Hornby's financial updates to the Stock Market

[Mel_H]

Hopefully link will work. For those interested, Bachmann Europe plc's 2014 accounts from companies house:

 

https://beta.companieshouse.gov.uk/company/02392907/filing-history

 

Shows turnover of approximately £14m. I'd suggest Hornby's model rail turnover is higher but I've no evidence to support that assertion

 

David

If my maths is correct that shows a margin of 1.82% - which is lousy. BUT, it is a private rather than a public company, so it can treat things very differently

[Clearwater]

If my maths is correct that shows a margin of 1.82% - which is lousy. BUT, it is a private rather than a public company, so it can treat things very differently

I get around a 3.3% margin after adding back non-cash items (depreciation and amortisation) of ebitda (earnings before interest, tax, Depreciation and amortisation). Agreed that's pretty low hence why you don't need to go far wrong on the revenue line before you have a problem. I'd note Bachmann only sells to trade so their revenue figure will be lower than Hornby's per item sold and h should have a higher margin.

 

I don't think the ownership is an issue for the margin (and in any event Bachmann's parent co Kader is listed in Hong Kong). The difference to me is that a public company has greater disclosure requirements and may need to show to public investors a growth profile whereas a private company can have more flexibility. However, private equity owners are generally pretty demanding of their management teams albeit they can take a 3/5 year view on when growth is achieved

 

David

[Mike Storey]

Maybe not worth as much as you suggest.

A Hornby rep, when in my local shop, told us they had been refused planning permission for housing on the site as it is zoned as industrial, and the planning authority wasn't budging on that.

 

No argument and I wasn't suggesting housing would replace it. What is strange about the Westwood site is that it is full, each time it expands. The retail giants are land hungry, the access road just to the west of the Hornby site has been upgraded and the only direction left is Hornby. A giant B&Q is next door and they need Westwood to come to them. Land Securities, who own the portfolio there, need more room, after the huge Sainsbury megastore took up most of the remaining, existing space. My guess is PC World will be next, who have no presence in Thanet. They often appear near a B&Q. Square footage rental costs have doubled in five years. This is a valuable site.

[Mel_H]

As its a public company, do they now have to make a further announcement based on share prices these last few days or can they just keep their heads down?

No, they are not required to make a further announcement based on the price movement, because it is a reaction to a a reason  - i.e. the trading update.

 

If there were falls (or rises) like this for other reasons, then yes they would - even if that statement says "we don't know why,". This does happen rarely. The AIM rules are fairly complex but, in short if the company is aware of something material that will affect its financials it is required to tell the market (which is what prompted the trading update on Monday).

Edited February 12, 2016 by Mel_H

[Andy Hayter]

Although OT, there may be a very good reason why Bachmann Europe has low margins.  They are a wholly owned subsidiary of a Chinese/Hong Kong company and as such it may well make good tax sense to minimise profit in the UK and transfer it to Hong Kong.  Hence but at a high price from the Far East and sell at minimal margin.

[gismorail]

Bizarre coincidence or has someone been reading the forum? When I checked just now this section has been re-arranged with the stuff in stock now on the 1st page, followed by Pre-Orders then the OOS/Sold Out. 

Following this post I went onto the Hornby website and had a quick browse through the site ..........having wandered around for a while I came to the conclusion , What an awful website no wander the companies in trouble if that is supposed to be the main shop window !!!!!!

[Mike Storey]

Just for interest, someone must think there is a decent business there, as the shares went up another 1.50 today, to 24.50.

[Coryton]

Following this post I went onto the Hornby website and had a quick browse through the site ..........having wandered around for a while I came to the conclusion , What an awful website no wander the companies in trouble if that is supposed to be the main shop window !!!!!!

 

Maybe I'm doing something wrong, but whenever I go there everything comes up in unpleasantly large text. It looks as if they assume that everyone is browsing on a phone or tablet.

 

It is possible to make web sites that work differently on computers and phones, as indeed RMWeb does.

[Mel_H]

You can pre-order one for next year. This version is improved with a circle of track of a radius more suited to going round a Christmas tree.

 

http://www.Hornby.com/uk-en/santa-s-express-christmas-train-set.html

Curiously, the description includes the contents as having a "Horny owner's manual" - maybe that's what makes it so saleable (and the £50 pricing with free delivery)

[Coryton]

Curiously, the description includes the contents as having a "Horny owner's manual" - maybe that's what makes it so saleable (and the £50 pricing with free delivery)

 

Ooops!

 

It is quite important to spell "Hornby" correctly when going to their web site.

 

And sites which try to help you find ebay bargains by searching for various mis-spellings of what you're searching for can give some rather disturbing results.

[Mel_H]

It already is. In the press Hornby has been hitting the buffers, tanking and chugging, along with all the Thomas gags they can come up with. 'Barclays might brick them up like Henry'

I may have mis-heard the trailer, but Radios 4's Sunday morning (0900hrs) 'Broadcasting House' programme this week (14/2) said it would be covering the Hornby 'crisis'.

[Mel_H]

Over on the Oxford diecast Facebook group a similar thread has popped up slating corgi's recent releases and oxfords dominance. I wonder if airfix modellers are also in deep discussion?

 

Paul

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

[Mel_H]

Although OT, there may be a very good reason why Bachmann Europe has low margins.  They are a wholly owned subsidiary of a Chinese/Hong Kong company and as such it may well make good tax sense to minimise profit in the UK and transfer it to Hong Kong.  Hence but at a high price from the Far East and sell at minimal margin.

A good point and there are examples of other areas of manufacturing where that appears to happen.

[ParkeNd]

A good point and there are examples of other areas of manufacturing where that appears to happen.

Central Management Charges - a common practice.

[37114]

Interesting reading, my thoughts on the situation:

 

- The £1m stock loss is a worrying, this could be through loss of stock from the ERP changes or write down of stock value. One hopes it is the latter as part of a "get all the bad news out in one set of results" strategy but more likely the former

 

- Hornby are in this limbo land of selling to trade and selling direct, quite simply they either need to do one or the other. If Hornby had decided that the best returns were to be had selling direct then they needed to have put a proper plan in place to do so as opposed to a plan which clearly hasn't worked and has alienated the current customer base (i.e independent retailers). The new management appear to have completely misunderstood their route to market as they have lost their key contact route with their customer so have limited end user feedback, something which is essential for any business to survive

 

- Where do they go now? Well clearly they have some immediate financial issues to resolve with the banks if they are in danger of breaking their banking covenants. They will no doubt be preparing or have prepared a turnaround plan for the bank as to how they will resolve the financial issues they have and return to profitability. This will likely include a sell off of some sort and commitment to cut costs (although unfortunately this will almost certainly be people). The strength and viability of this plan will be critical to Barclays saying "yes we are happy and will agree new terms" or "Sorry we don't think your plan will work".

 

- What is their brand strategy? When Hornby released the Railroad brand I thought it was a cracking idea. They could use the brand for the older Hornby and Lima tooling, priced accordingly aimed at the younger/new market entrant at an affordable price, then keep the Top Link brand for premium products like the Merchant Navy and the Class 50. They started off well but seem to have failed to capitalise on it with quite a confusing picture with thing like the A1 sitting in both ranges. The other thing that strikes me is the lack of ability to sell "projects" to customers, as an example there have been a number of examples of HST power cars being released in one catalogue with coaches following in the next year. As for not allowing magazines free review samples; really??? I can't believe anybody thought that was a good idea, never mind signed it off. Hornby need to make it easier for customers to buy product and part of that is having a credible marketing strategy which I don't think they currently have.

 

Interesting times ahead, I just feel for those who work for Hornby and are worried about the long term survival of the company

[phil gollin]

.

 

I was wondering about the timing of the announcement.   Now companies have certain obligations about making such announcements in a timely manner, however making it at Chinese New Year is that production in China won't be disrupted by any knee-jerk reactions from their Chinese factories.  Hornby's management have a LITTLE time to go over and talk to the factory managers to convince them that there is a reliable source of payment still available.

[Stevelewis]

One  of  my  sons  is popping  over  to  China  again  end  of  the  month  perhaps  he  could  be  persuaded  to  have  a  few  words  with  the  factory  bosses  to  keep  us  supplied  with  Hornby!!!

[Ron Ron Ron]

....The £1m stock loss is a worrying....

The £1m write off is a relatively small issue compared with the underlying issue at hand.

 

"January ..... poor underlying sales .... negative year on year revenue growth .... sales for the month being substantially below expectations..."

 

"The disappointing sales performance experienced in the New Year is expected to result in a trading profit deterioration of between £2.5m - £3.0m...."

 

"....now expecting to report an underlying loss before tax in the range of £5.5m - £6.0m..."

 

.

Edited February 13, 2016 by Ron Ron Ron

[phil-b259]

 

I would be more than happy to help Hornby out by making some purchases, but I'm afraid they don't make it easy.  The expected delivery date for the Adams Radial has now slipped to May and as they will now be released in Crimson instead of the previously announced BR Green, my order for the SR 58ft Maunsell Rebuilt ex-LSWR Coaches has been cancelled.

 

 

The consensus on here was that the ex LSWR stock never wore BR green in real life anyway. The 'BR Green' seen on photos is heavily varnished Malachite with a BR font for lettering. Hornbys change to crimson is a case of making changes to get it right - and if you want BR green (a totally fictitious livery for this stock) you will need to do it yourself.

[ChesterModelCentre]

Martin, avoid the risk of losing money online and shop local.

Then again. many people will use their local model shop to see and examine a new product then go away and order it cheaper online. These same customers are the usually the first and loudest to complain when a local model shop then closes down. Yes, I have a vested interest as the owner of a model shop but any model shop owner will tell you the same.

 

My opinion for what it is worth is that the Hornby brand including Airfix, Humbrol, Corgi and Scalextric will survive but with heavy restructuring. For those contempalting the purchase of Hornby just remember you buy the debts as well as the assets before you start to turn the business around. 

[ruggedpeak]

No argument and I wasn't suggesting housing would replace it. What is strange about the Westwood site is that it is full, each time it expands. The retail giants are land hungry, the access road just to the west of the Hornby site has been upgraded and the only direction left is Hornby. A giant B&Q is next door and they need Westwood to come to them. Land Securities, who own the portfolio there, need more room, after the huge Sainsbury megastore took up most of the remaining, existing space. My guess is PC World will be next, who have no presence in Thanet. They often appear near a B&Q. Square footage rental costs have doubled in five years. This is a valuable site.

The value for a retail park is nowhere near what it is for housing. If Hornby's finances were relying on selling the site for housing and then there may well be hole in the sums. Hopefully they used the existing use value in their projections pending consent.

 

As for B&Q, they are only still in the town after managing to downsize their store. http://www.thanetgazette.co.uk/Margate-B-Q-saved-closure/story-28406722-detail/story.html

 

The current local plan states:

 

http://thanet.devplan.org.uk/

POLICY EC12 - RETENTION OF EMPLOYMENT SITES

THE FOLLOWING SITES, AS IDENTIFIED ON THE PROPOSALS MAP, WILL BE RETAINED FOR EMPLOYMENT USES FALLING WITHIN USE CLASSES B1 AND B8 IN LOCATIONS CLOSE TO RESIDENTIAL AREAS, WITH ADDITIONAL B2 USE AWAY FROM RESIDENTIAL AREAS:

1. ALL SITES SPECIFICALLY IDENTIFIED UNDER POLICY EC1; AND
2. EXISTING BUSINESS SITES AND PREMISES IDENTIFIED ON THE PROPOSALS MAP AND SET OUT IN THE TABLE BELOW:............................

WESTWOOD INDUSTRIAL ESTATE

MARGATE

[DJM Dave]

The value for a retail park is nowhere near what it is for housing. If Hornby's finances were relying on selling the site for housing and then there may well be hole in the sums. Hopefully they used the existing use value in their projections pending consent.

 

As for B&Q, they are only still in the town after managing to downsize their store. http://www.thanetgazette.co.uk/Margate-B-Q-saved-closure/story-28406722-detail/story.html

 

The current local plan states:

 

http://thanet.devplan.org.uk/

POLICY EC12 - RETENTION OF EMPLOYMENT SITES

THE FOLLOWING SITES, AS IDENTIFIED ON THE PROPOSALS MAP, WILL BE RETAINED FOR EMPLOYMENT USES FALLING WITHIN USE CLASSES B1 AND B8 IN LOCATIONS CLOSE TO RESIDENTIAL AREAS, WITH ADDITIONAL B2 USE AWAY FROM RESIDENTIAL AREAS:

1. ALL SITES SPECIFICALLY IDENTIFIED UNDER POLICY EC1; AND
2. EXISTING BUSINESS SITES AND PREMISES IDENTIFIED ON THE PROPOSALS MAP AND SET OUT IN THE TABLE BELOW:............................

WESTWOOD INDUSTRIAL ESTATE

MARGATE

I hope the age of the Margate building doesnt preclude an easy sale, and i'm thinking Asbestos here, as that would be exactly what nobody needs as it would have an impact on perceived internal cashflow if it did.

[roundhouse]

Martin, avoid the risk of losing money online and shop local.

Then again. many people will use their local model shop to see and examine a new product then go away and order it cheaper online. These same customers are the usually the first and loudest to complain when a local model shop then closes down. Yes, I have a vested interest as the owner of a model shop but any model shop owner will tell you the same.

 

We don't have a local model shop in South London that we can get to easily.

 

Our 'local' model shop is Gaugemaster. They charge full price.

 

So when they sold out of Okehamptons along with other traders online that I checked, I went to last resort which was Hornby direct. They ran out a day later and were no dearer.

 

Back doing shows, this year I haven't seen a trader with one so a good job that I did order. Not saying that other retailers had them but there is only so much searching one can do.

 

Otherwise most of my purchases are at shows.

[Pacific231G]

Martin, avoid the risk of losing money online and shop local.

 

Then again. many people will use their local model shop to see and examine a new product then go away and order it cheaper online. These same customers are the usually the first and loudest to complain when a local model shop then closes down. Yes, I have a vested interest as the owner of a model shop but any model shop owner will tell you the same.

 

My opinion for what it is worth is that the Hornby brand including Airfix, Humbrol, Corgi and Scalextric will survive but with heavy restructuring. For those contempalting the purchase of Hornby just remember you buy the debts as well as the assets before you start to turn the business around. 

What's worrying for me is that Hornby's International brands also include Jouef which is the only mass market brand specialising in French H0. Similar stories I think for Hornby's Italian (Rivarossi) and Spanish (Electrotren) brands. European manufacturers are less confined to their country of origin of course but without Jouef, almost the only SNCF steam locos available would be ex German "reparations" types. There are other French manufacturers such as REE and  LSM but they tend to be at the specialist and therefore higher priced end of the market and without Hornby Jouef there would be nobody supplying the all important beginner's market.

[Shedmaster]

Hi, serious question :

 

When a business has serious problems, isn't that when they call in the likes of Keith Heller, as EWS did, to make the necessary reforms to get things healthy again?

 

Is this an option in this case?

 

It's true that he was nicknamed 'hatchet heller' and was absolutely ruthless but he had a job to do, does Hornby need some help maybe?

 

Kindest Regards,

 

Shed.