Clearwater

Quite but a ‘related party’ transaction for Hornby and a clear conflict of interest for the CEO. not clear, but this may have been anticipated at the point Hornby appointed LCD and took c50% of his business. For the rest of the shares to transact from the CEO to Hornby, he must be pretty confident in Hornby’s trading and profitability. However, Hornby trades at a greater EV/EBITDA multiple than they’ve just paid for Oxford. As such, if the H shares maintain their multiple, he’ll have created value. Creating a small synergy on design teams has the same effect though I doubt we’re talking more than £250k pa? I appreciate that the money he’s taken off the table here through the share sale and the loan repayment is a lot of money by ordinary standards and, to a certain extent, derisks him as even if he makes not a single incremental penny from Hornby, he can be set for life. But, if he has an aggressive remuneration scheme, he could make a multiple (10x) of that as CEO either through shares, share options or cash bonuses linked to the share price. From LCD’s perspective, a bet worth making IF he’s confident of taking Hornby to £10m+EBITDA. And this acquisition is a material step towards that target. .

by that logic, of Mainline city station, and assuming money for maintenance costs wouldn’t be an issue, Snow Hill to Wolverhampton Low Level would have been quite the preserved railway!

When we were in California just over a decade ago, I persuaded my wife we ought to go and visit the QM. We had an excellent tour of the ship by a person who was clearly trying to become an actor, she was entertaining. Ship is still magnificent but, per pictures below, is showing her age in certain places.

Is it possible to register a general vote in every mini poll? I’ll be honest, I’d almost certainly buy, in a not too discriminating fashion, any well produced OO model of a GWR prototype in 20s/30s livery…. if there are specifics, loco wise I’d like an Aberdare, various Saints and Bulldogs. David

The attitude of large, commercial venues will be interesting. Are they being more innovative in how they price lettings? They must recognise that with the uncertainty out there that a large hire rate might put off organisations wanting to hire a venue. A risk share model to encourage exhibitions, not just railway modelling, might be justified to bridge the gap between COVID closures and the new normal. That might mean lower deposits or a tiered price/attendee type structure. Surely better to get some people through than none? (assuming you cover variable cost of opening a venue). There may also be more scope for potential exhibitors to negotiate with venues at present as to what they'd need to make a show viable from their perspective. Buyer power has increased!

I think we’re at an interesting phase of this new wave. Without doubt, infections are currently rising exponentially. As that’s a leading indicator, we can’t be completely certain yet how that feeds into hospitalisations and, ultimately and sadly, deaths. However, there does seem to be growing evidence of the effectiveness of the vaccines. As this wave plays out, if the health services can cope with the numbers coming through AND it allows them to continue with their other services, covid starts to look “manageable.’” Yes, people are always going to get infected with it, but if it moves to being an inconvenience for most and treatable for the rest, we’ll either have to get on with things be it football matches, theatre, model train shows or whatever with the increasingly known risk of the consequences or face long-term curtailments of what we’ve previously enjoyed. There will be a tipping point where the risk of the former position is acceptable to both health service managers and the general population. Are we at it? Possibly. A hell of a responsibility for those both giving the advice on what to do and elected to take those decisions on our behalf.

Thanks Andy and appreciated it's a difficult topic with arguments in both directions which I can understand. It wouldn't be tenable for me, domestically, to go to a show that wouldn't allow my kids to visit (though I appreciate that some may not wish to attend a show with U18 at present). Consequently, I'd probably take a pretty dim view of an entity organising such an event and probably prejudice me from being willing to attend or support their events in the future, even post a fuller easing of restrictions. David

Thanks Andy. One thing that I don't think your survey covers is children. I have two sons who enjoy going to shows. Given the vaccine isn't licenced for under 18s, they've not (and will not be) been vaccinated. As such, I'd be very annoyed if shows were to return but only to those with fully vaccinated status. David

75 x 7 + 1+3+9

Hi My interests are probably more 1930s orientated. If anything was produced, I'd almost certainly buy it as I'm a discerning customer(!). I'm not knoweldgeable enough to differentiate on different Monsters. As such: My choices are: 2, 3, 4, 5, 7 My focused choices of PBV are: 2,4 David

Seems impressively fast. Did they have speed cameras in the 1930s?

Hi That rust effect on the wagon is brilliant. How did you do it? Thanks David

A group of my friends live there. One of whom was a parliamentary candidate in the seat a few years ago. Their view is that the people in the seat are against HS2 as they get the noise and disruption, the construction sites and the loss of land but none of the long-term benefits. The other big issues were housing, and the NIMBY desire to stop new housing in the seat and a sense that the levelling up agenda meant that resources are not being spent in A&C. I think there's also an element of this being a safe protest vote.

Or from a professional services firm persceptive, if they charge £1000 per hour (as they do for senior staff), £250/hr for junior staff, creating an hour's extra billing time makes immediate sense.

Hi My choices are: 2, 4, 5, 6. My 'focused choice' is: 6 Cheers David

I’m not too fussed which ones tbh but would probably (ie almost certainly without fail) purchase any new decent siphon RTR model in OO. if pushed for a choice, I’d go for 6- siphon J. It shows up on several of the train formations on the northern route and the only, out of production, kit I’m aware of comes up with hens teeth frequency on a popular auction site that none of us look at never mind compete with each other on! David

Tony, A question on the DJH/High level gearbox debate. Are the DJH ones put together in a factory by a machine? I'm wondering if the reason they run sweetly is that they don't have the inaccuracies that might creep in, particularly from the less skillful, in manual assembly? David

Hornby is in an interesting place strategically. Some, newer, competitors may operate on a much smaller corporate overhead allowing them to be more profitable at an equivalent pricing point. Nonetheless, I wonder the extent to which Hornby price their products effectively. There's a floor price they need to cover costs etc but I suspect strongly that on some lines they are not profit maximising. If I was Phoenix/a Non-Exec, I'd be pushing hard to look at the revenue side of the equation as well as the cost side. How fast do some lines sell out? Is there unsatisfied demand or could the sales team have pushed the price higher? What is the mechanic for setting price (bottom-up vs top down)? How are sales' teams incentivised? What's the margin on small vs large shops etc? How does profitability vary through the product lifecycle (new tooling, old tooling, legacy toolings)? Balance of margin vs complexity of tooling/assembley? Which brands are profitable? And in which market places? There's also the question of the relationship with retail. Hornby must be making a better margin on direct sales than those via shops. I get that selling via mom and pop model shops has brand value (it's a form of advertising) but I can also see why ceasing to sell via volume discounters, particularly those who compete in the 'manufacturing' space may also make sense. Great that they are now at least breaking even. Next step is to get to an operating profit that supports the current valuation. Step after that is the number that supports Phoenix's exit plan. A lot of strategy to develop to support those ambitions. David

Sure and that’s why financial analysts look at different metrics for different industries. Distribution networks have proportionately high capex and hence high margins. They’re also less volatile given the nature of their business model. However, their WACC will be lower.

I’d look at the operating cash flow and how much of that is being invested in new tooling and the movement in net cash from year to year. As @1andrew1says above, tooling will be charged to the P&L when the stock it has been used to produce is sold. This creates a cash margin that funds investment. In previous years, they’ve made an operating loss and a cash loss, hence the need for refinancings through equity raises and specialist debt financiers.

If you’ve not been, I strongly recommend visiting Bletchley Park. It’s a really excellent museum these days with some great hands on exhibits. I took my boys. I told them they’d only get a gilt in the shop if they passed the Turing Test! David

I’ll ask my sons. They’re 5 and 9. Hopefully they’ll make 2081 so I could make it a condition in my will that they check this out...

The other seriously fun school lab experiment is to add concentrated sulphuric acid to ordinary sugar. A brown dot appears, then smoke and suddenly a tower of carbon will shoot out of the beaker as the acid strips the water out of the sugar... teenage boys (self included) were most amused.

Mike on what basis is that 57% calculated? Is it number of journeys or proportion of revenue? Given fare structures, might be the case that business revenue contributes a greater portion of revenue than leisure passengers. Do you also have a feel for whether 43% business is high or low for a rail line?

One thing I found on the previous incarnation of the Modified Hall was that to fit DCC required removing a lead weight which made a distinct adverse effect on its performance.