Hornby's financial updates to the Stock Market

[robmcg]

But who is going to make the coaches and wagons for them to pull?  Don't forget Hornby do a range of things - many of the commisioners don't.

 

Incidentally reading in a previous post that the CEO was on a basic of £287,000 pa and the Chairman reputedly on £300,000 I am left seriously wondering how Hornby Group - a toy & model manufacturer with limited market impact and size of sales could actually start to be able to meet salaries that big (plus no doubt the fringe benefits and pension contributions).  The figures seem to be somewhat out of kilter with the size and profit generating capabilities of such a company.

 

Ah, at last a hint of the management costs of this actually small company.   I see liquidation as likely. Sadly.

I think the ex-CEO had a very difficult task, as does the current chairman/CEO.  The sadness comes from seeing such great product designers/producers and other employees losing their jobs, if the tooling is tied up in Asian factories.

 

Just my opinion. I buy more models second-hand than new and expect that to continue.

 

Of course I know little about PLCs and asset management, debt recovery and so on, so my feelings are just that, feelings.

 

typo edit

Edited February 15, 2016 by robmcg

[Ron Ron Ron]

I've heard the new CEO is coming from Bravissimo.

If that's true they'll have lots of experience in dealing with big boys toys.

[antrobuscp]

I wonder what their definition of sales are?

 

If it is based on orders, then the 2016 range was annouced earlier this year before Warley, yeah sure this will have a big impact on December (being more) and January (being less) with others waiting for the toy fair (no doubt so that they can leap on the battery powered virgin sets and Downtown abbey!).

 

However - in Hornby's case - orders mean little when it comes to paying bank loans, after all most will take the best part of a year to fulfil , so it's cash flow that counts. You can have a dull January taking orders but still have plenty of money coming in.

According to the "Revenue Recognition" accounting policy, sales are recognised when the goods are despatched to customers, be they the retail trade or end consumers in the case of direct sales. This applies across the group. The policy also refers to a provision for sales returns which, and I am guessing here, would likely be based upon past experience.

Edited February 15, 2016 by antrobuscp

[Legend]

I've heard the new CEO is coming from Bravissimo.

If that's true they'll have lots of experience in dealing with big boys toys.

Or going bust!

[andyram]

I'm not so sure about this. In theory it's true, but people moan that retailers can't obtain stock of Hornby track, etc. I bet hardly anyone one here has an exclusively Hornby layout - Peco track, anyone?

I would just like to say that I my completed exhibition layout is made up entirely of Hornby track, all purchased from a Hornby concession outlet.

[71H]

Noticeable one of them is firmly in the toy / licensing market.

 

Yes, I agree with you on this one, I spotted it too.

 

It was this person.........

 

Secretary

 

Company Secretary: Amy Stacey

 

 

Bless her

[darrel]

They need to be careful who they sell to. Case in point Craig Whyte buying Rangers FC. Fingers crossed he ends up in jail soon along with his business partners and Charles Green.

[Gwiwer]

They need to be careful who they sell to. Case in point Craig Whyte buying Rangers FC. Fingers crossed he ends up in jail soon along with his business partners and Charles Green.

 

Another case in point.  Western Greyhound buses in Cornwall found themselves in financial trouble after losing numerous Cornwall Council contracts.  The MD / sole owner sold up after performance nose-dived with the only buyer being a chap suspected of dubious practice in Hampshire.   Western Greyhound duly collapsed without warning leaving half of Cornwall without public transport as a result of this person failing to prove financial standing.

 

Said person has now been banned indefinitely from holding an O-licence (operator's licence in the industry) and from holding any position within the industry.  His offsider has a condition imposed to the effect that any registration under his name must be referred to the Traffic Commissioner after he was allegedly involved in unlawful financial dealings.

 

I'm not sure Hornby PLC would be sold as is.  If anything I suspect it may be broken down into brands and managed more leanly.  If there is an under-performing brand within the PLC which could drag the rest over the edge (even if that is the UK railway operation) then it might be closed rather than sold.

 

I'm sure they would want to continue the name rather than sell it though possibly not with the letters PLC behind it.

[Mike Storey]

But who is going to make the coaches and wagons for them to pull?  Don't forget Hornby do a range of things - many of the commisioners don't.

 

Incidentally reading in a previous post that the CEO was on a basic of £287,000 pa and the Chairman reputedly on £300,000 I am left seriously wondering how Hornby Group - a toy & model manufacturer with limited market impact and size of sales could actually start to be able to meet salaries that big (plus no doubt the fringe benefits and pension contributions).  The figures seem to be somewhat out of kilter with the size and profit generating capabilities of such a company.

 

Ames was on £347k including basic salary, benefits (car and health) and pension. He, along with the other board members, received no annual bonus last year. However, he was awarded 847,000 performance shares, which only become active over three years based on company metrics (although whether these are retained is not known). Incidentally, a "relation", J Ames, held 36,000 shares at at 31 March.

 

Canham's salary was reduced to £150k when he became just Chairman, but I guess that will go back up to c.£300k now that he is CEO and Chairman again.

 

For these salaries, blame the Remuneration Committee, which consists of the two Non-Exec Directors. The salaries were not put to a shareholder's vote following the 14/15 report, as "remuneration policy had not changed".

 

The average basic salary of a CEO in the UK is c.£109k, although significantly higher in publicly listed companies - I cannot find the average for companies in the AIM. To compare with Hornby, the CEO of Network Rail (post the strange arrangements with Coucher) is paid around £700k plus performance bonus and benefits, on a £6.5 billion turnover and rather more responsibilities than that of a medium sized model and toy maker, turning over c£60m. It suggests Hornby are paying over the odds because they struggle to attract calibre to the industry. I make no comment about Mr Ames' calibre.

[robmcg]

Could someone remind me about Hornby's turnover in recent years?  ..., as this must have a bearing on the viability of trading out of trouble. (edit sorry I should have read the previous post!   duh!)

 

Also fixed costs like directors' fees senior management, out-sourced warehousing, distribution, and so on.

 

As I understand it gross revenue for the year reported-on in 6215 was UKP58.1m  but I cannot untangle the meaning of this plus the losses and warnings.

 

With debt rising any lender, shareholder or investor would surely need to have these basic elements well-understood.  I am not sufficiently literate in financial reports to draw any conclusions based on Hornby's annual and interim reports.

 

I await enlightenment with interest (and bought a new Hornby R3236 Duke of Gloucester 1960s version from TMC today as my contribution to the brave survival of this British hallmark brand, TMC had 9 in stock.....and Hattons cannot give away main range Duke R3191..)  

 

edit;  Also I imagine the ownership and value of tooling in Asia must have some bearing on any likely re-structure

Edited February 16, 2016 by robmcg

[MGR Hooper!]

Any clearer than the completely different box designs/logos they currently use?

 

I hope it isn't that Railroad products will be sold in blister packs like the Lima models displayed at the Nuremburg Toy Fair, or that they've managed to repurpose the Triang tools that were lurking at the back of the Margate factory.

 

The mind boggles...

 

As an aside, I was thinking about the description "full-fat" used by some to indicate that a model is top of the range.  Perhaps Hornby could divide their models into three parts (like Ancient Gaul) and call them Skimmed Hornby, Whole Hornby and Jersey Hornby.  With Green, Blue and Gold stars on the boxes. We'd know where we stand there!

 

Think I'll have a lie down...

Well he did say that more out-dated stuff will be pushed into the RailRoad range. I highly doubt that we'll see the blister packaging and I highly doubt that it's more older tooling. That aside I cannot say much more as we all know certain things are kept strictly confidential in the industry.

 

 

Personally I think Hornby (with the models they currently have) should have 3 ranges low, mid and high. RailRoad with the ex-Lima tooling is perfect for the low end. The mid range can have models like the Mk1s, Mk2Es, DoG, P2, Hall and Crosti 9F etc. And the main range can hold those excellent models. To me Hornby's issue is the segregation of the range and the pricing. Some things just don't make sense at all.

[Legend]

It needs a complete sorting out that's for sure. People fondly remember Simon Kohlers era , but can I just point out that while the concept of Railroad was good, the delineation of the range was appalling. Surely as marketing man he bears responsibility for that. You now have a hopeless mishmash of Hall P2 Duke Tornado that hover between main range and Railroad. Things like the 91 that should be Railroad but aren't .

 

It would need investment but I've always maintained Railroad should be the bridge between trainsets and main range. It should contain things you see on everyday railway such as sprinters , 66s , HST and 91s all in bright liveries of today. Chuck in an electrostar to railroad standards. Have some play value built in like aggregates hoppers you fill and discharge, car carriers etc. The old Triang was good at installing play value .

[Oakydoke]

.....Chuck in an electrostar to railroad standards.....

Please g*d no!

That would severely dent, if not preclude the chance of an Electrostar to normal main range high standards.

I'm sure you and others would go apoplectic if I suggested all future steam locos should only be built to Railroad or train set standards and not be included in the main range.

[MGR Hooper!]

It needs a complete sorting out that's for sure. People fondly remember Simon Kohlers era , but can I just point out that while the concept of Railroad was good, the delineation of the range was appalling. Surely as marketing man he bears responsibility for that. You now have a hopeless mishmash of Hall P2 Duke Tornado that hover between main range and Railroad. Things like the 91 that should be Railroad but aren't .

 

It would need investment but I've always maintained Railroad should be the bridge between trainsets and main range. It should contain things you see on everyday railway such as sprinters , 66s , HST and 91s all in bright liveries of today. Chuck in an electrostar to railroad standards. Have some play value built in like aggregates hoppers you fill and discharge, car carriers etc. The old Triang was good at installing play value .

That's sadly the issue. I've spoken to 3 Hornby reps before, all seem to think that their Class 59, 66, 86, 87, 90, 91, 92, 101, 142 etc fit perfectly in the main range. It's like they've never seen their own super-detailed models.

 

They actually do tell me with utmost sincerity that they feel those models are well detailed and fit right in. It baffles me...Do I laugh or do I cry? 

Edited February 16, 2016 by MGR Hooper!

[MGR Hooper!]

Please g*d no!

That would severely dent, if not preclude the chance of an Electrostar to normal main range high standards.

I'm sure you and others would go apoplectic if I suggested all future steam locos should only be built to Railroad or train set standards and not be included in the main range.

For one I think the RailRoad range should expand. I personally would like to see a new Class 86, 87, 91, 92, 110 and 142. I would have no issue if those were re-tooled to a RailRoad standard because in their current state I feel that they are even below the level of some current RailRoad stuff. They have their pros and cons. Think about the Class 91 for instance, something that's ridiculous in today's terms, priced stupidly already. Can't even make a prototypical rake for that matter.

 

On the other hand locos are perfect to be well detailed. Coaches and wagons IMHO can be lower spec. Or it gets too expensive to run proper rakes. The HST does well here, amazing power cars and lower spec coaches. EMUs and DMUs tend to be a hard one, detailed ones will cost money, budget ones will displease a lot.

 

You last point made me laugh... I remember reading a topic on a forum ages ago where the steam era modelers kept complaining that they didn't get well detailed models and that the modern era modelers should be thankful for what they have. We are a funny lot.

[peterfgf]

Yes, slipped up on that one.  I should have read it more carefully.

Peterfgf

[Stevelewis]

Shares  are  on  the  UP  again  almost  40p  at  0825  Tuesday.

[Joseph_Pestell]

Head above parapet here !! (and before anyone says it I have no connection with Hornby except as a buyer of stuff and I am certainly not a shareholder even at second hand.)

Joseph - not aimed at you here but just want to present a St Jude (look it up) view of some of the  comments on this subject

I think you will find principal shareholders been a lot more patient than football fans/owners -The investment houses own around 55% of shares and one of the less opaque -Phoenix Asset Management has the stated aim of investing longterm in businesses that have significant potential (!). These investors have seen the share price steadily decline over 4 years , the shareholders in total then subscribed £15m to a right issue six months ago at around £0.95 a share and the shares have now fallen off the cliff(75%), and in all these 4 years these “profit-driven” shareholders have taken no dividend at all. That is more patience than any football club (except perhaps Arsenal-2nd tin hat on !) and certainly more than has been shown by many people on this web-site, waiting for their favourite loco from the raft of specialist forward looking, innovative manufacturers all so capable of stepping into Hornby's shoes. I still have unfulfilled orders from 2011 and 2012 from two of these innovative suppliers and they're not Hornby.

Interestingly Phoenix also has one Mr R Canham as a director and the chairman of Hornby is also Mr Canham and the chairman's job is to look after  shareholders interests (on £300k p.a I believe.). I think 4 years is long enough - you could argue that Mr Ames is (once again?) taking the rap for for someone higher up - he left Ladbrokes as an IT director on remuneration of around £370K (see Guardian) with the Guardian saying he carried the can for Ladbrokes (IT) failures. He walked into Hornby around two years ago on a basic of around £287k (see annual return) where a major IT project was taking off and  and in his just under two years has been found wanting - in the last 6 months the undertakings given by the coy are in danger of breaching the financial covenant, there is a large  and significant hole in the value of the held stock, and to my mind some query over the performance/progress of the IT project (not sure of the latter - may be reading too much into iill-informed press comment). As CEO he has actually accepted the responsibility/blame - that strikes me as an honourable thing to do - unlike so many in the public/political sector who's fingers have to prised one by one off the doorframe and then pushed out with a massive press boot up the backside, a wafting of tax-payers pound notes and an alternative job offer on the other side. (PS his pension pot is not millions - according to annual report = £56k p.a for 2 years = £112k total - but I have got to admit do not know severance details - but unlikely to be millions based on these figures).

However of more immediate relevance to all of us is No profit = no new models (and no tax for governments to spend for our(their?) benefit, and without the various SR locos I, like "DunSignalling", would have precious few SR locos on my S&DJR/SR layout. If it was not for Hornby what would be pulling my Pines Express or my Royal Wessex (a Dapol A4 at 4x the price - now there's a thought ). The disruption of any re-alignment/sell off of the  Hornby businesses could well result in major delays worse than those 2-3 years ago and goodness knows what we would end up with, and finally as far as quality is concerned compare the relative merits of the three current O class freight locos I know which is the best as I have got at least one of each - the Hornby one is excellent the others ... they're ok.(don't ask where the O classes fit in on the S&DJR - rule 1 applies - a belated Exchange perhaps!!). Just though I would offer an alternative view!.

 

Thank you for that very detailed account. You have clearly put some time into studying the situation.

 

It does seem fairly amazing that with a recent rights issue of £15M, the company has declined to a stockmarket value not much above that. Since Phoenix put in a large part of that £15M, you would wonder what Mr Canham has been doing.

 

And why was an IT specialist appointed to be CEO? Completely different job spec.

[Joseph_Pestell]

That's sadly the issue. I've spoken to 3 Hornby reps before, all seem to think that their Class 59, 60, 86, 87, 90, 91, 92, 101, 142 etc fit perfectly in the main range. It's like they've never seen their own super-detailed models.

 

They actually do tell me with utmost sincerity that they feel those models are well detailed and fit right in. It baffles me...Do I laugh or do I cry? 

 

As I wrote yesterday, history is repeating itself. I can recall similar conversations with Jouef reps.

[locoholic]

I wonder if the volume of sales & profit margins for the serious models has now shrunk to the extent that it no longer justifies the big corporate structure that Hornby seems to think is necessary? Received wisdom on here is that the train set (& slot-car) market still exists, which would benefit from the larger number of sales outlets that Hornby has. But other manufacturers/commissioners have recently shown that expensive, detailed models can make do with a much lower (& cheaper) profile, & I suspect that the high-end Airfix kits are the same. There would therefore seem to be little logic in keeping all the businesses under the same roof. In fact, the serious model train business has probably been harmed by the corporate approach Hornby adopted, distancing itself from its customers and retailers in a way that a smaller business wouldn't have dreamt of doing. I would still buy a couple of S15s or a rake of coke hoppers even if the boxes didn't have the word Hornby on. The train sets probably need that name. So I think it's time to split the business up into toys and serious models, as they actually have very little in common.

[highpeakman]

Where would these people with experience of running PLC sized hobby companies come from? There are few (if any) other similar companies in the UK so the pool of suitable recruits with exactly the right experience will be tiny. 

 

He does not need experience of running a PLC sized hobby company.

 

He needs experience of running a large company certainly but, principally, he needs experience of managing an experienced team. They can each have their own disciplines but must work as a team.

 

The team being him (or her), a marketing manager/director who really does know and understands the hobby/toy industry and a good finance manager. Let that team be at the top of a structure that manages the development, production, sales and funding of the products. 

 

Sounds easy but, again as I know from personal experience, you can have all the correct elements but the mix together just does not work - just like a football manager and his team - change the manager and (sometimes) you get a revived team. Or, indeed, schools in selection of headmasters.

 

When that team works well together, with everybody bringing their own expertise together and welded by a good CEO everything can go great.

 

Edit: slight rewording and emphasis.

Edited February 16, 2016 by highpeakman

[Ron Ron Ron]

That's sadly the issue. I've spoken to 3 Hornby reps before, all seem to think that their Class 59, 60, 86, 87, 90, 91, 92, 101, 142 etc fit perfectly in the main range. It's like they've never seen their own super-detailed models....

I think you've made a typo there?

Class 60 ????

Shouldn't that be Class 66 ?

 

 

They actually do tell me with utmost sincerity that they feel those models are well detailed and fit right in. It baffles me...Do I laugh or do I cry?

Are they simply following the company line here?

I assume they are just typical salesmen and not model aficionados?

They couldn't possibly say their company's products are sub-par, could they?

 

 

.

[DonnyRailMan]

 All I can say is what would Frank  Hornby think knowing what a mess management people have got his

family firm into or even present day family members of Hornby.

[coachmann]

This thread is the oft-seen case of a hanging posse, the ugly side of humanity that has forgotten which side of the bread carries the butter.   If most folk on this forum removed their Hornby items from their layouts I bet they would look pretty bare and it doesn't matter if folk are RTR-dependent or people who build models.  

 

Reading this thread, one would think Hornby is generally held in low esteem, yet when threads are read about Hornby locos and rolling stock, the picture is well rosy with gushing reviews for GWR bow-end coaches and Stanier non-corridors and for the K1 and 01 and King and S15 and original Bullied Pacific and P2 and Crosti 2-10-0 and the 700 and the Britannia an so forth all the way down the track to the red box company....

[Mark Dickerson]

Please g*d no!

That would severely dent, if not preclude the chance of an Electrostar to normal main range high standards.

I'm sure you and others would go apoplectic if I suggested all future steam locos should only be built to Railroad or train set standards and not be included in the main range.

There again, one can infer that it's perfectly OK to suggest that for very small steam types, given some comments on the price of the new Peckett and J50.