Hornby (therefore Airfix) in trouble

[Weaver]

This makes grim reading:

Hornby shares crash 48% after latest profit warning

Producer of railway sets, Airfix kits and Corgi cars at risk of breaching one of its loan covenants with its bank


Sean Farrell

Wednesday 10 February 2016 08.17 GMT


Hornby's shares have almost halved in value after the planes, trains and automobiles toymaker said it risked breaking a lending agreement with its bank after a third profit warning in five months.

The producer of railway sets, Airfix kits and Corgi cars said revenue fell in January because stockists in the UK did not respond to product promotions. Trading outside the UK was also disappointing in December and January.

As the result of poor trading and a £1m write-off of stock at its warehouse, Hornby expects to lose £5.5m-£6m in the year ending in March. In November, the company predicted a £2m loss as it warned on profit for the second time in two months.

Hornby said it was at risk of breaching one of its loan covenants with its bank, Barclays. The company's shares plunged by 48% to 42p after the announcement on Wednesday. They have lost more than 60% of their value since late August before the company began issuing a series of warnings about trading.

Hornby has been beset by problems as it has tried to revamp its business by upgrading computer and stock management systems. The overhaul caused UK sales to fall sharply over the summer and affected Hornby's European business, which was also hit by problems getting products made in China on to shop shelves.

In a trading update, Hornby said: "The group now expects to report a substantially wider trading loss than previously forecast in this current financial year. As a result the directors consider there to be a risk that the group will breach a covenant of their banking facility in March 2016. The group has enjoyed a long and supportive relationship with its lender, with whom it is currently in discussions."

The company, based near Margate in Kent, had reported that business in the UK recovered from the summer disruption and underlying sales rose 17% in December. Hornby said its directors were investigating the reasons for the poor start to this year.

Richard Ames, Hornby's chief executive, said: "This has been a real year of change at Hornby. Undoubtedly this is a disappointing result, but we have a strong portfolio of brands that we are determined to see flourish."

Hornby said last month it had high hopes for new products, including Corgi Thunderbirds models based on the original TV series, wooden toy Hornby trains and Scalextric Arc Pro, which lets model car racers drive through different weather conditions and share their results on social media.

[scooter]

This is what makes bankers a despised subspecies of Homo Sapien.  Because they control the credit, they chose to let what companies live or die

[Weaver]

As far as I can tell, the bankers havn't done anything wrong here (yet). It seems to be a result of business decisions and mistakesd by senior management. Richard Ames doesn't have a great track record.

[PR19_Kit]

revenue fell in January because stockists in the UK did not respond to product promotions

Hardly surprising when the company is undermining their stockists by selling direct to the customers. Loyalty is a two way street!

Their engineering side has improved by leaps and bounds over the last few years, and that goes for the model railway and slot racing side as well as the kits we know so well. The same can't be said for their business efforts apparently.

[McColm]

When I was growing up boys played with train sets or scalextric.
I was into model trains and can remember either buying Hornby pre-built buildings or getting the Airfix alternative kit.
This meant you could tailor the buildings to suite your layout. There were card building kits and papers for brick or tiles. Shoe boxes were kept.
Hornby and Lima had themed products, although Hornby now own Lima the gantry crane for loading and unloading containers was a well worded letter to Santa.
The themes seem to have stopped the last being Harry Potter.There was a platform 9&3/4s set released but was a limited run.
A surge in digital and live steam but the new generation have yet to be exposed to train sets.
Seems to me to be a father to son or daughter attitude behind closed doors.
Maybe if they intergrated Hornby with Airfix kits circa World War 2.
Not sure what the answer is.

[kerick]

Sounds like the products are good its the distribution system that's taking them down. If someone can straighten that out there may be hope.

[Alvis 3.14159]

Ah, I can start panic buying of Airfix kits. Again.

This is the third (fourth?) time I've done this since the late 70s.  It's becoming a regular event.


Alvis Pi

[zenrat]

Sales are obviously suffering because of a lack of a Rotodyne in their line up.

According to what i've been told the problem here (with Airfix anyway) lies in getting enough stock to the Australian distributor.

[NARSES2]

This has been rumbling on in the financial pages/press for about 12 months now. It's amazing how such a small company generates so many column inches. Obviously journalists have fond childhood memories ?

Anyway the feeling is that the core ranges are fine and turn over a small profit. It's the specials and newer lines that cause problems. Witness the Olympic Games themed stuff. There also seems to be a loose management structure that doesn't keep a firm enough control of the business. Part of the current problem is that with the recent move to the new warehouse facilities they have had to write off £1m in stock write downs etc. Now that's a little bit more than loose management and I wonder how much of that was the special "themed" stock ?

So at it's core the business is sound, not a world beater in terms of profit, but sound. It's when they move away from that they have problems. To me it sounds as if they need a new, senior management team who will concentrate on what they do well not on newer, riskier lines that don't seem to work for them.

Please note this is a personal view based on some reading in the financial press.

[Gondor]

This has been rumbling on in the financial pages/press for about 12 months now. It's amazing how such a small company generates so many column inches. Obviously journalists have fond childhood memories ?

Anyway the feeling is that the core ranges are fine and turn over a small profit. It's the specials and newer lines that cause problems. Witness the Olympic Games themed stuff. There also seems to be a loose management structure that doesn't keep a firm enough control of the business. Part of the current problem is that with the recent move to the new warehouse facilities they have had to write off £1m in stock write downs etc. Now that's a little bit more than loose management and I wonder how much of that was the special "themed" stock ?

So at it's core the business is sound, not a world beater in terms of profit, but sound. It's when they move away from that they have problems. To me it sounds as if they need a new, senior management team who will concentrate on what they do well not on newer, riskier lines that don't seem to work for them.

Please note this is a personal view based on some reading in the financial press.

Sounds about right to me too.

Gondor

[zenrat]

Does Corgi make money?  The die cast car collectors I know seem never to buy new Corgi, only old ones.  But maybe it's a distributor issue again?

[Weaver]

This has been rumbling on in the financial pages/press for about 12 months now. It's amazing how such a small company generates so many column inches. Obviously journalists have fond childhood memories ?

Or maybe 'British Icon From The Past Goes Under' is a standard headline they're pre-conditioned to write and this looks like a chance to use it...

[NARSES2]

Does Corgi make money?  The die cast car collectors I know seem never to buy new Corgi, only old ones.  But maybe it's a distributor issue again?

Now that's an interesting one. I've seen figures for Hornby/Triang, Scalextric, Airfix and Humbrol but not Corgi. I do know that the Corgi range had a fair few Olympic themed items and they didn't do that well at all. As for the recent stuff ? No idea, but my local MZ franchise in Smiths keeps a fairly large stock, indeed better than the range of kits they keep so whether you can read anything into that ?

[Old Wombat]

I know that Airfix don't do a lot of armour but if they'd lose their 1/32nd range & move into the common 1/35th scale, they may sell more of them.

Then there is their 1/76th stuff, it may work for model railways but ...

Why haven't they evolved them into 1/72nd? Their figures are 1/72nd, their planes are 1/72nd; why not their armour & vehicles?



(Yes, I know there's a cost but the cost of gradual retooling may be easier to bear than the cost of lost sales. Although they may have left their run too late.)

[zenrat]

All the new armour seems to be 1/48.