Hornby's financial updates to the Stock Market

[Robin Brasher]

You're right there - they were the most basic of models, but a useful basis for detailing & conversion to other types.

Terry Gough's SR articles in the mid-sixties "Modeller" still get read from time to time! I just wish I'd kept a few of those coaches now....

I bought one for £5 last week at the Weymouth exhibition last week. A bit cheaper than Hornby's ex LSWR coaches. The coaches needed to be light because they were hauled by the Lord of the Isles locomotive a year before Tri-ang Railways invented magnadhesion. There seems to be a glut of second hand model coaches available as lots of older people are upgrading their collections, downsizing their homes, going into nursing homes and ascending into the next World.

[Mel_H]

Stock exchange announcement at 0700 this morning:

 

Hornby ANNOUNCES INTERIM RESULTS

 

'GOOD PROGRESS WITH TURNAROUND PLAN'

 

Hornby Plc ("Hornby"), the international hobby products Group, today announces its interim results for the six months ended 30 September 2016.  The Company owns a number of iconic brands including Hornby, Scalextric, Airfix, Humbrol and Corgi as well as a number of European model rail brands.

 

Financial Highlights

 

·     Group revenue of £21.9 million (2015: £22.3 million)

·     Underlying Group loss of £3.6 million (2015: loss of £3.4 million) 

·     Statutory loss for the period of £4.7 million (2015: loss of £4.5 million)

·     Net debt of £2.1 million (2015: £5.7 million) 

·     Refinancing successfully completed with £8.0 million Placing and Open Offer of new shares approved by shareholders on 5 July 2016

 

Turnaround Plan Progress

 

·     Structural changes progressing with £2.0 million of annualised headcount savings realised

·     Re-engaging core customers in the Independent sales channel with new term and conditions issued 

·     Strategic exit from majority of concessions progressing with around half closed to date and the remainder to close post-Christmas 2016

·     Careful allocation of new capital investment this financial year of £1.5 million (2015: £4.6 million), with £1.0 million invested in the period

·     2017 product range focused on smaller number of profitable lines 

·     Reduction of stock being carefully managed to avoid disruption and cannibalisation of underlying business

 

Steve Cooke, Hornby Chief Executive commented,

 

"We are making good progress with the Hornby turnaround. We are delivering the structural changes to reduce business scale and costs and to streamline the European operating model. We are currently focussed on the Christmas trading period as well as ongoing stock reduction initiatives. 

 

"We have listened carefully to our core Independent customers and responded positively to their concerns with new trading terms and a commitment to rebuild our relationship with them.

 

"The Group has traded steadily during the first half of the year but revenue is expected to decline significantly year on year in the second half as the planned rationalisation of product lines, channels and certain international brands takes effect. We remain confident of meeting the Board's financial targets for this financial year."

[adb968008]

Turnaround plan sounds good.

 

Sadly £2mn in job losses, but if it's needed it's needed.

I haven't heard many comments about the retailers new ts &cs so one assumes no news is good news there too.

No massive sales, but stock reduction

 

They are planning a smaller volume of product sales from a smaller range (and we've seen the price rises), hard to say this sound like a plan that doesn't seem solid... ?

[Mike Storey]

Have just read through the long-form (and re-issued) Interim Report and the headlines remain the same.

 

No dividend to be paid again - share price dropped by 5% immediately, despite reasonable long term plan - now under £30 again.

 

Credit facility only 50% used and is currently only half what it was at the same time last year.

 

Exchange risks still not re-calculated, as expected, but a combination of 12 month hedging and increasing prices as the higher rate impacts planned.

 

Despite reduction in product lines of 40%, revenue expected to drop only 25%, which shows what a loss some products were incurring, plus the impact of reduced overheads.

 

Much is made of the new relationship with independents, and their importance, and the withdrawal from concessions, but this time I could not see any narrative on direct sales?

 

One interesting snippet, tucked away, was that their latest Airfix plastic kit (Curtiss Warhawk 1:48 scale) was manufactured in the UK. I am not an expert from what I see this is the first non-Quick Build kit to come out of the Newhaven plant? Shape of things to come perhaps?

[The Stationmaster]

Have just read through the long-form (and re-issued) Interim Report and the headlines remain the same.

 

No dividend to be paid again - share price dropped by 5% immediately, despite reasonable long term plan - now under £30 again.

 

Credit facility only 50% used and is currently only half what it was at the same time last year.

 

Exchange risks still not re-calculated, as expected, but a combination of 12 month hedging and increasing prices as the higher rate impacts planned.

 

Despite reduction in product lines of 40%, revenue expected to drop only 25%, which shows what a loss some products were incurring, plus the impact of reduced overheads.

 

Much is made of the new relationship with independents, and their importance, and the withdrawal from concessions, but this time I could not see any narrative on direct sales?

 

One interesting snippet, tucked away, was that their latest Airfix plastic kit (Curtiss Warhawk 1:48 scale) was manufactured in the UK. I am not an expert from what I see this is the first non-Quick Build kit to come out of the Newhaven plant? Shape of things to come perhaps?

 

Mike have you had a chance to compare the original statement with the revised one which has subsequently appeared?  I wonder if that might have prompted the move in the share price?

 

Oddly the Daily Telegraph business section does pass comment about direct sales and Hornby's aim to increase them.  The unsurprising bit to me is the situation regarding concessions - with odd exceptions (such as Locomotion) these seem to be simply a way of warehousing unpaid stock judging by a couple of examples I've seen with little evidence of anything moving off the shelves and that stock no doubt sticks on Hornby's books.

[Mike Storey]

Mike have you had a chance to compare the original statement with the revised one which has subsequently appeared?  I wonder if that might have prompted the move in the share price?

 

Oddly the Daily Telegraph business section does pass comment about direct sales and Hornby's aim to increase them.  The unsurprising bit to me is the situation regarding concessions - with odd exceptions (such as Locomotion) these seem to be simply a way of warehousing unpaid stock judging by a couple of examples I've seen with little evidence of anything moving off the shelves and that stock no doubt sticks on Hornby's books.

 

I did not compare the whole thing Mike, only the headlines - I believe the original omitted some financial tables. I think the short press release did refer to direct sales but I did not find mention of it in the long form version detail, unless I missed it!

 

One thing I did notice was the appointment  of a "new", interim Sales & Marketing Director, but I could not work out when that happened, some time between May and November I presume. He is not a plc Director, so no details given, let alone a name. Anyone know who that is and where he/she came from?

[Mike at C&M]

I haven't heard many comments about the retailers new ts &cs so one assumes no news is good news there too.

Unfortunately, this is not the case. We have many issues with the T&Cs as originally released, and many of us have let Hornby know this.

 

Thankfully, what was the impregnible wall of "Fortress Margate" is now more foregiving, and there has been some 'give and take' between us.

 

But the trust that was completely lost between us over the recent years and months will take a lot of getting back. Promises were made and regularly broken, now is the time for Mr.Cooke and his employees to prove that the tide has turned and that they value us, and not simply use us.

[MatthewCarty]

Unfortunately, this is not the case. We have many issues with the T&Cs as originally released, and many of us have let Hornby know this.

 

Thankfully, what was the impregnible wall of "Fortress Margate" is now more foregiving, and there has been some 'give and take' between us.

 

But the trust that was completely lost between us over the recent years and months will take a lot of getting back. Promises were made and regularly broken, now is the time for Mr.Cooke and his employees to prove that the tide has turned and that they value us, and not simply use us.

One thing to note is the lack of any sale/special deal today. Surely a good sign.

[Mike at C&M]

One thing to note is the lack of any sale/special deal today. Surely a good sign.

Which is one promise that they made to we retailers. So agreed that this is a good sign.

[Ron Ron Ron]

One thing to note is the lack of any sale/special deal today. Surely a good sign.

 

Note what was said in the press release......

 

·     Reduction of stock being carefully managed to avoid disruption and cannibalisation of underlying business

 

.......We are currently focussed on the Christmas trading period as well as ongoing stock reduction initiatives. 

 

 

Stock reduction is being carried out more carefully (sneaking it out the back door possibly?).

 

 

 

.

Edited November 25, 2016 by Ron Ron Ron

[PCW]

Note what was said in the press release......

 

 

 

Stock reduction is being carried out more carefully (sneaking it out the back door possibly?).

 

 

 

.

It's a bit radical, but I think stock reduction is actually being achieved by selling it at a proper margin through independent retailers!  I'm not aware of any stock dumping, and the price Hornby are charging for selling direct on their website is now a lot more than the independents, so you could argue they are actually trying to steer the majority of the sales back into the hobby shops. Bravo!  And yes, decent hobby shops have to have a decent online sales facility as well, but still staffed by enthusiastic folk with knowledge and care.

 

I think because the massive over production has stopped there is actually no need to dump stock now, and if independents are regaining their appetite to order with confidence there is no reason why upon arrival of a model the majority of the stock shouldn't go straight out to the shops, it's all very radical because Hornby then simply invoice the shops and collect the cash in 30 days or whatever. No surplus stock to pay for, warehouse, or dump!  Gosh, I wonder why no one ever thought of doing that before?

[reevesthecat]

The couple of independent retailers around here have told me they have no intention of restocking Hornby as they were so appalled by how they were treated. Whether this will change in the future I don't know.

Mark

[Robin Brasher]

My nearest model shop is at Swanage Station.  Here the shop has stopped stocking Hornby due to the problems the shop has had with Hornby in the past.

 

Now all they stock is 00 gauge Bachmann and Peco so the blue boxes are winning here. The shop has had no problems with Peco which is probably made in Britain. There have been delivery delays with Bachmann.

 

Railway Modellers can run a complete service using Bachmann and Peco products so there is little point in stocking Hornby. if modellers want a couple of Hornby items like the Adams Radial and a southern cattle wagon they can obtain them by mail order from Hornby or from mail order shops like Hattons or Rails.

[jjb1970]

The problem I see is that if you can meet your Hornby needs by mail order then you might find you can meet all your other needs in the same way.

[bigherb]

 

Now all they stock is 00 gauge Bachmann and Peco so the blue boxes are winning here. There have been delivery delays with Bachmann.

 

 

And they had very little of that when I was there in September.

[Fenman]

... Railway Modellers can run a complete service using Bachmann and Peco products so there is little point in stocking Hornby. ...

 

Really? I can see how 3 Bachmann locos might work on the passenger services of the M&GN in 1952, but Hornby produces pretty much everything I absolutely need: from different ranges of coaching stock to J15, D16, B12 and B17. Plus a few others I can press into service at a pinch.

 

Any model railway shop owner who has decided to boycott Hornby is likely to be cutting off a very significant - I could almost write "huge" - section of their potential market. But, of course, every shopkeeper is entitled to stock what they please. Reminds me of the old joke: the shopkeeper complaining in frustration to the customer that "look, you're the tenth person I've told this morning that I don't stock those because they never bloody sell".

 

Paul

[2750Papyrus]

Tried to buy a trainset for grandson's birthday 18 months ago.  No trainsets in retailers in July - "a Christmas item" apparently.  Finished up buying from EBay.  Also noticed no stores stocking Hornby whether Toys 'R Us or more traditional toy shops. 

 

I have poked fun at Hornby on other threads but  as a hobby we need them now and for future generations and they are certainly trying hard to turn things around.  I hope sincerely that they succeed.

[MikeParkin65]

Tried to buy a trainset for grandson's birthday 18 months ago.  No trainsets in retailers in July - "a Christmas item" apparently.  Finished up buying from EBay.  Also noticed no stores stocking Hornby whether Toys 'R Us or more traditional toy shops. 

 

I have poked fun at Hornby on other threads but  as a hobby we need them now and for future generations and they are certainly trying hard to turn things around.  I hope sincerely that they succeed.

I take some heart from the number of children playing with the demo layouts on the Hornby stand at Warley. Likewise in the Q&A after the 2017 range presentation there was a clear recognition that they needed to engage with young and new modellers as well as dyed in the wool old hands and collectors.

[Legend]

The couple of independent retailers around here have told me they have no intention of restocking Hornby as they were so appalled by how they were treated. Whether this will change in the future I don't know.

Mark

Agree they were badly treated in the past , but if you are selling model railways you really need to stock Hornby.. Full range from cheepo 0-4-0, starter sets right up to a top of the range a Duchess. If you don't stock them you are really turning a substantial , possibly majority, of your market away. What they going to sell......Bachmann? Not a lot of entry models there, and still pretty expensive.

[Clearwater]

Agree they were badly treated in the past , but if you are selling model railways you really need to stock Hornby.. Full range from cheepo 0-4-0, starter sets right up to a top of the range a Duchess. If you don't stock them you are really turning a substantial , possibly majority, of your market away. What they going to sell......Bachmann? Not a lot of entry models there, and still pretty expensive.

Agreed. Smacks of cutting off your nose to spite your face.

[PCW]

I think what is needed now is a good long period without any stock dumping / gazumping that has driven so many retailers to despair in the past.  When it has been proven that the leopard really has changed it's spots some retailers will gradually re-build their confidence in the brand and start properly stocking Hornby again. It's all about trust really, trust has to be earned and it doesn't happen overnight. I just hope Hornby can afford a period of lower sales while it waits for the trust to be re-built.

[ruggedpeak]

I think what is needed now is a good long period without any stock dumping / gazumping that has driven so many retailers to despair in the past.  When it has been proven that the leopard really has changed it's spots some retailers will gradually re-build their confidence in the brand and start properly stocking Hornby again. It's all about trust really, trust has to be earned and it doesn't happen overnight. I just hope Hornby can afford a period of lower sales while it waits for the trust to be re-built.

And that is exactly what the CEO has made clear they are doing in the interview with Hornby Mag. They are fully aware of this and working on it. Indeed overstocking was one of the major issues for them under the old regime, they are aligning their manufacturing to realistic sales targets so they don't end up with a warehouse of stock that has to be discounted to generate cash.

[Clearwater]

And that is exactly what the CEO has made clear they are doing in the interview with Hornby Mag. They are fully aware of this and working on it. Indeed overstocking was one of the major issues for them under the old regime, they are aligning their manufacturing to realistic sales targets so they don't end up with a warehouse of stock that has to be discounted to generate cash.

I think we can confidently expect "stock outs" of one or two items in the next 12 months...

[Ron Ron Ron]

The clear message is more than ever, buy models as soon as you can, after they are released.

Hornby will be keeping minimum stocks and will want to shift them all out ASAP.

The shops/stores/stockists will order to satisfy pre-orders and for the numbers they think they will be able to sell.

 

 

 

.

[Mike at C&M]

I think what is needed now is a good long period without any stock dumping / gazumping that has driven so many retailers to despair in the past.  When it has been proven that the leopard really has changed it's spots some retailers will gradually re-build their confidence in the brand and start properly stocking Hornby again. It's all about trust really, trust has to be earned and it doesn't happen overnight. I just hope Hornby can afford a period of lower sales while it waits for the trust to be re-built.

As a retailer, I cannot see a long period of no stock dumping happening.

 

Hornby are now committed to withdrawing from most (if not all) of their concession stores in the near future. I have a concession store close to me (not a model shop, but a garden centre belonging to a large chain) and I am amazed at the stock levels in there, as well as the age of some of the 'new' stock.This will all have to find a home.

 

Hornby are under an obligation to their bank to reduce stock holding, so they will not sit on this, but look to find a home for it.

 

My hope is that all retailers get a bite of this cherry, and that our finances are good enough to be able to help those of Hornby. If we get a repeat of the recent Hattons/Rails clearance or cheap direct selling at the exclusion of everybody else, then Hornby's decision to work with their retailers will backfire catastrophically, and where would they go to from there.