1andrew1

Thanks for that informative post, Gallows-Bait. It seems the core question is can the company hang on to Kader House long enough for an upturn in the Hong Kong property market without damaging its core business too much? And that upturn might depend on Hong Kong finding a new role now for itself as it becomes more integrated into China and its position as the financial gateway into Asia is challenged by other countries.

As Kader is family controlled despite a stock market listing, I can understand why it hasn't cut its losses and sold the building. Until then, the model railway business has its arms tied behind its back a bit although the UK arm still seems to get investment...at the moment. 

2 hours ago, Gallows-Bait said:

I found this topic so interesting I ended up registering so I can comment.

Really enjoyed reading your post. Thank you for sharing your insights, really helpful

I would be interested to hear your take on Kader/Bachmann. Their issue seems to be on the property side. 

1 hour ago, adb968008 said:

Welcome to the forum, what an interesting first post.

 

how do you offload £9mn of stock (at Trade price, not rrp) without a fire sale ?

 

 

 

I guess you try and target different markets (geographic, types of retailer, types of purchaser) and bundle or unbundle it. And perhaps try and influence buying patterns by making it more desirable through promotion and advertising?

1 hour ago, osbornsmodels said:

Kader also manufacture model railway products for other independent (from Kader) companies based in the US and the UK but do we know what brands they are and how significant is that share of the group turnover?

I think this is hard to determine from the limited publicly available information available. I don't think Kader states its external customers' names anywhere nor breaks down revenue from external brands. I suspect its minimal as with production capacity constraints, it makes sense to focus on its own brands. 

2 hours ago, woodenhead said:

Here is a link to the financials.

https://www.kader.com.hk/investor_relations/pdf/press_240327_2e.pdf

 

It interesting to note that the model division made an operating profit last year, it in fact the company as a whole made an operating profit, it is the interest on loans, depreciation and reevaluations of properties that is dragging it down.

Good point that the operations made a marginal profit last year but if you just include the finance costs it still made a loss.
 

The company as a whole made a loss due to four things:

• Finance costs 
• Share of losses from associates
• Impairment loss from loans to an associate
• Deficit on revaluation of investment properties

15 minutes ago, ThaneofFife said:

Loss making even after ridding a 5th of the permo staff???

Worth comparing Kader's losses with Hornby's

- Kader's turnover £38.20m, generated a £7.5m loss 

- Hornby's turnover £55.1m, generated a £5.9m loss

Kader does own property so has a backstop although that's mainly in Hong Kong which is not performing amazingly at the moment. 

11 hours ago, pH said:

Bachmann’s North American models are not as well-regarded in their target market as their UK ones are in theirs.

Agreed but they've been going in the US for a lot longer and I thought that would be their largest market. Credit to their European/UK presence for being bigger.

Bachmann's parent company Kader published its 2023 results last month.

I think it's interesting to see that Europe (including the UK)  is Kader's largest market, that it continues to be loss-making  (last profitable year was 2018) and that permanent staff numbers have been reduced by a fifth.

Until I looked at the accounts, I would have expected North America to be its largest market. 

2023

• £38.20m turnover
• £7.5m loss

2022

• £36.09m turnover
• £8.7m loss

Notes

• Europe accounts for 46% of income, US 39%
• Rental income represented approximately 13% of the Group’s revenue for the year.
• Full-time staff numbers reduced from 1,009  in 202 to 817.

Source: https://www.kader.com.hk/investor_relations/pdf/press_240327_2e.pdf (HK $ converted to GB £)

On 03/04/2024 at 23:02, Dunsignalling said:

 

TBF, Hornby are marketing TT:120 at beginners and the budget-conscious, so the segment most under threat from it will logically be the Railroad range. 

 

They are smart enough to have factored that in, along with a degree of attrition that they will consider tolerable in the short-to-medium term.

 

So long as TT:120 thrives over the longer term, I would expect a point to be reached where Railroad disappears altogether. That will allow Hornby to move OO upmarket with the "full fat" (plastic) range at (by then) around £350-£400 a go for DCC-ready 4-6-0s/2-8-0s and above, with sound/smoke/lit versions and metal-bodied "neo-Dublo" in a spread between there and £600 or so. 

 

John

 

  

Question for me is how PlayTrain's 00 gauge offering fits into this? It encourages owners to upgrade to a proper OO model railway as their existing trains can run on it. 

41 minutes ago, e30ftw said:

I forgot about exports of BR locos. That could sell on the continent.

 

class 66 and 37 make sense, class 20 and 58 also worked abroad didn't they? I know 58 did. Did the 20s get about in France or just near the tunnel?

 

I can not see a 87 , bit to risky. 

 

WD 2-8-0 and 8f for early post ww2 Europe?

 

wild card class 77/EM2 for dutch modelers 🤪

 

Would a eurostar set sell well for the Europeans?

I guess success here would be both where these locos operated in Europe and the popularity of TT120 in those countries. France might be logical for the class 20s, 58s and Eurostar but TT120 is not really a thing there as far as I know.  

5 hours ago, Dunsignalling said:

In short, no other UK r-t-r brand seems likely to expand into TT:120 for a good while yet (if ever), simply because none of them need to. 

 

John

If Hornby does retain Oxford Rail, would it make sense to direct that brand to focus its efforts on TT120 as well? Maybe it could play to its strength in wagons?

12 hours ago, PaulRhB said:

The decision making process is odd and even in the Q&A at 5:15 they say “another loco that’s been asked for a lot is a pannier tank or a terrier, which we will get to but we have to make sure we have the right rolling stock to go with it.” So they at least understand the concept which makes the initial disjointed releases more baffling. The sets are great

 and adding the HST to that is sure to work well but I currently have three out of my 5 locos with no train to go with them! 🤪

There has been a change of management since TT120 was launched. Plus, we don't know what resources Hornby have. eg if a designer targeted to do GWR wagons has left Hornby, then the company may decide to realign its pipeline. 

6 minutes ago, Hobby said:

And the share price went up 5% according to someone on FB following the announcement!

This is the day's share price graph: https://www.Hornby.plc.uk/share-price-graph/

Hornby plc opened the day at 38p, went up to 40p at 10am and again at 11am and now 37.33p (4.15pm)

2 minutes ago, Legend said:

I’m puzzled as to what people expect. This is not OO .  I thought the announcements were fine . They’re a prebiously unannounced loco , the J50, some container wagons and renders of the new 37 . A few re liveries . Looked pretty good to me . I do like the signals . 

The signals and level crossing looked good and better than their 00 Hornby counterparts. Understandable as the 00 ones must be 40-50 years old.

20 hours ago, andrewshimmin said:

East Coast express legends

Just missing the Azuma...

2 hours ago, tomparryharry said:

Aha! I can see it now! 

 

To the mark the occasion, perhaps Hornby might release some limited edition Flying Scotsman jogging bottoms, with Beatles motifs on the posterior of said owner/wearer*

 

* Prospective purchasers are advised to buy the double tender version, for the larger 'fit'....

A YouTuber has already shared a video with a mocked-up Sport Direct wagon and trainer brands applied to the Hornby 0-4-0😆

2 hours ago, Fireline said:

 

Have you actually asked Phoenix, or is this based on supposition?

If the price is right, I'm sure they would sell as that would maximise the return for their investors in the fund. They're a financial investor, it's not like they're a family holding onto the stake for more emotional reasons. And I don't think Hornby has been a great investment for them to date.

6 hours ago, teletougos said:

Thanks for the discussions. How has manufacturing in Vietnam panned out so far for the model railway brands doing it?  Roco I think was suggested.

Modelleisenbahn GmbH (Roco & Fleischmann) has ported its manufacturing skills over to its factory in Vietnam. However, this doesn't directly benefit Hornby. It's more a case now of the OEMs in Vietnam getting up to speed on model railway manufacture so they can deliver and bid for more work from brands like Hornby than just Playtrains.

6 minutes ago, adb968008 said:

=Could the strategy be much simpler…. buy a shareholding, become unruly and beligerant, risk the whole business and seek a share buy back premium payout from Hornby or Phoenix or let it sink… afterall this is chump change to Frasers, but a bigger risk to Phoenix which forces them into an even larger stake in Hornby ?

So far, Frasers  has bought a stake in Hornby and seen the investment rise substantially in value. Not bad for Frasers or the other shareholders, primarily Phoenix.

The next step seems to be to try and help continue the share price growth by sharing expertise with Hornby and seeing if there's more areas the two companies can collaborate on.

After this, it's all a bit of an unknown. If Frasers think they can run Hornby better by taking control and it's worth their while, then I'm sure Phoenix will be pleased to sell them their controlling stake. But would it really be worth  spending Frasers' management time on such a niche, low margin business? 

Perhaps Frasers see a Wonderworks or a Warlord retail opportunity they can roll out to reinvigorate Game?  With traditional computer games sold by Game moving to online downloads, it does seem to be moving towards being a more traditional games retailer by necessity.

I think it's relatively few manufacturers who can do without China as it's become a  centre of expertise for the industry.

Playtrains are made in Vietnam so another benefit of that range is to test supply chains from another country. Vietnam is certainly picking up other work that used to go China so that's a possible new location if there is a factory there that can go beyond Playtrains level. 

1 hour ago, ruggedpeak said:

Also bear in mind that Phoenix did or do (can't get current details of their holdings) have around 7% of Fraser shares in its portfolio (from when it was Sports Direct). So there is existing linkage between the companies.

Showing today as 1%. It's interesting to see the stakes Frasers holds in other companies. It doesn't always acquire full ownership.

• ASOS 20.00%  
• Boohoo 22.08% 
• Castelnau 1.59%         
• Currys  6.59%    
• Hornby 8.94%    
• Hugo Boss 0.99%    
• Mulberry 36.82%    
• N Brown 20.02%  
• Northern Bear 0.43% 

https://uk.marketscreener.com/quote/stock/FRASERS-GROUP-PLC-9590226/company/

1 hour ago, BachelorBoy said:

 

I suspect TT will be under the microscope. It's not too late to abandon it.

 

Alternatively, push TT train sets cheaply through Frasers and Game. That way, future modellers are in a scale dominated by Hornby rather than selling OO train sets where Hornby's market share for OO is a lot lower.

If a train set buyer wanted to expand their set, sticking with the same gauge is highly probable. Right now, TT is Hornby except for a few Peco wagons. The same is not true for OO where the train set owner's next purchase could come from Dapol, Bachmann and many more manufacturers.

Both Frasers and Hornby would conceivably gain from such an arrangement. 

8 hours ago, The Stationmaster said:

The bit that worries me is the asset-stripping reputation of Mr Ashley getting involved in 'strategy' for Hornby.  The share price hasn't reacted to the latest announcement which suggests that snmall onvestors don't yer see much in it and phoenix are staying in there.

Apparently, the share price rose 7% on the announcement before falling back.

I wasn't a fan of Ashley over his ownership of Newcastle but he has invested in the high street at a time when other retailers have gone online or closed down altogether.

The traditional opportunities to asset-strip Hornby are limited as a lot of this has already been done. Move to a cheaper part of the country. Done. Sell and lease back your HQ. Done. Offshore manufacturing. Done. Offshore distribution. Done. 

What opportunities are left? Maybe the big opportunity is to focus on Warlord Games and introduce specialist Warlord areas into Game and Frasers. Sell Oxford Diecast back to the founder and decide on the other brands once their performance is better understood.

It will be interested to see if WonderWorks is rolled out in conjunction with Frasers Group. With space in shopping centres and a move to leisure provision in them, there could be an opportunity but I think it will be limited to a handful of big UK cities.

6 minutes ago, ruggedpeak said:

Blacks were a failing outdoor retailer but allowed them to consolidate market share in that sector, and they already had expertise in dealing with surplus retail property etc so fitted well into their existing activities.

I think a lot of your hypothesis makes sense. Small point of accuracy - Blacks went into administration and was acquired by JD Sports. Sports Direct did have a 30% stake in Blacks but failed to acquire the company.