Hornby's financial updates to the Stock Market

[Clearwater]

Quite - if you sell an asset for £2.25M you only make £2.25M profit if it had zero value on the balance sheet.

 

And you don't depreciate the value of land in the accounts.

Though worth noting in hard cash terms, that's what you get. £2.25m is a material number in the context of a business of Hornby's size. From memory, they lost around £4.5m on operating cash last year so half of that. Or 40% of the cash raised from shareholders. Or 25% or so of peak debt.

 

Hence they've announced this to market as soon as they've concluded the contract.

 

David

[Coryton]

Then late this afternoon Hornby Trade sent an email stating "We would also like to inform you that products from our international brands are now available to order in the UK." It reads like this is something new but not from what you have experienced.

 

Hmmm. Somebody there reads RMWeb?

[Coryton]

Though worth noting in hard cash terms, that's what you get. £2.25m is a material number in the context of a business of Hornby's size. From memory, they lost around £4.5m on operating cash last year so half of that. Or 40% of the cash raised from shareholders. Or 25% or so of peak debt.

 

Hence they've announced this to market as soon as they've concluded the contract.

 

David

 

Absolutely. Cash(flow) is king.

[Mike Storey]

Hi 40F, just like 87029, we have been asking to have access to Hornby International and have not had any luck. As for weekly stock lists, never seen one. Didn't even know they existed. Would be interested to know what part of the country you are in as different areas have been receiving different information. This is a complaint that we have brought to Hornby's attention. It remains unsolved. This evening we have received an email again from Hornby re the  Doncaster Show that a shop in the South West had told me about earlier in the day. I had queried this with Hornby earlier.

 

Then late this afternoon Hornby Trade sent an email stating "We would also like to inform you that products from our international brands are now available to order in the UK." It reads like this is something new but not from what you have experienced.

 

Makes you think that someone in Hornby continues to monitor this forum!

 

(Post Edit note - I see Coryton beat me to it!)

Edited February 7, 2017 by Mike Storey

[Clearwater]

They'd be mad not to... around Warley they were posting under the town name from the development team however I'm sure that most of them will have an alias account they use to read what's said here and onnother fora. Why wouldn't you? Certainly Kohler made it clear he read rmweb when he was there

 

David

[Mike Storey]

I hope you mean beside Ramsgate Harbour Mike In the harbour would imply rather excessive exposure to sea water.

Seriously, were they planning a sort of Hornby version of Pecorama?

 

Loco Revue did a survey of RTL H0 flextracks last July and gave them realism (in representing French  track of course) ratings of A-G, none did better than a C as no mass market track represents the fixing of flat bottom rail by fang bolts commonly used in France (and elsewhere in Europe) but the six out of sixteen that did rate C, included all four flavours of Peco code 75. This seemed to be because the rail fixings though still different are less obviously Germanic than the others. This was of course before the appearance of Peco Bullhead.   Of Loco-Revue's featured layouts over the past few years I'd say a majority used Peco though a surprising number also used SMP BH despite the sleepers being too wide in H0.

 

I think Peco use a different distribution model outside the UK from that used here and there's no reason why Hornby International couldn't do the same without competing with their own suppliers. There seems to be a far larger proportion of modellers in Britain modelling non-native railways than in most other countries so the UK

 

I think they could only do something like Beer if they did extend into the harbour! A kind of Hornby Waterworld?

 

On Peco, I agree, at least here in France, and from the more limited knowledge I have, of Italy. One thing that propelled their street cred here was the dramatic production of HO bi-bloc, which had the same reception in France as 00 BH did here (only with far less criticism....). I don't know how their distribution is done here, but it is done at saturation level. Almost any model shop that stocks track will have some Peco, even if just 009, whereas it is pot luck whether you see Fleischmann, Roco or Tillig etc. You very rarely see them all in one shop, in fact I have only seen them together in one of the big box shifter emporiums in Paris.

[Mel_H]

Hmmm. Somebody there reads RMWeb?

 

Hope so!

[Fireline]

It was not going to be a new building but conversion of an existing but disused one, already earmarked and plans for which had been prepared (according to the Thanet Gazette about a year ago maybe). I suspect the issue was capital, as you say, and also the original aspiration to sell the Margate site for housing, since refused, which would have required re-location. I guess the new owner can accommodate the Visitor Centre without trouble. But my question was as to whether anyone had seen Hornby's explanation, as I have learned that one or two on here have much better local knowledge than I do!

 

Yes, it's an interesting piece of journalism. The paper seems to insist that it would just be a renovation of an existing building. However, when you look at the actual site, it is quite obvious that "renovation" must mean "increase in size by 90%". Unless the Visitor's Centre can fit in the guard hut right of centre in this image....

 

 

In fact, this image seems to show that the Visitor's Centre would be somewhere about the position of the blue shipping container.

 

Edited February 8, 2017 by Fireline

[Mike Storey]

Yes, it's an interesting piece of journalism. The paper seems to insist that it would just be a renovation of an existing building. However, when you look at the actual site, it is quite obvious that "renovation" must mean "increase in size by 90%". Unless the Visitor's Centre can fit in the guard hut right of centre in this image....

 

 

In fact, this image seems to show that the Visitor's Centre would be somewhere about the position of the blue shipping container.

 

 

Very interesting - thanks. I have never seen that image. The article I read just had a view of the existing harbour! No wonder I could never work out which building they meant.

 

And look! I was almost right about it being "in" the harbour.....although now I have looked at a larger image, the Hornby sign seems to be attached to part of the old Casino building. I wonder if it was going to go in there and the new building is for something else, as part of a total refurbishment and redevelopment (which has long been discussed since it closed, but nothing ever seemed to happen)?

 

Perhaps we will know one day, if it ever goes ahead.

Edited February 8, 2017 by Mike Storey

[Mel_H]

Good morning. The following trading statement was made to the Stock Market when it opened this morning (0700hrs, 7 April 2017). Please note that none of the other UK manufacturers are listed on the UK Stock Market, which is why Hornby alone, is the only one to make such announcements. Given the time this thread has been going, and how the position has changed, I'll suggest to the moderator that its name might be changed.

 

-----------------------

 

 

Hornby plc 

("Hornby" or "the Group")

 

7 April 2017

SOLID PROGRESS ON TURNAROUND PLAN CREATING SOUND PLATFORM FOR FUTURE GROWTH

 

Pre-close statement

Hornby Plc, the international hobby products group, provides an update to shareholders on progress made in its turnaround plan and on Group trading for the period from 6 February 2017 to the end of the financial year, 31 March 2017.

First stage of turnaround successfully completed

The first stage of Hornby's turnaround is now completed and has progressed in-line with the Board's plan. The Group has restructured its UK and European operations, resulting in structural improvements to the cost base, and has re-engaged with its core independent retailer base as part of a re-positioned sales channel strategy. The product range has been rationalised and re-focused which has allowed Hornby to reduce capital expenditure and improve working capital.

The business is focused strongly on improving cash flow and at 31 March 2017 net cash on the balance sheet was £1.1m (31 March 2016 net debt £7.2m) which was ahead of management's expectations. This has resulted from sound underlying trading combined with a carefully managed programme of stock reduction and the successful sale of the Group's Margate site. 

Current trading

As the Group has previously stated, the year ended 31 March 2017 has been one of transition and, as a result, Hornby was loss making during this period in line with the Board's expectations. Revenue performance for the full year was slightly ahead of our plan, with the fourth quarter showing an improving trend.

Outlook

With the first phase of the turnaround plan now largely complete, Hornby is confident in the business' underlying trading momentum as it embarks on the next phase of its turnaround plan. Having placed the Group on a solid financial footing, Hornby's focus is now on realising the full potential of its iconic brands.

Commenting on the trading performance, Steve Cooke, CEO of Hornby, said:

"I am pleased to report that the first stage of our turnaround plan has been successful and this provides a strong base from which Hornby can build. It has been a challenging time for all of Hornby's employees and I would like to thank them for their dedication, commitment and hard work over the past year. Improving our customer focus has been a key part of the plan and I am particularly pleased that we have now begun to restore our leading position with our core hobby retail customers. Coupled with the considerable improvement in our financial position, I am confident that we have set the Group on the right course to generate value for all our stakeholders.

Edited April 10, 2017 by Mel_H

[JSpencer]

From that statement, I conclude the ship is righted and powering up but still not yet sailing in open waters. They need to be cautious especially with various world events an instabilities unfolding. But good news none-the-less.

 

"slowly does it chief, we don't wanna hit a mine now....."

[Mike Storey]

I see the share price has risen by over 6% already this morning. Let's see if that continues or is just a blip. The view of the market remains pretty important, despite the level of director holdings.

[JSpencer]

There are obviously still quite some challenges facing this market in general, although Airfix kits should get a boost from an ever increasing Asian market. Sadly UK outline trains don't do well outside the Uk.

[phil gollin]

...  Commenting on the trading performance, Steve Cooke, CEO of Hornby, said:

 

"... and I am particularly pleased that we have now begun to restore our leading position with our core hobby retail customers. ..."

.

 

I suppose they must mean us (amongst others) ?

 

I'm a bit surprised there was nothing about the fall in exchange rates and Brexit.

 

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[Trains4U]

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I suppose they must mean us (amongst others) ?

 

I'm a bit surprised there was nothing about the fall in exchange rates and Brexit.

 

.

 

I think that means the independent retailers - They have expended a lot of time and effort trying to rebuild some comprehensively demolished bridges.

[Mel_H]

.

 

I suppose they must mean us (amongst others) ?

 

I'm a bit surprised there was nothing about the fall in exchange rates and Brexit.

 

.

 

I suspect that the currency fluctuations have already been priced in; plus they will have long-term currency deals like all major companies that manufacture in countries not trading in their selling currency (if that makes sense). If Brexit or currency changes are happening/expected to happen, that are likely to be material to the business, they would have said so ('cos they are required to).

[Hilux5972]

Sadly UK outline trains don't do well outside the Uk.

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.

[Bernard Lamb]

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I'm a bit surprised there was nothing about the fall in exchange rates and Brexit.

 

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Point one is well known and there is not much anybody can do about it.

In respect of the second point. Having a foot on either side of the channel I would think it is a good policy not to comment until the situation becomes a bit clearer.

Bernard

[Clearwater]

I suspect that the currency fluctuations have already been priced in; plus they will have long-term currency deals like all major companies that manufacture in countries not trading in their selling currency (if that makes sense). If Brexit or currency changes are happening/expected to happen, that are likely to be material to the business, they would have said so ('cos they are required to).

Given their credit profile, I doubt they're able to trade fx much more than 12 months in advance. Hornby is pretty much a corporate minnow and with a questionable track record as far as their lenders are concerned!

 

I'd expect them to run a rolling hedge programme linked to when they have relatively large predictable cash outflows linked to stage payments in the manufacturing process. Their forecasts, and brokers, will have made some assumptions on long term currency. I'll be interested to see how their numbers change in 6/12m when the change that happened last summer flows through to the hedge programme

David

[Mike Storey]

Point one is well known and there is not much anybody can do about it.

In respect of the second point. Having a foot on either side of the channel I would think it is a good policy not to comment until the situation becomes a bit clearer.

Bernard

 

Not sure I understand your point one comment - if that is about their relationship with independent retailers? There is an awful lot both parties, and indeed end clients, can do about that.

 

On currency, company statements are obliged to refer to matters which have affected, or may affect their trading in the past and future 12 months. Hornby IIRC did indeed refer to this in their last full formal Statement, in that they had taken steps to counteract it, but such steps normally have effect only for twelve months. Their next formal annual report will have to take a position, and it must be a nightmare. On the one hand, Trump strategies, entirely out of Hornby's influence may or may not determine the future level of the Chinese currency. On the other, as you say, there is uncertainty over the level of the pound until speculators determine whether the UK has reached a stable negotiating position over Brexit, its corresponding credit rating and whether it manages to retain reserved currency status. The German finance minister, for example, has concluded that the pound and the Euro will reach parity over the next two years, and unusually, I have seen no great disagreement with that. Quite how Hornby's finance team, as well as the accountancy firm that must approve their accounts, will deal with this, is not a position I would like to be in right now (especially with consolidation of Hornby International to a UK HQ). Whilst you counsel "no comment", they will not be allowed that luxury over the next two years, according to Company House rules.

 

I can see Bachmann and several others facing the same issues, but not as exposed publicly to their views, and domestic results, as is Hornby. We should therefore give Hornby a bit of slack whilst they try to adjust to the situation. That may include some pricing shocks to us as customers.

[Legend]

Well it's good news. On the way to recovery if not fully there yet (they were expecting a loss for 2017 being a transition year). And they've been producing some great models Peckett, B12 and Merchant Navy and of course some great coaching stock at a price much less than Bachmann, even after Brexit. So keep on course please, well done

[JSpencer]

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.

Ok, in Australia and NZ I see there are quite a few posters here. The odd few from a North America and a few from Europe (my self included).

 

I am not sure what sales would be, my own experience from working in a model shop 20+ years ago would put that at about 2-3% of the market. Of course the internet has doubtless grown that market, however are more people getting into Trains abroad or is it regressing?

I now the kit market for planes, tanks etc is growing in Asia and Eastern Europe.

[Mike Storey]

Ok, in Australia and NZ I see there are quite a few posters here. The odd few from a North America and a few from Europe (my self included).

 

I am not sure what sales would be, my own experience from working in a model shop 20+ years ago would put that at about 2-3% of the market. Of course the internet has doubtless grown that market, however are more people getting into Trains abroad or is it regressing?

I now the kit market for planes, tanks etc is growing in Asia and Eastern Europe.

 

Very hard to know the total answer to your question, but there does seem to be a bit of upsurge here in France, given the increasing number of exhibitions and availability of rail and rail modelling mags (you almost never saw them in a local newsagent or supermarket, but suddenly our local newsagent and a few others I have been into recently, have started stocking them, That can't just be because of me.) over the past five years. The other big difference is that, purely from seeing them at a few MRS's and seeing pictures of modellers in mags, that there is a far greater spread of ages involved - i.e. as many youngsters and people of working age as there are oldun's, which contrasts with the usual perception in the UK. That means there must be less concern about the future of the hobby here, than is often the impression in the UK (true or not), which bodes well for the longevity of Hornby International's products at least here, but maybe not necessarily the volume. 

 

As for people modelling UK railways out here, I keep meeting, in person (word soon gets around about the local train nutters) or on-line, a surprising number of Brits who have moved here so that they can afford the size of house, or usually barn or outhouse, to build the layout of their dreams, which would have been otherwise unaffordable for most of us in the UK. That was one of the reasons I came here, although Mrs S believes it was for her health..... Of course, actually building any railway here becomes a Round Tuit when you realise just how much house, barn and garden repairs, maintenance, improvements and weed warfare you have taken on. If, like me, purchases for same are more often done when visiting the UK, rather than on-line or locally (with the big exception of Peco track, which is readily available here), it must be hard for firms like Hornby to gauge the actual number involved, at least in Western Europe, but then, perhaps they don't need to know. For those farther afield, of course, such distortion is unlikely so numbers can be more readily estimated.

[Clearwater]

Way OT, but I think the somewhat impressive Carlisle layout is located somewhere in France

[robmcg]

Very hard to know the total answer to your question, but there does seem to be a bit of upsurge here in France, given the increasing number of exhibitions and availability of rail and rail modelling mags (you almost never saw them in a local newsagent or supermarket, but suddenly our local newsagent and a few others I have been into recently, have started stocking them, That can't just be because of me.) over the past five years. The other big difference is that, purely from seeing them at a few MRS's and seeing pictures of modellers in mags, that there is a far greater spread of ages involved - i.e. as many youngsters and people of working age as there are oldun's, which contrasts with the usual perception in the UK. That means there must be less concern about the future of the hobby here, than is often the impression in the UK (true or not), which bodes well for the longevity of Hornby International's products at least here, but maybe not necessarily the volume. 

 

As for people modelling UK railways out here, I keep meeting, in person (word soon gets around about the local train nutters) or on-line, a surprising number of Brits who have moved here so that they can afford the size of house, or usually barn or outhouse, to build the layout of their dreams, which would have been otherwise unaffordable for most of us in the UK. That was one of the reasons I came here, although Mrs S believes it was for her health..... Of course, actually building any railway here becomes a Round Tuit when you realise just how much house, barn and garden repairs, maintenance, improvements and weed warfare you have taken on. If, like me, purchases for same are more often done when visiting the UK, rather than on-line or locally (with the big exception of Peco track, which is readily available here), it must be hard for firms like Hornby to gauge the actual number involved, at least in Western Europe, but then, perhaps they don't need to know. For those farther afield, of course, such distortion is unlikely so numbers can be more readily estimated.

 

My impression from here in NZ is that UK 00 modelling primarily Hornby is still quite healthy here at least, but the influence of recent exchange rate changes cannot have helped Hornby's production costs, thus I expect price increases.. It also does not bode well that models like the GW King class can be bought for £89 retail, and with the drop in Sterling such fine models have never been cheaper for we antipodeans.

 

What intrigues me from the point-of-view of Hornby's mid-term viability is that it has Hornby International in what must surely be a significant cost-income player, and my current enjoyment of US-outline steam has included some truly outstanding Rivarossi models, the Chesapeake & Ohio/Virginian 'Allegheny' 2-6-6-6 being listed as available new but not so far as I can tell available at retailers. I doubt that they are ever going to be high-margin volume sellers though.

 

Interesting times. Ebay is thriving with s/h models too. Can there be a point where supply exceeds demand for quality 00/H0 to such an extent that quality scale models cannot be made in profitable volume?