Hornby shares tumble over 50%

[MikeDunn]

Hardly the same thing though, is it 

[Nik96]

With a whopping 181bn wiped off the FTSE so far this year its no wonder stocks are plunging, this week alone has suffered a further loss of 80bn!

Losses such as this along with the global market losses affects every stock.   As for the post that mentions "Today's biggest mover up was Prudential with a whopping 4.40%" Their shares have actually been the the biggest casualty on the 100!

Read this to see why

Yesterday Prudential had a growth of 4.40% (FACT). It was used to illustrate my point that hornby's crash is somewhat decoupled from the FTSE slow decline and the fact that a 60% crash is a big thing. Hornby's shares went down 60% one day and 25% the next. That is called a crash.
The FTSE is decreasing gradually over the last 5-6 weeks, at a few percent every day is a decline.

The point half of us seem to understand and the other half dont is one companies crash has not been caused by the FTSE slowly falling since January. You can have decline without it being a crash.

[MikeDunn]

If the price is zero I will buy all the shares 

P.S. How much debt do they have ?

You'd have to fight a few people

New Pistoia may sell you theirs (they dropped to22.5% today), but Ruffer might beat you to them (they moved up to 12%  I wonder what %age is required to demand a seat at the Board ...    Takeover bid, anyone ?  What would have cost £18M yesterday is only £12.5M today ...  )  Phoenix Asset Mgmt only have around 29% ...

As to debt - they have £26M in liabilities.

[MikeDunn]

The point half of us seem to understand and the other half dont is one companies crash has not been caused by the FTSE slowly falling since January. You can have decline without it being a crash.

Indeed ... and I hardly see the point of comparing this with the FTSE - Hornby aren't a member ... they're on AIM ...  You might as well say that it's because the NASDAQ fell !  Another Exchange they aren't in ... 

[Nik96]

The point half of us seem to understand and the other half dont is one companies crash has not been caused by the FTSE slowly falling since January. You can have decline without it being a crash.

Indeed ... and I hardly see the point of comparing this with the FTSE - Hornby aren't a member ... they're on AIM ...  You might as well say that it's because the NASDAQ fell !  Another Exchange they aren't in ... 

Apart from the FTSE is relevant to Hornby, we wouldn't be having this discussion and this would be on the news if the FTSE dropped remotely near 60%. My point is one of correlation. Why is this news? Because the individual share price dropped 60% but the rest of trading didn't. This means something has happened with Hornby's Investors...

This is my point, the crash of Hornby shares was caused by something Hornby did and it's investors reacting. Something which appears to be missed here...

[MikeDunn]

You mis-understand me; I was agreeing with your point to Mr Sprue ...

[Nik96]

You mis-understand me; I was agreeing with your point to Mr Sprue ...

I apologise to you Mike,

[MalcolmInN]

Closing down today another 27.5% down to 23p, Does anybody know what happens if they hit a rock bottom of nil value?

Interesting question ! I guess there may be a minimum price to be ( remain) quoted ? 1p shares are often spoken about as experimental hunting grounds for the ever hopeful investor Maybe 1p is the minimum ?

Yes, 23p at close, they went down to 19p at one point (3pm ish ?) then went up, so someone somewhere must have decided to snap up a bargain.

[Nik96]

Closing down today another 27.5% down to 23p, Does anybody know what happens if they hit a rock bottom of nil value?

Interesting question ! I guess there may be a minimum price to be ( remain) quoted ? 1p shares are often spoken about as experimental hunting grounds for the ever hopeful investor Maybe 1p is the minimum ?

Yes, 23p at close, they went down to 19p at one point (3pm ish ?) then went up, so someone somewhere must have decided to snap up a bargain.

I'm currently toying with the idea.

[MalcolmInN]

toying with the idea.

 

[JasonBz]

They wont drop that far...unless the company is a totally debt laden basket case.......

[Chetcombe]

A very interesting thread, thanks to all for their comments.

A couple of observations from me as of end of trading on Thursday and based on Hornby's 2015 annual report (see http://hsprod.investis.com/ir/hrn/pdf/23204_Hornby_AR_2015.pdf ). Of course their financial position would seem to have significantly worsened since their 2015 annual report:

~ Hornby's market cap is only GBP12.64M, which makes them a very small traded company. Market capitalisation is the total value of the company calculated by multiplying the total number of outstanding shares (~55million) by the current share price (GBP0.23).

~ So in theory, the NGF could buy Hornby for 12 million pounds, but this would require the agreement of the majority of Hornby shareholders to sell at today's share price which is unlikely. If the NGF was to put in a hostile bid we could expect to acquire Hornby at about a 30% premium; in other words we could realistically buy Hornby for about GBP17million. Hmmm.

~Looking at Hornby's 2015 annual report their profitability is marginal at best. In 2015 on sales of GBP58.1million they made a profit of just GBP300,000 - a profit margin of just 0.5%. Interestingly this is a vast improvement on 2014 when Hornby posted a GBP4.1million loss on sales of GBP51.6million. So they have increased sales by about 12.5% over the last year and increased profit by an even greater percentage. At the end of there day though they are making very little money at all on their sales.

~Others can maybe speculate as to why their margins are so tiny, but at the end of the day Hornby is a company with reasonable sales, but tiny profits which equates to minimal earnings per share of 3.4p and a dividend of zero. Not very healthy at all.

~ Debt is listed at about $7.5million (more than half Hornby's market cap). They also incurred costs of just under GBP1million related to their relocation and 'restructuring' - not unreasonable if these costs helped return the company to profitability in 2015.

~ Other posts have mentioned the resignation of Simon Kohler as a significant factor in last year's performance. Sorry to all Simon fans, I don't think he had a senior enough position to make a real difference to the overall financial picture. As a marketing manager he would have limited control of supply chain strategy (manufacturing and distribution costs), corporate restructuring or corporate debt management.

~ Finally a look at the balance sheet suggests they have high inventory levels of around GBP12.5 million (i.e. stock not yet sold to wholesalers or retailers) and another GBP10million or so in amounts owed to them by wholesalers and retailers.

~ So with about GBP1million in cash (and short term derivatives) plus about GBP12.5million in inventories, less about $9million owed to suppliers and about $7.5million debt, it is difficult to assign much value to the company.

In summary, I can see three ways forward:

1) Hornby goes it alone and tries to increase revenue, reduce costs and decrease debt. Achievement of which is not likely based on prior performance.
2) They are purchased at a price less than GBP20million by a competitor such as Bachmann
3) Private equity steps in and takes them over - the most likely in my opinion

None of these options are positive for our hobby as a whole. As far as future investment in N Gauge, well I don't think we should expect much at all....

[MalcolmInN]

A very interesting thread, thanks to all for their comments.

but tiny profits which equates to minimal earnings per share of 3.4p

3) Private equity steps in and takes them over - the most likely in my opinion

None of these options are positive for our hobby as a whole. As far as future investment in N Gauge, well I don't think we should expect much at all....

Thank you, fascinating read
,
3.4p yield per share, if bought at say 20p/share, would be a healthy  17% return, not to be sniffed at when faced with negative interests on bank deposits ! * But I dunno, are they paying out all their tiny profits, I have not studied them, it was just a curious thread thus far !
someone Mike? I thought said their debts were a lot higher than that ?

I also thought 3) was a probable outcome until I saw that late pick-up at 19p
would a load of venture capital be any worse than present, , ummm lets not go there

* some say that will boost the economy by getting money into real things not languishing in banks, [ but then banks did not usually languish it in the past anyway, they used to use the deposits to do real things, till they started messing with dodgy mortgage whatsits,,ho hum ] I wonder if it wouldnt just make me put it under my bed if inflation remains so low ,,,

[MikeDunn]

I apologise to you Mike,

No worries 

[MikeDunn]

Yes, 23p at close, they went down to 19p at one point (3pm ish ?) then went up, so someone somewhere must have decided to snap up a bargain.

Yup; the drop seems to be around the time New Pistoia sold a bunch ...

Closing down today another 27.5% down to 23p, Does anybody know what happens if they hit a rock bottom of nil value?

They'd be suspended before they went that far ...

Other posts have mentioned the resignation of Simon Kohler as a significant factor in last year's performance. Sorry to all Simon fans, I don't think he had a senior enough position to make a real difference to the overall financial picture.

Agreed; and it was more like he was pushed than went happily.  Interestingly, the company still have him as a consultant ... however, given the lack of understanding of the market they're in by the Directors, pushing out a resource like SK was a rather stupid idea, unless they pay him less as a freelance & get the same draw on his knowledge ?  Can't see that, TBH !

3) Private equity steps in and takes them over - the most likely in my opinion

Look at who the main shareholders are - that's already happening, and has for a while.

3.4p yield per share, if bought at say 20p/share, would be a healthy  17% return

Only to the company - you wouldn't see any return as Hornby aren't paying any dividends ...

someone Mike? I thought said their debts were a lot higher than that ?

I quoted the overall liabilities; debt is a component of that.

I also thought 3) was a probable outcome until I saw that late pick-up at 19p
would a load of venture capital be any worse than present,

As I say above - check out the main stockholders ...