Hornby Business Funding

[cessna152towser]

Any thoughts on this?

https://www.reducebusinessbills.com/margates-Hornby-hobbies-secures-12m-business-funding-the-isle-of-thanet-news/?fbclid=IwAR0EpHxKKHNOuV1IO1e7IbEWqWE9SVjBlM-_CK4YGbXSHihVFXfFAOZh82E

[The Stationmaster]

Interesting in that it seems to be aimed, in some respects, at providing working capital.  That leaves me wondering how it fits in with Hornby's two existing draw down loan facilities so I wonder if it might in part replace some of that financing. (maybe it will cost Hornby less?).  But the need to go into this arrangement might suggest that they are short of working capital for some reason and i can immediately think of one such reason, which has nothing to do with tiers.  

 

I think the annual report could make very interesting reading.  Incidentally as yet nothing about this has been announced on Hornby's RNS although the deal seems to have been announced earlier this week and it hasn't (as yet?) done the share price any good.

[mdvle]

Per Stationmaster, I think we need to wait for the annual report. 

 

Other than the news about the financing the story is more like a PR piece - quoting revenue to make Hornby look good instead of profits.  What may be more telling is that no one else found it worthwhile to report.

[Fireline]

6 hours ago, mdvle said:

Per Stationmaster, I think we need to wait for the annual report. 

 

Other than the news about the financing the story is more like a PR piece - quoting revenue to make Hornby look good instead of profits.  What may be more telling is that no one else found it worthwhile to report.

https://theisleofthanetnews.com/2022/05/24/margates-Hornby-hobbies-secures-12m-business-funding/

 

https://www.insidermedia.com/news/north-eastnational/toy-manufacturer-on-track-for-growth-with-funding-boost

 

https://www.kentonline.co.uk/kent-business/county-news/iconic-toy-brand-back-on-track-with-funding-boost-267641/

 

https://techy-job.com/margate-based-Hornby-hobbies-which-owns-airfix-scalextric-corgi-and-humbrol-secures-12m-funding-facility-from-safe-belief-financial-institution/

 

https://bestadvice.co.uk/Hornby-secures-eight-digit-commercial-finance-facility/

 

No, no one else reported it.....

[Farang]

As already said - wait for the annual report. The next two years will, I think, be critical for the company. It needs a regular input of new products for cash flow.

Ultimately I think the company will fail. If Hornby railways disappeared it would be sad but there are a growing number of manufacturers to supply the enthusiast market.

As for the "train set" market it's anybody's guess.

[HExpressD]

I don't really see how anyone can see a manufacturer in the hobby receiving some extra cash as anything but a good thing. Anything that can help keep the models coming after a few years of struggles is good in my book. 

[The Stationmaster]

1 hour ago, HExpressD said:

I don't really see how anyone can see a manufacturer in the hobby receiving some extra cash as anything but a good thing. Anything that can help keep the models coming after a few years of struggles is good in my book. 

Yes - but.  Oddly  this financial facility has still not been mentioned on Hornby's RNS although the extension, in January, of Phoenix's loan facility to £9 million (up to 31 December 2023 was announced) as was their earlier facility from Phoenix plus the considerably larger loan facility from a US company (which is secured against Hornby Group assets).  

 

All of this suggests to me that this new facility might be rather different from the two existing loan facilities and might not impact on Hornby's accounts in the same way (possibly no facility fee for unused loan money hence no ongoing cost??).   So whatever this facility - which comes in two parts - actually is it might not impact Hornby's accounts oin the same way as other sorts of financial facilities/loans which would be very sensible if it enables them to avoid drawing down on the US facility in particular.

 

But whatever this new facility is in detail terms it means that Hornby has now got access - should it need it - to huge amounts of money (I think it's well over £30million without checking the detail of the US facility).  But thus far this week the daily closing share price is remaining flat at 30p. 

[Phil Parker]

3 hours ago, Fireline said:

No, no one else reported it.....

 

And in the trade press: https://www.toynews-online.biz/2022/05/24/hornby-on-the-right-track-with-12m-facility-from-secure-trust-bank/

[G-BOAF]

2 hours ago, Farang said:

As already said - wait for the annual report. The next two years will, I think, be critical for the company. It needs a regular input of new products for cash flow.

Ultimately I think the company will fail. If Hornby railways disappeared it would be sad but there are a growing number of manufacturers to supply the enthusiast market.

As for the "train set" market it's anybody's guess.

 

Given Hornby has been kept going all this time, odds are on it surviving, even if it were taken over. There is a HUGE set of very good tooling and IP (as well as some less good), as well as a household brand name that has inherent value.

All well and good saying there are a growing number of new manufacturers, but unless the tools were sold (and with that, the brand as well) it would take DECADES to replace many of the excellent models we now have from Hornby.

 

So lets hope Hornby survive, and clearly if someone is extending this sort of loan, the business is deemed to have reasonable prospects

[mdvle]

5 hours ago, Fireline said:

https://theisleofthanetnews.com/2022/05/24/margates-Hornby-hobbies-secures-12m-business-funding/

 

https://www.insidermedia.com/news/north-eastnational/toy-manufacturer-on-track-for-growth-with-funding-boost

 

https://www.kentonline.co.uk/kent-business/county-news/iconic-toy-brand-back-on-track-with-funding-boost-267641/

 

https://techy-job.com/margate-based-Hornby-hobbies-which-owns-airfix-scalextric-corgi-and-humbrol-secures-12m-funding-facility-from-safe-belief-financial-institution/

 

https://bestadvice.co.uk/Hornby-secures-eight-digit-commercial-finance-facility/

 

No, no one else reported it.....

 

Didn't show up in Google for me yesterday.

 

 

[wombatofludham]

It'll be interesting to see just how much debt the company is in now and how much revenue is being used to service that debt.  If at some point the financial backers go enough is enough, the company will find a ready buyer simply because of the brands it owns, with Airfix and Hornby being the jewels in the crown, although I suspect it would be broken up and bought for "badge engineered" items from another less well known manufacturer.

I just hope that Hornby repair their relationship with retailers, and stop selectively picking fights with other manufacturers, grow up and get back to making steady progress in paying off the payday loans. I can't help thinking though that Hell will be having it's first blizzards before that happens.

[Farang]

Borrowing money is all well and good but eventually that money has to be repaid and interest has to be paid.  Hornby needs shipments of new products but the supply situation is not going to improve much over the next 12/18 months. So to increase income will it be tempted to start reducing prices of existing stock?

[wombatofludham]

Doubt it.  It'll just strangle supply to outside retailers to force people to use their own on line retail outlet at full RRP.

I am a cynic though.

[The Stationmaster]

1 hour ago, wombatofludham said:

It'll be interesting to see just how much debt the company is in now and how much revenue is being used to service that debt.  If at some point the financial backers go enough is enough, the company will find a ready buyer simply because of the brands it owns, with Airfix and Hornby being the jewels in the crown, although I suspect it would be broken up and bought for "badge engineered" items from another less well known manufacturer.

I just hope that Hornby repair their relationship with retailers, and stop selectively picking fights with other manufacturers, grow up and get back to making steady progress in paying off the payday loans. I can't help thinking though that Hell will be having it's first blizzards before that happens.

Don't forget - this is nor debt but a financial facility (which presumably works on a draw-down basis like Hornby's two existing arrangements).  The fact that it has yet appeared in RNS suggests to me that it might work differently from the two existing arrangements where Hornby is paying for the facility to borrow that money whether it uses any of it or not.  So there might be quite a substantial difference in the cost of this arrangement compared with the continuing cost of the other two which is arising even when they are not used to borrow funds.  But as yet we don't know how this one will work

[adb968008]

On 27/05/2022 at 17:40, Farang said:

Borrowing money is all well and good but eventually that money has to be repaid and interest has to be paid.  Hornby needs shipments of new products but the supply situation is not going to improve much over the next 12/18 months. So to increase income will it be tempted to start reducing prices of existing stock?

this is a start…

Quote

From Monday, May 27 to Sunday, June 5, Hornby Collector Club Members can take advantage of a 20% discount across all in-stock items on our website. Terms and conditions apply.

https://uk.Hornby.com/community/Hornby-club?src=jubilee-banner-tmr
 

Any business that is not preparing for an epic sized economic crash this autumn deserves to fail. Hornby started preparing for it last June, and again in January. Discretionary spend could really suffer from Autumn and might well continue into right into mid-2024. Family, Food and Warmth come first, and after that settles probably a vacation after which some stability may emerge only if incomes rise or costs fall…

 

To me, The new arrivals dial has been toned right down, and a focus on selling existing stock at higher rates and margins direct, that brings in cash with no additional outlay would seem like prudence to me.

 

We might not like their actions both to us customers or the trade, but in my mind they appear to be right on the money with business preparations to survive whats coming.

 

Its some of the other players that concern me.

Edited May 29, 2022 by adb968008

[Markwj]

Sorry if I sound a bit thick (but that’s nothing new) is this money to maintain the status quo at Hornby, or allow more investment in new models/ facilities (as stated on the Hornby program a lot of money is raised when releasing brand new models) or is it to safeguard the company against the financial storm looming. Or even a mixture of all three.

Would we know if the other manufacturers/ companies are doing the same or not so is it even that unusual to be putting this into place?

Cheers

mark

[Chris M]

 

Hornby have borrowed a lot and invested a lot. That’s fine business in the short term. They now urgently need to reach a point where their sales generate sufficient cash to pay for new investment. You can’t keep on borrowing more and more forever.

[adb968008]

2 hours ago, Chris M said:

 

You can’t keep on borrowing more and more forever.

Governments / Billionaires do.

 

They refinance it at differing points to repay the expiring loan by funding it from a new one, thus deferring the overall repayment, until its original value is inflated away. Finance makes its money of the accuring interest, which is invariably inflation backed.

 

In laymans terms…

Its a bit like buy to let mortgages.. the property is technically yours, your repaying nothing but interest, and at the end of it you reset with a new loan, or sell the property in the mean time in order to pay off the loan… presumably in between your making money off the rental income, and inflation makes the repayment amount much more trivial than when you started.

 

thats how billionaires fund their lifestyles tax free when taking no salary.. they are borrowing/ financing off their future unvested stock options etc. Now substitute a property in the above scenario for warehouse stock, machinery, luxury yacht, company stock options, fine art, vineyards, even the value of existing loan agreements themselves can be traded (2008 Mortgage crisis anyone ??) etc etc…

iirc didnt the Glazers use Man Utds own assets as a security of funds to buy the club itself, and thus didnt spend their own money to buy it ?

 

I’d imagine the government will do this with all its covid debts, however 2-3 years of very high inflation would immediately reduce that initial debts long term value, before you goto the banks for longer term financing… convenient that isn't it ?

 

No inference Hornby is doing this in their org, ive no idea what they are doing, but just responding to the suggestion that infinite borrowing isn’t possible… it is and potentially a lucrative route for funding too…

Edited May 28, 2022 by adb968008

[HExpressD]

This is all getting a bit big-brain for me, I just like playing with toy trains

[Ouroborus]

On 28/05/2022 at 17:14, adb968008 said:

Didn't the Glazers use Man Utds own assets as a security of funds to buy the club itself, and thus didnt spend their own money to buy it ?

 

 

 

Absolutely correct.  It's a little bit more murky than than.  Without straying too far off topic, it would seem that you need a really good accountant.  In the case of Man Utd, as well as the leveraged buyout you mention, Ed Woodard is on record as saying the players headline salaries were purposefully "bloated" in order to 'offset' the debt.   In other words, 'look at how rich we are'.  Scratch the surface and you find there was a lot of penny pinching going on (ibramhovic recalls having £1 deducted from his salary for a hotel orange juice).  

 

Bringing this back to Hornby, it would serve to suggest that it would be unwise to make too many 'on the face of it' assumptions.  Clearly they need money.  Whether they *need* to add to the debt they already have or whether this is in essence a remortgage to take advantage of better terms, i guess we don't know

[Fireline]

On 27/05/2022 at 13:06, mdvle said:

 

Didn't show up in Google for me yesterday.

 

 

Have you tried turning your Google off and on again? 😄

[The Stationmaster]

14 hours ago, Ouroborus said:

 

 

Absolutely correct.  It's a little bit more murky than than.  Without straying too far off topic, it would seem that you need a really good accountant.  In the case of Man Utd, as well as the leveraged buyout you mention, Ed Woodard is on record as saying the players headline salaries were purposefully "bloated" in order to 'offset' the debt.   In other words, 'look at how rich we are'.  Scratch the surface and you find there was a lot of penny pinching going on (ibramhovic recalls having £1 deducted from his salary for a hotel orange juice).  

 

Bringing this back to Hornby, it would serve to suggest that it would be unwise to make too many 'on the face of it' assumptions.  Clearly they need money.  Whether they *need* to add to the debt they already have or whether this is in essence a remortgage to take advantage of better terms, i guess we don't know

The most interesting aspect of this is that it still hasn't appeared on Hornby's RNS feed which it should do in order to advise the stock market that Hornby is taking on additional borrowing.  That in itself - together with their existing (as at last accounts) unused loan facility - makes me wonder if it is far more some sort of accountancy 'insurance' rather than acquiring more current debt.  But perhaps it now takes over a week for RNS to catch up if folk are working from home?

[Widnes Model Centre]

Could it simply be that Hornby have changed their bank to Secure Trust Bank and this is a loan to go with this new account? 
 

I noticed that my monthly payments are now going  to Secure Trust Bank.
 

Presumably if they left the previous bank they would have to pay off their previous bank loans?

[The Stationmaster]

4 hours ago, Widnes Model Centre said:

Could it simply be that Hornby have changed their bank to Secure Trust Bank and this is a loan to go with this new account? 
 

I noticed that my monthly payments are now going  to Secure Trust Bank.
 

Presumably if they left the previous bank they would have to pay off their previous bank loans?

If what they said some time back was true (and why doubt it?) they cleared their loans with other UK banks some years ago.   But i do wonder if you're hitting an important point in that having changed their bank they have some sort of facility with that bank in two current account areas which allows for rollover/variations in the amount they can bring to account each month or whatever.  That sounds far more likely than establishing a third loan facility and could explain why it is not mentioned on RNS?

[newbryford]

Maybe they'll use the funds to bring out some new whizz-bang model that we all want.

Or even some tat in a fictitious livery.....

 

I see they've invested wisely already...........

 

https://uk.Hornby.com/products/hm-queen-elizabeth-ii-platinum-jubilee-hst-train-pack-r30215

 

 

Edited May 30, 2022 by newbryford