Clearwater

Hi

The notes for Comet’s D83/90 say that some roof vents were later removed.  Does anyone know when the is happened?  I’m likely to go for mid 1930s (and a simple livery..) as a time period for my coach!

thanks

David

10 minutes ago, The Fatadder said:

Strangely their value seems to have held up rather well given the bad press the model had, I dont recall seeing any fire sale of unsold stock either.  I had given some thought to adding a second 47xx if the price had been right.   That said I still need to get the first one (PDK) running given it still doesnt have a decoder...

 

There's been some reasonably heavily discounted at Kernow recently.  I hadn't brought one so took advantage of the price.  Came with the pony wheel unattached.  

David

I like the second shot with the loco just peeking behind the embankment.  Perhaps, if the lens was lower still and pointing up, you’d get the impression of being on the path, hearing a whistle and looking up to be rewarded by a splash of green, brass, bronze and chocolate and cream thundering past.

One last point for me on this debate, Sam is comparatively young.  Like most people on this thread, my teens and twenties were before the days of universal camera phones, status updates and live tweets.  How many of us would cringe if views, which we sincerely held and thought were groundbreaking insights, we'd expressed in our teens and twenties to our mates were preserved for all eternity on the internet?

David

19 minutes ago, Roger Sunderland said:

Yes, sadly, this is the way now Tony. I’m afraid anyone who can use a computer can say anything they like about anything else irrespective of whether they have any knowledge of the subject matter or not. Very sad.

brings to mind an Abraham Lincoln quote: “better to remain silent and be thought a fool than to speak and remove all doubt.”  

As an aside, 9 year old Edward has commented to me that he doesn’t think laying track on carpet is a good idea so there is hope!

1 hour ago, Tony Wright said:

I've just come across something by accident on Youtube where someone called Sam assesses the latest Hornby A2/2.

 

He's young and enthusiastic, but he tests the products on badly-laid trackwork on the floor! I gave up running trains on the carpet when I was still in short pants. 

 

There are some assembly issues with his 60501, but I'm glad he found the performance 'exceptional'. 

 

Where I winced in disbelief was how he described the cab roof roof ventilators (which, as you know, slide) as (if I've heard correctly) 'air-intakes'! 

 

Does anyone know anything about this bloke? He admits his knowledge of the prototype is limited, but surely shouldn't someone presenting (potentially-damaging) assessments have done some homework?

 

He also compares the paint finish with a Bachmann A2 (which I think has much too-prominent lining in comparison), praising it as much better, but then zooms in on a section of the boiler where a handrail pillar is missing! 

 

Is this the way forward now with reviews? Where anyone who buys a model can tell the whole world (and expose their ignorance from time to time as well)? I know from personal experience, having reviewed hundreds of items down the years, that prior research is essential, and there's a huge responsibility to make as 'value' a judgment  as possible. 

 

He paid £171.00 (Hattons, I think) and considered that to be a lot of money. It's a good job he wasn't around when a Hornby-Dublo three-rail BARNSTAPLE cost £5 19s 6d! 

 

Regards,

 

Tony. 

My sons, particularly the 5 year old, are fans of Sam's Trains.  I strongly suspect my 5 year old is less discerning than you but my five year old can confidently identify different A4s just by their number.... I find, like you, that his knowledge isn't great but he is enthusiastic.  His IT skills are very good at editing/animating trains and he also does stuff on Train Simulator (you can find videos on that by him and a guy called "Lazerjet").  Some of what's put together in Train Simulator is remarkably good.  For example, there's a guy who posts on the Great Western Modelling group on facebook who's using the software to develop broad gauge models.  I get the sense the person has done railway modelling before. 

What surprises me about Sam is that he doesn't  seem to do much basic research about his model before making his video.   However, if he helps sell a few extra models, if of those who purchase a small percentage graduate from train set operators to more accomplished modellers, then great.  I think the shops, manufacturers recognise the potential value of this marketing channel and do provide samples to some of these people, in other spheres, eg fashion, you might call them "influencers."   However, the power and reach of youtube is quite telling when you consider how many people on this thread have used your rightrack video, available on youtube, as a guide to assembling models.

David

Hopefully not too off-topic but perhaps a close parallel to the cost of commissioning a builder to make a loco is the artist world.  I'm sure many of us have admired, and probably have the odd print or two, of the works of Philip Hawkins.  His website states takes commissions though I'm willing to bet he has a waiting list of several years and the cost of a commission will run substantially into four figures if not five.  However, I have seen one or two originals in auctions that have not necessarily realised such a high price.  I can see a logic for paying a premium if you want your favourite trainspotting snap turned into a work of art but not necessarily being willing to pay for someone else's.

David

17 minutes ago, Barry Ten said:

 

Agreed, Don't do as I did, and try and use cyano - I thought it would be more controllable, but the resultant bond was too brittle and the sides kept separating from the roof.

and by evostick, is it this stuff?  I like to check to make sure I’m not getting the wrong stuff!
 

thanks

David

Thanks @The FatadderRich, I thought that was what they meant but wanted to check before attacking with a file...

David

Tony and other experienced builders,

A couple of quick questions if I may about a Comet coach kit that I’m torturing my fingers with.  Firstly, having fixed the drop lights, solder has leaked through to the visible side.  Should I remove this before painting?  If so, what’s the best method.  Secondly, the Comet guide to coach building describes removing the “rebate”on the roof at each corner.  What do they mean by that?  Is it the bottom bit of the rail that will ultimately sit on the top of the sides?  

The sides and ends seem straight enough to me and it’s solid enough.  Nothing has fallen off when I’ve washed it although I’m sure my soldering can improve.

I also seem to recall a debate about how to fix roofs.  Comet suggest glueing.  Is there a better plan for aluminium?

Many thanks

David

Whilst I've not brought any part completed or kit built locos over a certain popular auction site, I'd suggest a couple of other motivations:

1) a cost effective way to buy certain parts, for example wheels or motors.  If you pay £100 and get a set of wheels that would otherwise cost £60-70 plus a motor costing £40+, you may be ahead.   This may be particularly true if those motors are no longer in production.  

2) If the kit is long since out of production, it may be the only way of obtaining that prototype absent scratch building.  Even if badly assembled, it may offer a good scope for cannibalisation.  Take the Raven A2.  Limited number of kits produced, go for high prices in unassembled form, if you want one, then why wouldn't you buy a partially assembled kit?

David

One thing I'm wondering about, both for the Manor and the Mogul, is how it will look when alongside the competing product.  I'm sure some people, myself included, may want to support both manufacturers and buy one of each.  Will the models have points, particularly the shade of green, that make them glaringly incompatible to have next to each other?  

David

24 minutes ago, David Stannard said:

 

Nobody saw any CAD's or had any hint of tooling with Accurascales Manor until they dropped the bombshell with their announcement last week, which included the partly complete EP.

Or indeed Bachmann's partial retool of the Modified Hall which is stated as due in the spring.

8 minutes ago, Pandora said:

Eurostar may have competition from  airlines and ferries, but for rail travel it has a monopoly.

Any experts on the forum with knowledge of EU business  monopoly and competition laws and regulations? If Eurostar  folds after 30 years of existence, and is replaced by a new company, will that new company attract the attention of Brussels who may see the much expanded business in terms of passengers numbers users compared to the formative years,

, as a monopoly for rail travel and  take certain anti-monopoly measures?      

I doubt it.  Any competition authority will look at the market for travel between London, Paris and Brussels and consider all modes, not just rail.  There is plenty of precedent about how competition authorities analyse situations.  They may take a slightly different view when the transaction is buying a company out of receivership - ie in this situation, they may be more relaxed about an airline buying the route than they would be if both were profitable, trading entities.

3 minutes ago, hayfield said:

 

But if it linked to the Continent perhaps there would be more

Id be amazed if it were enough to make a service commercially viable.  If not commercially viable, it would need a subsidy and is the benefit greater than the cost?  Transport planners/modellers have looked extensively at when ‘ where passengers opt for rail over air.  If the train journey is 4h+ and the flight sub 2h, then the flight takes the vast majority of the mode split.  Sure a few people prefer train but most favour the faster overall journey time by air.  The only way I see that changing is if the air option is made massively more expensive by some form of taxation.

1 hour ago, Mike Storey said:

 

Indeed, I fully understand all that, and have considered it. What worried me was not the half-year numbers, which looked seriously good, but the more recent statement. This appears to indicate that pre-Christmas growth was small and post-Christmas growth worrying. Lyndon primarily blames Covid production issues in China, with a suggestion that all will be well when that returns to "normal" levels. But that would suggest a reduction in inventory, as orders are not fulfilled, and I am struggling to identify that to any significant degree, from the little that was provided.

 

That is why I think your proposal of a £5m EBITDA is optimistic currently.

 

We shall see, with the full year statement. I hope I am wrong.

 

Sorry, to be clear I don’t think they’ll get that this year but they’re not far from it.  I’m also projecting forward to the type of number they need to be showing to be credibly looking at an exit.  If they’ve able to cover capex for, free cash flow, then I think they’re on the right track.  Agreed that cash flow can swing wildly with stock levels. 
 

I’m sceptical over medium term valuation levels.  I see your point that £5m looks a short term challenge but to get to £10m and say a group valuation of £150m + seems very challenging to me.

8 hours ago, adb968008 said:

That was where my thoughts first started.

But be realistic, is Hornby the next Mattel ?

 

I think the current team are turning the ship around, but converting a ship into an aircraft and making it fly is a very difficult task, especially without a Mattel size budget or a long queue of investors.

if a ship is a ship, then its only ever going to be a ship, so it will only sail at ship speed. In that circumstance the best thing is to make that ship sail efficiently and earn money.

 

As for the share price, What I see is a bunch of sock-draw investors trading small volumes causing price spikes, whilst the institutional investor forever sailing against the wind and upstream, invests heavily to make slow progress.

 

Would a new institutional investor want to buy into that, at a substantially higher price than is currently traded ?

Similarly many Investors dont seek full portfolio divestment, but seek to reduced stakes at a an increasingly higher return over time, based off the back of growth success.

 

Hence my thought that perhaps small investors are the exit ?

remember sockdraw traders are the ones moving the needle, getting people excited about Hornby stock as they are about a new tooling is how Hornby went public originally.

 

if the ships crew and cargo holders had a stake, there more likely to increase their efforts, a bit like “General Average” insurance...everyones in it together.

 

if being a “financial partner” was a pre-req to being a Trader, you need to make it appeal to Trader.. shifting out the big boys and creating a stable trading environment is a big step towards that, whilst recognising the importance of the high st and getting everyone bought into the brand... that could move the needle and lower the exposure of a major investor, off the back of a ship thats now sailing more efficiently in the wind, backed by a high st team with a stake in it.

 

just my rationale, interested in other scenarios.

 

I very much doubt whether Hornby can move out of its niche and near niche.  I don't think Mattel is a good comparator.  If I was their strategist/corporate finance team, I'd look at Games Workshop and how they operate, what their product is, what the similarities are and really delve into what are Hornby's strengths (brand, distribution and commissioning in my view).  However, Hornby have arguably tried different aspects of strategy and not succeeded.  They survive because of some very strong underlying brands.

I really don't think you can draw an analogy from Gamestop to Hornby.  I doubt anyone shorts Hornby which is what created the Gamestop bubble.  There simply isn't the money to be made.  To think thousands of "sock draw traders" are going to get excited about Hornby as a stock is magical thinking.  What is the underlying value story???  Games Workshop has sales of c6x Hornby, 

Hornby is an extremely small entity by stock market standards.  However,  its market capitalisation is still c£100m.  That's an awful lot of small investors to invest say £10k.  And £10k is a lot to invest against a single stock with a volatile trading and however many consecutive years of losses.... Whether those investors are individuals or individuals who own shops, I just cannot see it happening.  Look at the amounts most crowdfunds are able to raise - typically single digit millions.  How many model shops are there who would be willing to invest £10k, £100k, £250k?  Very. very few I'd wager.  And those that do have capital are happy to disintermediate Hornby and go directly to the factories for stock.  If you have got £250k to invest, feel you understand the model / model train market, why would you put it in Hornby where there is no certainty of return when you can invest the same sum in your own product where you can control and manage the risk and increase your own profit margin through not paying Hornby's overhead?  I'm afraid your suggestion doesn't add up.

You touch on investor strategy.  It's simple.  Phoenix exist for one thing and one thing only and that is to make money.  If they think they will make more by dripping their stake into the market, they'll do that (that's the advantage of having a listed stock).  However, there will be a point where the management hassle of a) the mark to market and b) the time required don't add up for them anymore and they will want a full divestment.  There are a lot of other considerations that if I were advising either Hornby or Phoenix I'd go into but are beyond the scope of a forum like this.  

Investors can and do buy into stocks at a premium to a trading price.  It happens all the time.  Why?  It's the only way that you're able to assemble a controlling stake in a company.  If I own shares in a stock, I see it at a particular value.  Why would I sell unless someone offers me materially more money than I think it is worth not least as I then have to reinvest the money in something else.  The converse is also true.  if someone offers me 30% over what I think it's worth then why wouldn't I sell?  Analogies such as paintings, vintage cars, houses don't really apply as there is less sentiment to apply. Typically a public to private stock market transaction takes place at a 20-30% premium to the unaffected trading price.  If you do a bit of googling, you'll find the stock market communications for when an investor has approached a listed stock.  

David

2 hours ago, Mike Storey said:

 

They are not even close to that lower figure yet. The latest trading statement (after the initial optimism of the half-year statement) suggests that growth has not been as spectacular as originally expected, in the Christmas run-up and certainly afterwards. There has been seismic growth, for sure, but virtually all of that was wiped out by their finance costs, despite not having used all of their credit. So, whilst the trend looks far more promising, the growth rate is still volatile.

Hi Mike

When looking at valuation, financiers typically look at cash generation usually taking EBITDA (Earnings before Interest, tax, depreciation and amortisation) as a close proxy.  As EBITDA isn't usually disclosed in accounts, its a bit of an art form to get back to a figure.  As a quick and dirty, you can can statutory operating profit and add back for depreciation.  (not perfect but good enough for a fraction of the effort).  I agree their finance package is expensive but as I mentioned a couple of years ago, they were in the last chance saloon and had little choice but to take such a package.  The implicit assumption in the EBITDA based analysis is that once profit stabilised, the expensive finance package is refinanced back towards a cheaper and more flexible RCF , probably from one of the UK clearers.  Not using the credit lines is a good thing here- suggests that the business is generating enough cash to pay its way.

• Taking the most recent financial results for the half-year to 30/9/20, Operating Profit f was £163k which is pre-finance charges.  They generally trade better in H2 for Christmas etc but cautiously lets annualise by doubling to £325k. By comparison, in the year to 2020, approx 42% of the revenue was earned in H1 and a similar proportion of the gross profit.
• Depreciation charge for 12m to 31/3/2020 was £2.1m. 6m to 30/9/2020 was £870k so slightly lower.
• Adding back to give EBITDA shows H1 21 as being £1m so annualised call it £2m, possibly slightly more depending on your view on seasonality (see below).

Cash generation is H1 was reported as £1.7m (p12 of the interims) so roughly the same as my crude calculation above.  Both pre financing and pre capex (arguably a discretionary figure...).

As such, I don't think they are far away from achieving £5m EBITDA.  Gross margin in H1 2021 is 2% higher than in 2020 full year (46.6% vs 44.1%)  and  6% better than H1 2020 (40.9%).  On £50m of sales, that alone equates to an extra £1.1-3m of gross profit.  The worry for me is that they plateau at say £5m EBITDA which then suggests a toppy multiple for the type of business they are to their market capitalisation.

A full valuation would start with EBITDA, take an assumption based on advice, of an appropriate debt structure, see what capex is required to sustain the revenue line and then discount the remaining free cash flow to get a valuation.  Model would show 5 years and make an assumption on value at the end of year 5 (Terminal Value).  Different ways of calculating that so I'd take a spread of options.  Discount rate for the equity would be pretty high, risk free plus 5-10%.  Again I'd show a spread.

Agree there growth rate is volatile.  They need to show sustained profitability for a couple of years without the overhead, capex and financing costs swallowing any cash flow the sales generate.

David

6 minutes ago, Ighten said:

Sprry slight misterm - I dont mean cheap as in value Im simply referring to this idea that people (and some popular newspapers) see them as just a few pence to fritter a way (in cost per share - the idea of I can have a piece of that and take advantage)  rather than a few £ and they should see something in return for any ownership - If you look at the daily trading volume its quite suprising how many trades are done..

 

Im not sure Hornby since 2012 have ever offered a dividend or are even considering one this time - though they are just about to offer a long term incentive plan 

Understood.  Yes, they're a very thinly traded micro cap stock.  Hence the volatility you see whenever there is a material order or piece of news.  

I'd reckon a couple of years or so before a dividend until they feel their balance sheet is stronger.  Typically, PE don't pay dividends and focus more on capital growth.  If they could reinvest to take Hornby's EBITDA from say £5 to £10m, then they may be more likely to look more at doing that than paying the cash out to shareholders and make their return on exit.

Just now, Ravenser said:

And if the ship doesn't go to Rotterdam, it will call Antwerp instead

 

The only logistics impact is that you have to make up separate containerloads for Britain and the Netherlands

 

If you need more warehouse space anyway, this is an easier option than moving your British warehouse to somewhere bigger in Kent

Yes, apols I was using Rotterdam as shorthand for big container ports.  Whilst I don't know, I'd be surprised if their loads were big enough for multiple containers of the same product.  Intuitively, I'd expect them to fill containers with product at factory and break them down at a single warehouse rather than asking the source factory to pack different containers for different locations.  Latter sounds to have more scope for error that everything arriving in Europe to be sorted out.  Particularly if they're using multiple factories.  Plenty of options to devan and then send pallets over to the UK on the RoRo services.  Might suggest that Margate isn't an ideal location for a UK logistics operation fed from the Netherlands/Belgium.  Barwell is a much more logical place to base yourself!

10 minutes ago, Michael Hodgson said:

One big warehouse?  Or a lot of brass plates?

Physical warehouse as @Ravenser explains.  Chances are the containers they import in will be on a ship going to Rotterdam anyway so taking them off the ship and palletising in Rotterdam as opposed to Margate may make sense anyway.  I'd expect that the warehouses mentioned would likely be 'customs warehouses' such that the goods technically hadn't entered the EU in any event.  That way the importer would only pay VAT/duty when the goods leaves for distribution to retail.

11 hours ago, adb968008 said:

SNIP

Hornby is the only one in General public ownership.

So the ultimate aim of Hornby (and any traded company) is to raise the share price.
At some point Hornbys largest shareholder is going to want to see a long term stable growth return, or an exit strategy that maximises the investment return.

So, exit strategy... If they wanted an exit, they need buyers of shares, perhaps getting retailers to become investment partners (as opposed to franchising) solves several issues... competing with yourself and too many others in the network, maintaining the high st presence and it offers a stable high share price whilst a large investor exits or reduces exposure ?

 

25 minutes ago, Ighten said:

Hornbys shares are relatively cheap though so you would need quite an amount for them to considerto offer an incentive - on the other side as an investment unless your holding a lot the % growth that shows is a little meaningless - I do use them on my ISA platform to scoop up any loose change from regular trades in my portfolio but even when they shoot up as they did your still only talking a relatively small monetary growth when you sell  ...  The opposite of this is that if you did sink a lot of money into just Hornby you would have to be very lucky or possess a crystal ball on when to sell - your money is sort of stuck in a non growth share as they dont pay out a dividend.

In my view, seeking to get retailers to be investment partners would be an absolute nightmare within the confines of an entity with a rump listed stake.  Bearing in mind the sums involved, even at the current share price would, I expect, be way above what any retailer would wish to invest.  Unless they have 10s of millions.  Which I doubt.  Even if the did have the cash, a shareholder agreement would be required which would be problematic unless you're proposing a sale of listed shares that the retailer could later trade on the open market.  That would be an unusual structure, I'm not sure of any precedents, and would be challenging for all parties to agree a valuation.

Hornby's majority investor is a private equity fund.  They will want a clean exit either by a block sale of the shares through a broker to institutional investors or a sale of the stake to another fund.  They will be looking to maximise their sale proceeds which will mean that they want to show strong growth and in their sales memoranda they will seek to explain how that growth can be maintained.  

How are you defining Hornby's shares as cheap?  They don't have a full p/e earning ratio,  on the half year I make the ratio c200 (crude calculation taking 56p of current share price divided by 0.14*2)Games Workshop is c47, M&S 8.3) and EV/EBITDA  (again annualising the half year results looks to be c36x), I wouldn't view that as "cheap."

Stocks can be growth stocks without paying dividends.  If anything, slow and steady dividend payers like utilities, show lower share price growth rates.  A stock trades on the basis of the mix of dividend paid and hoped for share price growth ie you get part of your return through the share price.  It is, however, not unusual for companies to offer shareholder discounts to stock holders, say5-10% off. 

David

1 hour ago, AY Mod said:

 

Bachmann have confirmed "this was a simple omission on the sample that was photographed and will be present on the finished item".

Oh good.   I'm beginning to wish I hadn't spent part of my lunch hour googling prototype photos of the loco in the 50s/60s to see if Bachmann had in fact got it right!

4 hours ago, Tony Wright said:

It's been done regularly, Andy.

 

New Bachmann, Hornby and Heljan DCC-equipped locos have all run on LB, controlled by DCC as well. There's a pair of leads dangling down with 'DCC' writ big on them, ready to be coupled up. Advertising DVDs have been made as well.

 

All I do is disconnect my DC control, switch every switch to 'on' and away they go.

 

I might have asked this before, but could it be done as easily the other way round? Not without isolating sections, otherwise everything would run at once. 

 

Regards,

 

Tony. 

That's similar to the conclusion I came to for my sons' train set.  It's notionally wired for DCC but increasingly we use it on DC with just a controller plugged in (we run one loco at a time).  If/when I next rewire, I'll design to work on DC but allow a DCC plug in.  As it is not permanently erected, its no real extra hassle.  If/when I get space/planning permission for a permanent layout, I'll adopt the same approach to give flexibility.  

David

4 hours ago, gwrrob said:

 

It seems he has previous as the venerable Captain can verify.

 

is he asking the captain if he has one of these in his modelling tool box?