Hornby's financial updates to the Stock Market

[Coryton]

DJM Dave, on 13 Apr 2017 - 16:45, said:

They ARE British Chinese-produced Model railways in my book!

 

 

Let's not forget the reality.

 

 

The reality is that - no matter where Hornby products are manufactured, to most people in the UK Hornby means model railways (or at least train sets) and vice versa.

 

If I remember correctly, according to one of Simon Kohler's articles Hornby were quite happy to give away the track for James May's Toy Stories as even though the company name wouldn't be mentioned in the programme it was still effectively advertising for Hornby.

 

DJM Dave, on 13 Apr 2017 - 16:45, said:

They ARE British Chinese-produced Model railways in my book!

 

[Loconuts]

I suppose I should clarify something that I didn't in my last post here.

 

I do not, repeat NOT want Hornby to disappear or suffer. The problem is they are suffering through decisions of others in the past.

This is not good for the hobby In general, and let's be honest here, we need them! We need the brand awareness the name brings to the hobby, we need the Hornby trainsets, the railroad range, the Thomas, as without Hornby, who else will take up 'that' mantle??

 

They ARE British Model railways in my book!

 

Hope that helps?

Cheers

Dave

 

That's more like it Dave, trumpet blowing of I did this or that does not bode well. I also totally agree with your comments but what can we do as mere mortals apart from ganging together and taking the company over.

 

I agree we need the brand to survive for the benefit for the hobby but we are not privy to the Hornby boardroom decisions. The decision is ours to decide, modelers tend to say they are going to buy many but only buy one. This gives the retailers wrong figures to feed back to the manufacturer.

 

The people who can also change things are the shareholders, but I still say they need to get the marketing department sorted out and put in people who know the market. They also need to reduce the range and only concentrate on the items that sell well.

..

Cheap models are the thing of the past and manufacturers have got to bite the bullet on this, true sales will drop but in the end it will be accepted. I feel that quality locos should be around the £300 pound for 4mm models and the quantity produced should be such that mass discounting by retailers is reduced.

 

However do we know the answer as amateur CEO's, I think not. 

[adb968008]

That's more like it Dave, trumpet blowing of I did this or that does not bode well. I also totally agree with your comments but what can we do as mere mortals apart from ganging together and taking the company over.

 

...

The people who can also change things are the shareholders,

 

Anyone can be a shareholder, grouping together and taking over the company is what shareholders can do.

 

Indeed that is exactly what Anton is trying to do, if he succeeds, what do you think the majority shareholder will do ?-exit stage left, with lowest loss possible, whilst the winner will seek to acquire at lowest price to recover their own losses, before seeking to divest itself, they certainly wouldn't want to be a majority shareholder in a company they can't influence and managed by a team they don't agree with.

 

Anton could indeed even have a buyer in the wings, waiting for the moment.

 

If more people were buying shares, the price would go up, but investor confidence isn't there, because the bottom line isn't there.

 

I'm more than happy buying Hornby models, but I wouldn't buy their shares... I didn't in2012, I'm not sure I would now either, but an eye for a bargain, I might consider pending how this pans out, but it would be very short term.

The best way out for Hornby is a shareholder, who is an enthusiast and a financier, it's a niche industry that needs deep knowledge, trouble is a financier who looks with a business head, wouldn't go near it unless they really fancied a hard challenge with low returns.

 

Given we can't agree to buy a Yelliw J94 ltd edition, I'm not sure the forum could mount a takeover :-)

Edited April 13, 2017 by adb968008

[Caledonian]

 

 

The reality is that - no matter where Hornby products are manufactured, to most people in the UK Hornby means model railways (or at least train sets) and vice versa.

 

 

 

 

That, I think, may be the problem.

 

Hornby's reputation is founded on building 00 locomotives and the stock to go with them, but right now they seem to be all over the place.

 

Leave aside the add-on extras like Corgi and we have good quality locomotives like the Peckett and [i'm told] the Merchant Navy, but then there are old time-expired locos such as the J94, they have new-release Railroad models like the Crosti, which aint bad and as somebody pointed out probably wouldn't get made at all in a full fat version, and then there's the recycled Railroad with new motors but essentially ancient models rescued from the scrap-line. There are some absolutely splendid wagons and then a downward spiral of increasingly ancient ones which aren't even cheap enough by comparison with the new ones to justify taking up the production slots.

 

They really need to get a grip, and instead of "diversifying" consolidate their stock to market a range of consistent good quality. After all that's exactly what Bachmann do.

Edited April 13, 2017 by Caledonian

[jjb1970]

As the saying goes, if wishes were fishes we'd all cast nets. If turning Hornby around was a simple and easy task we wouldn't have this thread. From what I can see the current management team are doing a pretty good job, not perfect and problems remain but I suspect if any of the backseat drivers were given a go at the wheel they'd suddenly realise it wasn't as easy as they thought it was.

[Loconuts]

Hear, hear that man.

 

Loconuts

[Caledonian]

As the saying goes, if wishes were fishes we'd all cast nets. If turning Hornby around was a simple and easy task we wouldn't have this thread. From what I can see the current management team are doing a pretty good job, not perfect and problems remain but I suspect if any of the backseat drivers were given a go at the wheel they'd suddenly realise it wasn't as easy as they thought it was.

 

 

I make no claim to expertise in the management business, but as a customer I can tell the difference between the current dogs' breakfast of the good [and sometimes very good], the bad and the ugly offered by Hornby, and the consistency delivered by Bachmann.

[jjb1970]

I make no claim to expertise in the management business, but as a customer I can tell the difference between the current dogs' breakfast of the good [and sometimes very good], the bad and the ugly offered by Hornby, and the consistency delivered by Bachmann.

 

That may be so, but do you know if that has any relevance to the financial predicament Hornby have found themselves in?

[Caledonian]

It rather suggests a lack of direction as to where they are trying to go in the market.

Edited April 15, 2017 by Caledonian

[jjb1970]

Not necessarily, their new tooling is excellent and fully competitive with the best OO RTR avalable. That indicates their new projects will be aimed at the top end of the market. However if they have legacy tooling which remains profitable (I am speculating) then it makes perfect sense to keep using the tooling if they make a good return from it.

[Caledonian]

Not when it occupies production slots which could be utilised by more modern tooling currently sitting idle.

[bigherb]

I make no claim to expertise in the management business, but as a customer I can tell the difference between the current dogs' breakfast of the good [and sometimes very good], the bad and the ugly offered by Hornby, and the consistency delivered by Bachmann.

Are you serious? Bachmann consistent when they are still producing stock without NEM couplings, split chassis, either separate smokebox handles or the design clever half molded on handles, molded handrails and brake blocks molded onto the tender frames, tender pick ups or none.

[davefromacrossthepond]

Not when it occupies production slots which could be utilised by more modern tooling currently sitting idle.

But are those the most profitable models? That is the key issue that we don't have sufficient information on. Just a thought.

[Mike Storey]

For all their past faults, some of which continue to a varying extent (according to some of our retailer chums on here), Hornby do seem to be trying, much harder than they were, on getting their business into profitability, on getting their products better targeted (for both high end and with their forthcoming youngsters' products) and sorting out their marketing. They are by no means there yet on any of these, bar some excellent recent models, but the signs are much better. Their production chain is certainly out of the mire that was our main complaint a few years ago.

 

One example of getting back into the mainstream, despite the closure of the concession model, is the increased availability (I think, compared to when I last looked through their catalogue) of Hornby items in the Argos range. Argos claim to be the 2nd most visited retail web site in the UK, and Sainsbury are increasing their high street and supermarket presence. Could be a model for the future with others?

 

Personally, I rarely buy from Hornby now as they have little that I model. (Blue/ Blue Grey Southern Region). But I can see why they persist with the ranges they do, leaving Bachmann, Heljan and Dapol to meet my needs. But as others have said, it is crucial to the health of the hobby that Hornby stay a big player.

[jjb1970]

Not when it occupies production slots which could be utilised by more modern tooling currently sitting idle.

 

You're making several assumptions there. There is no reason that the legacy tooling should be occupying production slots which would be used by their high end tooling. One of the big problems Hornby have had in the recent past was over producing, as evidenced by the fact that a lot of first class models such as the 71 and King ended up in bargain clearance offers relatively quickly after release. If anything, the problem is not that Hornby didn't make enough high end models but rather they were flooding the market with some of their tooling.

The old Railroad, Lima and first generation China tooling will have been fully amortised a long time ago, should be much less labour intensive to produce and needs limited research effort. Or in other words the cost of production should be relatively low and if they make a good margin on them it is not impossible that some of the legacy tooling is just as valuable to Hornby as the latest high end tooling.

There is another point, the fact that Hornby see's the future as being in high end models does not necessarily mean that they no longer see a need for entry models and the Railroad range is pretty much the only affordable entry level OO range for the residual toy set market, for modellers on a budget or just those who enjoy running model trains and don't need the finery of the high end range. Personally I think the hobby would be poorer without this entry level range.

The Hornby/Hornby Railroad split range concept is not unusual and is widely used around the world. The German company Piko has three level, Expert, Hobby and Classic and they seem to have been successful in targeting these ranges. Lima (part of Hornby) have their standard Lima range which is equivalent to Railroad, and Lima Expert high end models. Roco and Fleischmann have their Start program of lower cost models which seem to utilise older tooling. Athearn in America have their Genesis high end models and the Ready to Roll entry level series. So if done properly there is no reason why splitting ranges into affordable entry level models and high end ones shouldn't work.

I really think the modern Railroad tooling fills a valuable niche for the hobby in providing good scale models with excellent running qualities at lower cost. They're perfectly adequate for many modellers, provide a great basis for detailing projects and are provide a more affordable growth path for new entrants into the hobby.

Edited April 16, 2017 by jjb1970

[ruggedpeak]

Are you serious? Bachmann consistent when they are still producing stock without NEM couplings, split chassis, either separate smokebox handles or the design clever half molded on handles, molded handrails and brake blocks molded onto the tender frames, tender pick ups or none.

Indeed, and their prices have gone up quite a bit recently, some partially hidden by 'extras' such as fitted passengers.

 

£140 for the Highlander coach set? 2 coaches at £70 each. Even discounted it's still nearly £60 a coach. That is seriously expensive for a model that is essentially just a relivery.

[JSpencer]

You're making several assumptions there. There is no reason that the legacy tooling should be occupying production slots which would be used by their high end tooling. One of the big problems Hornby have had in the recent past was over producing, as evidenced by the fact that a lot of first class models such as the 71 and King ended up in bargain clearance offers relatively quickly after release. If anything, the problem is not that Hornby didn't make enough high end models but rather they were flooding the market with some of their tooling.

bby.

The problem with by the King and Class 71 is that there were competing items announced just before Hornby's causing a chunk of the market to sit out and wait to see which was best before buying.

In the case of the King, Hornby had theirs out first, did not sell as many as expected because clearly a lot of King fans were waiting to see the other possibly better one. Hornby then sold the rest off cheap, which in turn killed (or seriously delayed) the other one.

 

I and others said at the time the Market was not big enough for 2 Kings especially given that there were lots of older Kings to be found. The same probably applies to 71s but less so as there no older 71s out there already.

 

We now have so many choices in new models that duplication is not viable period.

[Coach bogie]

There is a call for the Chairman to be replaced now.

 

https://www.ft.com/content/a84a5d9c-204b-11e7-a454-ab04428977f9

 

Mike Wiltshire

[Andy Hayter]

It seems the FT require me to part with the hard  earned.

[Mike Storey]

There is a call for the Chairman to be replaced now.

 

https://www.ft.com/content/a84a5d9c-204b-11e7-a454-ab04428977f9

 

Mike Wiltshire

 

Needs a subscription - could you please paraphrase? Is this any more than previous reports regarding their second largest shareholder a few days ago?

[Mel_H]

Indeed, and their prices have gone up quite a bit recently, some partially hidden by 'extras' such as fitted passengers.

 

£140 for the Highlander coach set? 2 coaches at £70 each. Even discounted it's still nearly £60 a coach. That is seriously expensive for a model that is essentially just a relivery.

 

And, in addition to the prices, some of Bachmann's stuff isn't that great (although it appears criticism of Barwell is not welcome by many, as Hornby bashing seems to be easier). The latest Stanier Mogul is good, but not up to the best (e.g. massively overscale front guard irons; it has a 5A Crewe North shed plate which would date it from May 58 to June 61.  It has counter-sunk rivets which was the case, according to the owners, until 1963-5.  It most certainly is not in 'as preserved' condition which Bachmann claims - the current shed plate is 8F (Wigan) It has works plates in a different position to 42969 and this would seem to be correct based on photos), while the less said about the 150 motor positioning the better (although they are going to rectify it), nor the massively-overscale jumper socket on the cl 40, plus the delay in actually producing announced items (158 anyone?). Mind you, the test shots of the Coal Tank do look nice. I'll get my coat....

[Coach bogie]

Needs a subscription - could you please paraphrase? Is this any more than previous reports regarding their second largest shareholder a few days ago?

Patience is a virtue on the Island of Sodor, toy train land and home to Thomas the Tank Engine. There, “the really useful crew” whistle in harmony, buffer, share, peep and puff along together. Pushy interlopers almost always get their comeuppance. Sample the FT’s top stories for a week You select the topic, we deliver the news. Select topic Enter email address Invalid email By signing up you confirm that you have read and agree to the terms and conditions, cookie policy and privacy policy. Life is not so wholesome elsewhere in toy train land. Last week, the chairman of Hornby, which makes Thomas and his friends as well as Scalextric and Corgi cars, was relegated to the really useless crew by one critic. Alexander Anton, non-executive director of rugmaker Victoria, who also manages legacy property portfolios, proposes to shunt Roger Canham, chairman for the past five years, off the board. Mr Anton is coupled to New Pistoia Income, a mysterious fund that owns about 20 per cent of Hornby, making it the Kent model maker’s second-largest investor after Phoenix Asset Management. New Pistoia and Mr Anton have, it seems, become impatient with Mr Canham over Hornby’s wheezing progress towards recovery. Mr Anton says the company has lost more than £30m of shareholders’ money in five years and is on track to lose more. That may be a bit hard on Mr Canham, an “iron man” triathlete. Hornby’s wheels were wobbling and its axles aching when he joined the board in 2012. The legacy of overstocking memorabilia for the 2012 Olympics and multiple problems with supplies in China have chugged on. Still, the group came close to breaching banking covenants last year and lost its second chief executive in four years. The shares at 33p are a third of what they were in mid-2015. However, on April 7, Hornby puffed out a statement claiming that it might soon crest the hill. The group still made a loss in the year to March. Nonetheless, after finding that half its product range earned more than 90 per cent of profits, it has stopped producing quite so many thousands of toys and is focusing on the most profitable lines. That sounds sensible. Better late than never. The old Margate factory site has also been sold and Hornby has stopped undercutting the retailers who specialise in selling its model planes, trains and automobiles to diehard die-cast buffs. The debt that threatened to derail Hornby a year or so ago is being whittled away. Instead of £7m net debt last year, Hornby has more than £1m net cash, whistled Hornby’s newish chief executive, Steve Cooke. The shares accelerated 10 per cent. Not good enough, wheeshes sleek and silvery Mr Anton. The strategy is wrong. The company needs to broaden its customer base and draw in a younger crowd, not narrow it to ageing miniature-train spotters, he told journalists last week. Mr Anton has expressed concerns about Hornby’s governance, too. He thinks Phoenix, which is chaired by Mr Canham and owns 34 per cent of Hornby, exerts too much control. This “is not in accordance with principles of good corporate governance and therefore is not in the best interests of the wider shareholder base”, says Mr Anton. This is the man who in 2012 was part of an ill-tempered board spat at Victoria, then the Anton family business, which resulted in him being made a non-executive director, with Geoffrey Wilding, a Kiwi private equity veteran, becoming executive chairman. Mr Anton, still a close associate of Mr Wilding, was on the board that two years later sanctioned a complex incentive plan involving derivatives that allowed the New Zealander to take close to half the carpet company as a reward for beating performance hurdles. Mr Wilding has since reduced his holding to about 33 per cent — about the same size as Phoenix Asset Management’s stake in Hornby. The taciturn Mr Canham’s record is not gilt-edged. He is not much given to chuffing cheerfully and it is by no means full steam ahead for Hornby. If this were Sodor, Sir Topham Hatt, the fat controller, would urge him to learn his lessons but would keep him in the yard. Mr Canham’s tenure at Hornby is less secure. His chairmanship of Phoenix does not assure his position. A year ago, Mr Canham was shunted as chairman of CPP, the insurer, even though Phoenix was the York group’s second-biggest investor. Nonetheless, shareholders in Hornby should take their time and think carefully about whether the model engine maker’s chairman should be displaced now and, if so, who should replace him.

Edited April 18, 2017 by Coach bogie

[Nimbus]

It seems the FT require me to part with the hard  earned.

Google is untroubled. The page was in their cache when I just checked. The piece is a summary of the Anton action, with a humourous slant. It gives some background to the protagonists' previous business histories, and concludes that Hornby investors should think long and hard before jumping.

 

The Nim.

[jjb1970]

The problem with by the King and Class 71 is that there were competing items announced just before Hornby's causing a chunk of the market to sit out and wait to see which was best before buying.

In the case of the King, Hornby had theirs out first, did not sell as many as expected because clearly a lot of King fans were waiting to see the other possibly better one. Hornby then sold the rest off cheap, which in turn killed (or seriously delayed) the other one.

 

I and others said at the time the Market was not big enough for 2 Kings especially given that there were lots of older Kings to be found. The same probably applies to 71s but less so as there no older 71s out there already.

 

We now have so many choices in new models that duplication is not viable period.

 

Indeed, but the problem is a lot of their good models that weren't being duplicated by other companies, such as the LNER 4-4-0s and 4-6-0s, Southern S15 & Class 67 amongst many others were also available at massive discounts indicating that over production was a significant issue for them.

 

In terms of duplication, I agree it doesn't help but at least in the case of the King it would seem Hornby were well advanced with their product when the rival was announced and their Class 71 beat the competition to market by a long time, duplication is an unavoidable risk of the model business and it is not really Hornby's fault if some of their projects were announced by others as well.

[Legend]

Possibly the massive discounts were to raise cash i.e. Convert stock to cash to help with their liquidity. Not due to them selling slowly, just not as fast as Hornby needed to immediately raise cash. Now that the liquidity position is restored there have been no more deep discounts.

 

The 71 is possibly an exception to this I've always thought that it was a limited market, partly already served by the DJM crowd funded one. It's quite possible they over produced here.