News Round Up Two November 2017

By Maz Woolley

Latest News

Hornby Hobbies surprised the Stock Market with the recent appointment of Lyndon Davies (Owner of Oxford Diecast) as their Chief Executive Officer.  Last week they released the results of trading for the last six months which show a fall in revenue from 21.9 million UK pounds last year to 17 million UK pounds this year and an increase in the loss from 3.3 million UK pounds to 4.6 million UK pounds. These results show that Hornby Hobbies  had to take radical steps as all the promises made to shareholders about turning the company round after the last re-financing were clearly not working.

The announcement also included some key statements about the intentions of the new management:

Firstly they intend to raise a further 12 Million pounds from a stock sale and this is to to be spent on 1 million UK pounds investment in new product development and on buying a 49% share in Oxford Diecast’s holding company for 1.6 million UK pounds.

They intend to re-vitalise the European sales, which have been falling over time, by spending more time identifying what the customer wants. Hornby purchased Lima brand some time ago along with Electrotren, Rivarossi, Arnold, Jouef, and Pocher. They have neither fully integrated them into Hornby’s offerings or managed to grow them as distinctive companies. Hornby are now showing the trains them on their web site which is probably a sign of things to come. Pocher they have tried to develop through the introduction of a very large Ducati motorbike model but the opportunity to make money on Pocher must be limited due to their size and cost.

The practice of selling stock at very substantial discounts in order to generate revenue at key points of the year is to cease. This is a sensible move as such short term “fire sales” upset collectors, and the trade alike. They devalue stock, encourage collectors not to buy things until they are discounted, and generally undermine confidence in the company.

The announcement also makes it quite clear that the organisation will be changed by the new management team with old practices and behaviours being replaced by ones which are working better elsewhere.

Lyndon Davies, Hornby Chief Executive, commented:

“The review of the business, operations and its strategy has revealed opportunities to improve performance. The strategy we are announcing today to invest in Hornby’s key brands, to instigate a clear pricing policy and to seek additional funds to further strengthen its balance sheet, I believe, will provide the platform for long term sustainable profitability and cash generation. By simplifying and improving basic business process, together with better selection and delivery of the highest quality products, we will re-establish the value of our brands in the eyes of consumers and collectors alike.”

From a collectors point of view the announcement that there will be a substantial investment in new product is excellent news. It would be nice to think that Corgi will be able to introduce some new castings after the starvation of new items in the last few years. Some other collectors have expressed concern that this may all have a negative effect on Oxford Diecast introduction of new items. As Oxford plan so far ahead to keep their factory working as close to capacity as possible this is unlikely to be the case in the near future and hopefully by then the shape of both of the new organisations will be established.

MAR Online wishes Hornby Hobbies the best of luck in the big task that they have ahead to turn the business round. The new financial links between Oxford and Hornby show us that in all probability further consolidation between the organisations will take place in the future.  Oxford always plan production roughly three years in advance so I suspect that the plans for their future that Hornby Hobbies are working on will be looking at 3 to 5 years ahead and that it will be some time before the full ramifications of these changes will be felt.

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