thought it was him stepping in last year that steadied the ship , following an ill thought out marketing policy that I think impacted the business directly. There was , of course the previous poor manufacturing policy that had all eggs in one basket and that was Sanda Kan, but that was under Frank's regime and Roger Canham sorted it out. It took years to get out of that, only for Hornby to embark on the direct selling plan, that so regally hacked off their model shop customers that things got worse.

 

It is difficult to see the best way out of this. Hornby do seem to have turned the corner, so continue with the same medicine or try a completely new prescription. Difficult one for shareholders

[adb968008]

ooooo an attempted coup....

 

Should it succeed I suspect it'd lead to a sell off.

 

It's just a squabble amongst bankers, my bet is it won't succeed without a hostile takeover, however we may see the redistribution of a large volume of shares.

 

Playtime is over, time for some serious remodelling.

Edited April 10, 2017 by adb968008

[Clearwater]

How exciting!

 

It'd be instructive to work out when and at what price New Pistoia brought in at. I'd wager they are hoping to be brought out by Canham's mob at a premium.

[34theletterbetweenB&D]

There are always competing views on how best to realise the value in a business. At least those with the votes in this kind of contest actually have money on the table. Get it wrong and it's usually their own and other's money that they are responsible for, that's gone forever.

 

If this succeeds, I too suspect a very rapid break up, to leave a profitable core business unemcumbered by 'distractions'.

[Mel_H]

I'd say that's an incorrect statement. I know many modellers here in NZ and in Australia that model UK outline, right across the board from big four to modern outline. It's more popular than might be first obvious.

 

Certainly when I went into a large model shop in Sydney, expecting to see loads of 'local interest' items I was very surprised to discover that more than half of the extensive stock (it would have been good by UK standards) was UK - Hornby and Bachmann. I guess there's a large number of ex-pats who are buyers.

[Mel_H]

How exciting!

 

It'd be instructive to work out when and at what price New Pistoia brought in at. I'd wager they are hoping to be brought out by Canham's mob at a premium.

 

Yes, it would.

The last published details (Annual Accounts in June 2016) don't reveal this, naturally, but they do show the following position - that is that 70% of the shares are held by four organisations. Phoenix Asset Management Partners is only (very minor) partially owned by Roger Canham (his stake is 2.8%); the Channon family is the majority owner:

 

[extract from report below]

 

 

SUBSTANTIAL SHAREHOLDINGS

The Company has been notified that at close of business on 17 June 2016 the following parties were interested in 3% or more of the Company’s ordinary share capital.

 

Shareholder                               No. of shares      Percentage held

Phoenix Asset Management Partners Ltd    16.257m                 29.58%

New Pistoia Income Ltd                              12.129m                 22.07%

Ruffer LLP                                                 7.022m                   12.78%

Downing LLP                                             3.156m                   5.74%

[JSpencer]

Yes, it would.

The last published details (Annual Accounts in June 2016) don't reveal this, naturally, but they do show the following position - that is that 70% of the shares are held by four organisations. Phoenix Asset Management Partners is only (very minor) partially owned by Roger Canham (his stake is 2.8%); the Channon family is the majority owner:

 

[extract from report below]

 

 

SUBSTANTIAL SHAREHOLDINGS

The Company has been notified that at close of business on 17 June 2016 the following parties were interested in 3% or more of the Company’s ordinary share capital.

 

Shareholder                               No. of shares      Percentage held

Phoenix Asset Management Partners Ltd    16.257m                 29.58%

New Pistoia Income Ltd                              12.129m                 22.07%

Ruffer LLP                                                 7.022m                   12.78%

Downing LLP                                             3.156m                   5.74%

 

Interesting.....

[Fireline]

ooooo an attempted coup....

 

Should it succeed I suspect it'd lead to a sell off.

 

It's just a squabble amongst bankers, my bet is it won't succeed without a hostile takeover, however we may see the redistribution of a large volume of shares.

 

Playtime is over, time for some serious remodelling.

 

I suspect that for those who work at Hornby, looking over their shoulders at their mortgage payments, "Playtime" isn't the word they'd use for what is going on....

[flapland]

I see Jeremy Hoskins, owner of many mainline locomotives and part owner of Crystal Palace has bought the old Margate factory. I wonder if he has any interest in buying the company, he is a experienced investment banker after all. 

Edited April 10, 2017 by flapland

[Legend]

'Mr Anton said that this would not work: "The turnaround plan talks about retreating from toys to the hobbyist market which is an ageing market. If you're not introducing youngsters to the toys, they wont have the same affinity to the company in years to come. I don't think this is a sustainable strategy. It is only going to continue to destroy shareholder value... On the face of it, the company looks like a basket case, but underneath it has a lot of potential," adding that he has great confidence in its future, as long as the "right personnel" are in charge.'

 

http://www.telegraph.co.uk/business/2017/04/10/leading-shareholders-aim-oust-chairman-ailing-Hornby/

I wonder to what extent youngsters have already voted with their feet. They are not interested in trains anymore. Could it be that Roger Canham has already discovered this while Mr Anton has yet to catch up. I genuinely don't know . Tricky decision

[Ron Ron Ron]

'Mr Anton said that this would not work: "The turnaround plan talks about retreating from toys to the hobbyist market which is an ageing market. If you're not introducing youngsters to the toys, they wont have the same affinity to the company in years to come. I don't think this is a sustainable strategy. It is only going to continue to destroy shareholder value... On the face of it, the company looks like a basket case, but underneath it has a lot of potential," adding that he has great confidence in its future, as long as the "right personnel" are in charge.'

 

http://www.telegraph.co.uk/business/2017/04/10/leading-shareholders-aim-oust-chairman-ailing-Hornby/

 

 

That's a certain recipe for failure then.

How can any business gamble on reaping such rewards some 30, 40, 50 years in the future; a future depending on the remotest chance that it will have that sort of effect.

Supposedly grown up adult men playing with kiddies toys. Great PR and a sure fire way of bringing in new entrant modellers in their droves. Mmmmmm?

 

 

  

[Ron Ron Ron]

I wonder to what extent youngsters have already voted with their feet. They are not interested in trains anymore....

 

10 years ago, former CEO Frank Martin confirmed in a couple of press interviews that.....

 

"A large part of Hornby's business is in peddling nostalgia.

Martin reckons that 70% of sales of model railways are to adult collectors and hobbyists and 30% to children....."

 

Surely that balance can only have tipped more towards the adult market over the last decade?

 

 

 

.

Edited April 10, 2017 by Ron Ron Ron

[JSpencer]

'Mr Anton said that this would not work: "The turnaround plan talks about retreating from toys to the hobbyist market which is an ageing market. If you're not introducing youngsters to the toys, they wont have the same affinity to the company in years to come. I don't think this is a sustainable strategy. It is only going to continue to destroy shareholder value... On the face of it, the company looks like a basket case, but underneath it has a lot of potential," adding that he has great confidence in its future, as long as the "right personnel" are in charge.'

 

http://www.telegraph.co.uk/business/2017/04/10/leading-shareholders-aim-oust-chairman-ailing-Hornby/

There is some truth in that, but it is not an easy question to address. We can look at German competition (Marklin for trains, Revell fot kits) who have managed to keep a foothold in toy stores between them however it is just that. Gone are days of an entire ally for trains and models.

 

They have not quite figured out for starters but there is clearly work going on there. So what will be Mr Anton's proposals?

 

Once started Hornby does have a good mid range to keep people going (railroad). They need to be pushed more to toy shops and other house hold high street names as well as catalogues like Ks. Remember they used to do limited edition locos for them.

 

They also need to look at availability. Ok top of the range locos can be and do sell quickly, you need to keep these in constant stock. But railroad items should be as newcomers are not going to be rushed. Sundry items like track should be constantly available. I see no talk on storage capacity. Outsourcing that, works perfectly fine for some items which need to shifted fast, but you do not want to pay storage rent for sundry items.

 

That said, bringing in the young faces some serious challenges. New generations wish to be less encumbered, they are less likely to keep things or have space to keep things their parents had. They might participate more with real trains than models. Being a generation that seeks to be less encumbered, the idea of collecting is probably quaint. Layouts take up space and few will find the idea of a tank loco with plank appealling. Fantasy still draws a fair number of flesh modellers, but fantasy is deeply linked to computer games.

Airfix can traverse international boundaries and maybe reach the young, but British outline trains will be harder.

 

I think all are aware that bringing in a new generation is important, I have seen details on the how part from him. If he has a strategy, it will probably have a high cost and if it fails, it's end game.

 

The current core market is a short term safer bet, but long term will take some careful consideration. Why should a kid buy trains inside of the latest super hero? Or glimmers? Or my little pony? How to wake up that constructive spirit in a young person? In today's world, the gratification will need to come as quick as winning a computer game...

[Legend]

Kids grow up a lot faster these days. The competition may be my little pony or the latest superhero at the 5 /6 year old range, but beyond that it's video games and tablets. Frankly in terms of space and value for money they win hands down . The other side of it is that model trains are just too expensive, maybe not the initial train set but figure in the cost of track locos etc until it gets to the interesting stage where it may compete with a tablet or video game , and I'll think you'll find it's very expensive. I had a shot on an Xbox 4 with 3D goggles on Saturday . I tell you it was amazing . My Great Nephew is well into that and views his Uncles obsession with trains as quaint ,not enough interest in it for him. I love my trains , but today's generation has moved on. That's what Hornby is up against.

[Phil Parker]

It was interesting that the same issue of todays Toy News that mentioned the Hornby fun and games, also had this story about who's buying toys: http://www.toynews-online.biz/news/read/adult-toy-fans-fuel-market-growth-says-npd/048448?utm_source=Adestra&utm_medium=email&utm_term=&utm_content=&utm_campaign=ToyNews%20Daily

 

The Telegraph piece about introducing youngsters to the brand echos what Corgi worked out about 4 years ago. In response, they introduced a line of cheap cars to supliment the more expensive range of collectable diecast. I wonder how that went?

[Ron Ron Ron]

....In response, they introduced a line of cheap cars to supliment the more expensive range of collectable diecast. I wonder how that went?

 

 

Having had a quick look at the Corgi web site, those pocket money cars are nowhere to be seen.

This is their "toy range"....

https://www.corgi.co.uk/shop/by-brand/corgi-toys.html

 

 

Many die cast cars are listed at £27.99, although there's a lot of cheaper vehicles too.

 

There's also a set of lorries at a m.r.p. of £769.99 !!!

 

 

.

Edited April 10, 2017 by Ron Ron Ron

[Caledonian]

I wonder whether part of the answer might be a greater diversity in terms of what's being offered; pre-grouping locomotives and stock offered on its own merits rather than as plugging the last gap in the British Railways stable. Once upon a time it was reckoned that a lot of modelling was down to nostalgia and we still get articles and letters describing how layouts have been shaped by memories of trainspotting. Good for them but anno domini happens and while BR Blue and everything that has followed obviously has its adherents I'd question whether for all the reasons mentioned above it is as robust as British Railways steam - and it certainly isn't as diverse.

 

At 63 I don't remember steam except fleetingly [apart from a certain Peckett - and yes I'll cheerfully admit that was a major reason for getting one] so to me it is very much a case of what the late great Mr Jenkinson called Historical Railway Modelling, and if its going to be historical then surely some decent history in Caledonian blue and Midland red is going to reach out to future customers more effectively than yet more twilight of steam.

Edited April 10, 2017 by Caledonian

[adb968008]

Hornby has it right at the collectors end and this year is a big improvement but it's not at the other end of the market.

 

There's a lot Hornby could be doing for youngsters in model railways.

All kids toys have VR, Apps and interactivity these days.

The models themselves could have more kit based interactivity too.

 

The Hornby Railroad market for kids is stuck in the past and over priced, it lacks imagination...indeed the only imagination I see is what was there in the 1970s. It does need a revamp, but it needn't be expensive.

 

I took my little one through Hamleys in London, 5 floors of toys for kids, all equally over priced... but the Hornby section was basically dead... After Thomas and friends, in my mind Hornby doesn't relate to kids, it all starts with trains kids don't know... why a Railroad D49, no "kid" born since 1970 would relate to it.

Kids love colour and our railways are more colourful now than they've ever been, but good luck finding anything your kid would recognise on the journey home in the Railroad range.

 

Tornado hit the spot, but it's would have been a bigger hit if kids had to put stickers on for numbers/names/logos and put it somewhere more of an achievement like the airfix kit range, a range of "super kits" card buildings would go a long cheaper way too.

 

Kids don't care if it's tender drive either, if that means mass production of motor is cheaper, as it used to be.. why change it ? If it's down to tech, then do as they did in the 70's.. 1 can motor chassis frame used across the range, not a new tooling for every loco chassis.

 

In my mind, There tons of things that could be done, both in economy and in inspiring sales.

 

Back to the current position though, Hornby aging and shrinking, someone needs to turn it around.

Whilst the staff are worried, so are them that are paying for it, and its clearly not us the customer.

 

New Pistoia have invested a lot, and it would seem a bigger investment was made post Olympics, its 5 years since that loss making event so it's fair to say a 5 year plan is coming to an end and it's coming in as a rocky finish...whether they want to run a train business with a bag full of ideas, or whether they are looking for an exit strategy has to be seen.

We could see a white knight, prepared to take it over, we could see a hostile takeover, but equally there may be a secret buyer guiding this war fare strategy, awaiting a move.

 

In any news story, it's not the "what" that is happening that's the news... it's the "why" and why now.

Edited April 10, 2017 by adb968008

[jjb1970]

I have thought for a while that there is a conflict between the short-mid term drivers for model companies and what is needed for the long term. In the short - mid term I don't think there can be any doubt that the key market is the adult market for scale models, selling to collectors and what are termed serious modellers. A market with disposable income and willing to spend for the right product. The average age of people in that market might be politely described as not being especially young. Building a business around a market of advancing years makes sense to make profits in the short - mid term but the long term future will need to attract new entrants into the hobby as to be blunt about it you don't need to be a genius to figure out what's going to happen to that golden egg laying senior market over the next ten - twenty years. On the other hand the things that will attract youngsters are probably not the same as the things people on this board are looking for. One of the biggest mistakes many hobby and special interest markets make is that they work backwards from what adults want and what those adults want children to want rather than looking at what children want (i.e. play value). I tend to agree with Legend, of course there are children who still like models and traditional toys but on the whole I think that train left the station many years ago and is unlikely to come back. When I was at school most boys had some experience of plastic kits and at some point had a train set, I look around my little lad and his friends and don't see models or trainsets anywhere. Toy makers are competing against electronic devices and games, and while it's easy to decry these devices and look back at more traditional toys as being a more noble sort of toy the truth is that these devices offer immense play value and grow with children, as their interests change so a tablet changes to suit. Yet it is not as simple as saying that traditional toys are no longer relevant to children, as Lego stillsell plenty of their sets to children, and toy cars still seem pretty popular. If the product is right there is still a market for toys.

Legend makes another good point, buying a trainset is just the first step. To become a real hobby you need somewhere to put a baseboard as putting it up on the carpet and then repacking it after a couple of hours is hardly going to win a child's heart for toy trains. That means a house with enough space. Then to have a layout you need extra track, controller, some scenic, you'll want some extra rolling stock, before long that relatively cheap train set is looking very expensive. I know, my boy and I have gone through it over the last couple of years, too many parents buy their kids a train set, don't let them set it up properly and develop it into a layout and don't grow it and then wonder why kids quickly lose interest.

[railroadbill]

 

I took my little one through Hamleys in London, 5 floors of toys for kids, all equally over priced...

Obviously hasn't changed since I was taken there by my granny then (travelling on a Green Line bus). :-)

 

The current Airfix snap together models that seem compatible with lego look brilliant, the new Volkswagen camper van in particular (popular at VW rallies according to the Airfix site).  I was looking at a Youtube vid by an American guy who was very pleased with the VW beetle kit,that he's had to get sent from UK.  Now I'm thinking that this sort of kit would be great to try on the grandchildren when they are a bit older. Compatible with existing toys (lego) and lots of play value with other toys when finished.  That would be a good introduction to the idea of modelling for a youngster, without all the hassle of trying to make a £40 B-17 or whatever and getting glue everywhere.

So in the kit market, a case could be made that Airfix are being very innovative already (I think the snap together range are moulded in the UK?)

[Ozexpatriate]

It was interesting that the same issue of todays Toy News that mentioned the Hornby fun and games, also had this story about who's buying toys:

No accident they used a LEGO graphic in that story.

 

LEGO and Star Wars appear to be favourites for the more mature toy buyer.