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Ian Pollard – Hornby #HRN & self-inflicted wounds

Hornby plc HRN Years of mismanagement continue to take their toll at Hornby, where sadly, things seem to go from bad to worse with every year that passes. Revenue for the year to the 31st March slumped badly from £47.4 to £35.7m whilst the annul loss before tax edged slightly higher to £10.1m. Group sales for the 10 weeks to the 8th June are lower than expected, a self inflicted wound if ever there was one, caused it seems by the impact of insufficient investment in tooling in past years. The new CEO puts a brave face on things, claiming that they are currently laying down the foundations for their future success.

Ferguson plc FERG third quarter revenue rose by 10.2% and trading profit was up by 17.1% despite a miserable performance in the UK. The US continued to grow strongly and the fourth quarter has started well. Yet again the UK let the side down badly with growth of 0.7% which included price inflation of 3%. In the UK organic revenue declined by 10.9%, whilst trading profit slumped by 29.3% at constant exchange rates.

Ashtead Group AHT Announces another very successful year crowned with a strong fourth quarter which saw revenue and profit before tax each rise by 20% and earnings per share by 26%.Revenue for the year to 30th April rose by 20% and it is proposed to increase the final dividend  to 27.5p per share making a total rise for the year of 20%.

Telecom Plus TEP performed as expected in the year to 31st March, with further growth in all areas of the business. Revenue rose by 7.1% and on a statutory like for like basis profit before tax just managed to edge ahead  by 0.3%, earnings per share rose by 2.1% and the full year dividend is to be increased by 4.2% to 50p per share. The most notable achievement of the year appears to have been winning the Which “Best Utilities Provider” 2018 award.

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Ian Pollard – Hornby #HRN – plagued again by late deliveries

Hornby plc HRN claims for the umpteenth time that it is at last getting its act together over the delivery problems which have been plaguing it for years. It introduced a new strategy to increase sales which failed to do so because it involved putting an end to discounting. which, not surprisingly led directly to a fall in sales. Although there was some improvement towards the end of the year both sales and profits fell as expected.

It did not however end there because the sales problem was made worse, as it continued to be affected by late deliveries. Hornby must have more experience of long standing delivery problems than any other UK company and it still could not find a solution to what is after all  a basic management problem

But good news is in the offing and it intends to refine the strategy which has been a failure so far. The refinement is one which will need more finance, so the begging bowl has come out again and new lenders have been approached for a new finance facility which appears to have been approved and is expected to be in place by mid June. Barclays is doing its bit by agreeing to a waiver for an expected breach of covenant.

The interim Chairman claims that the dust is now settling and trust amongst retailers and customers is returning.  One can only hope that this time it will not just be a case of more broken promises.

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Corporate news review Tuesday 17th October 2017

ASOS ASC says FY retail sales grew strongly at +34% on a reported basis and +27% on a constant currency basis. Customer engagement remains strong with active customers6 +24%, average basket value +2% and average order frequency +5%. CEO Nick Beighton said the new financial year “shows continuing momentum in the business” and the potential for the company “remains huge.”

Bellway BWY reports another record year with completions rising by 10.6% to a record 9,644 homes. Operating profit rose by 16.2% to £571.6m, with EPS up 12.7% to 370.6p and a 13% rise in the proposed total dividend per share to 122.0p.

Hornby HRN updates on trading and says to maximise the value of its brands over the long term, it will no longer offer for sale large quantities of stock at a discount. Hornby warns that current year revenues will be lower and, consequently, there will be a material impact on profitability in the current financial year. Interim Chairman David Adams has indicated his intention to step down to take up another appointment.

Merlin Entertainments MERL updates on trading and reports 12.4% revenue growth driven by continued strong New Business Development, including the successful opening of LEGOLAND Japan, five new Midway attractions, and 381 new accommodation rooms. Trading in recent weeks has remained mixed and Group like for like revenue growth for 2017 is therefore expected to be approximately flat on 2016. EBITDA is expected to be in the range of £470 – £480m.

Moneysupermarket.com MONY updates on trading and says it is on track for another record year.

Virgin Money Holdings VM. updates on trading and confirms profitability, earnings and underlying RoTE are in line with expectations.

Pearson PSON updates on trading and reports a good competitive performance year to date, while plans to complete the digital transformation and simplify the company are on track. Nine-month revenues are in line with expectations.


Fast start to the year for Whitbread

by Ian Pollard

Whitbread WTB – Management reports a good start to the year, with first quarter sales growth of 7.6%, in line with expectations. Premier Inn continued to win overall market share with strong sales growth of 9.2%, benefitting from a resilient hotel market and the contribution from the c.9,000 rooms opened over the last two years. Costa sales grew 8.7% with UK equity like for like growth of 1.1% and a good performance in the expanding travel and drive thru channels. Whitbread has a clear plan to deliver growth and remain on track to open c.4,200 hotel rooms, 230-250 Costa coffee shops and install c.1,250 Costa Express machines this year.

Hornby HRN – A dismal performance from a management team that needs to turn this company around, although CEO Steve Cooke claims “solid evidence of our delivery in phase one of our Turnaround Plan.” FY revenue of £47.4m (2016: £55.8m), loss before tax of £9.5m (2016: £13.5m loss). At least net cash at 31 March 2017: stood at £1.5m (2016: £7.2m net debt). Hornby claims the current financial year has started positively and it is are well placed to achieve the Board’s expectations for the year.

Wynnstay Group WYN – Interim results benefited from greater demand for agricultural inputs over the winter period but were affected by continued subdued trading at pet products business, Just for Pets. Revenue of £205.32m (2016: £193.24m) and adjusted profit before tax, before goodwill & investment impairment charges of £4.07m (2016: £4.08m). The interim dividend of 4.20p is an increase of 5%.

Lekoil Limited LEK – Reports continuous commercial production and cash flow generation at Otakikpo. The company says the 15m Shell offtake facility secured on Otakikpo production provides liquidity to complete Phase 1 development and ramp up production to 10,000 bopd by year end. The Honourable Minister of State, Petroleum Resources of Nigeria, granted consent to complete the transfer of the original 17.14% participating interest that LEKOIL acquired in OPL 310 in February 2013.

Berkeley Group Holdings BKG – FY profit before tax shot up an impressive 53% to £812.4m, with net asset value per share up 18.4% to £15.56. Management claimed it had delivered another strong performance in a fast-changing environment.

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Countrywide blames Brexit for woes

COUNTRYWIDE CWD blames the EU referendum in June for a fall in what it calls transactional activity in the quarter to the end of September. Not a fall in activity you will note, not a fall in transactions but a fall in transactional activity, whatever that is supposed to mean when you translate it into basic English. Transactions for the quarter were significantly below 2015 and for the full year a fall of some 12% is expected with a further decline to come in 2017, in what the company describes as a fst changing market

HORNBY HRN is pleased with progress in the half year to the end of September and does not seem at all bothered by the fact that the second half will produce a significant decline in revenue 

SEVERN TRENT SVT claims to be the most trusted water company and to have the largest reduction in complaints of all water and sewage companies. In addition it claims to be winners in a world of incentivisation. Perhaps it should stick to sewage. Interim turnover to the 30th September rose by 3.9% and reported profit before interest and tax by 0.8%, whilst reported earnings per share surged by 39.7%

PETS AT HOME GROUP PETS is increasing its interim dividend by 25% after what ir describes as robust like for like growth of 2.5%. Perhaps some peoples idea of robustivity is more robust than others. Group revenue for the 28 weeks to 14th October rose by 9.1%. but recent trading has been softer than in the first half.

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Hornby On Its Knees with a Begging Bowl.

Hornby HRN has been forced to go to its shareholders cap in one hand and begging bowl in the other and ask them for a measly £8,000,000 for working capital and other essential items which will, they hope, help keep it afloat. The share price has justifiably nose dived from 109p last August to yesterdays 31p and the offer price of the proposed new shares is at a 15% discount to that. Things at one of the UK’s best known brands with a globally recognised name, are so bad that in March, Barclays waived its covenant test. February’s profit warning was the last straw after years of mismanagement and an endless list of excuses, at last brought home to the company that the end was night and the company was on its knees.

Today’s results show that 2015 was yet another disastrous year with revenue to 31st March down by 4% and last years profit of £1.6m turned into an underlying loss of £5.7m or on a reported basis,even worse, with a loss of £13.5m compared to £0.2m.

Steven Cook the CEO has the grace to admit that it was a difficult and disappointing year but then trots out the same pathetic excuse which the company has relied on for years – it faced, he says, “significant challenges”. For gods sake, man, that is what management and the Board is supposed to be there for – to face and overcome challenges. If it cant do it, then they should depart.

But fear not, all will be well. After months of deliberation, the company has at last produced a turn round plan.

Debenhams DEB saw like for like sales for the 15 weeks to 11th June fall by 0.2% or 1.6% if you prefer your results on a constant currency basis. Online sales provided an exception with growth of 7% but the international division’s performance remained mixed. Volatility in the trading environment is blamed for the lack of success, as is a weaker trading environment in the second half. Presumably it will decide which is the correct one to blame when it has a bit more of the second half under its belt. The departing CEO, says that its strategy remains unchanged and apparently regards this as a good thing.  We shall see in due course


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Hornby Crashes – Set to Breach Banking Covenant

It has taken Hornby (HRN) a long time getting there but at long last its board and management has driven it off the rails and that is no mean achievement for a company with some of the worlds most famous brands. Is there any hope for a company specialising in toy trains, whose  Chief Executive can seriously say that the company will create shareholder value with the “right platform”.  Is he unable to see the pun in that or that Hornby is nowhere near a platform, never mind the right one.

For the past 5 years or so Hornby has lurched from one crisis to another leaving a trail of unbroken promises behind it.

True, this Christmas it did manage to improve sales with a rise of 17% in November and December but from the New Year, trading has been a disaster with poor sales and a disappointing reaction to product promotion.  Even worse, management does not appear to know why and it seems to have spectacularly failed to anticipate the collapse. It certainly offers no explanations.

In fact management can not even bring itself to admit to a fall in sales.  Instead it resorts to a claim that there has been “negative growth.”  Any growth even if it is negative is better than calling it a fall.

In today’s trading update the company still witters on about the changes to its business model and its transformation plans for the company. Well they  certainly have transformed it.

January sales were substantially below expectation. The full year trading loss will be wider than expected and will be in the region of £5.5 to 6m.  They even managed to lose stock, leading to a write off of £1m. That is a lot of toy trains.

The result of this self imposed mayhem is that in March it expects to breach its banking covenant.  It is of course now in discussion with its bankers.

The present board and management have proved themselves incapable of managing a company which should and could be one of the UK’s success stories. Let us hope that investors and bankers force the company to take the necessary action.

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TipTV Daily Market Roundup – Nick ‘Moose’ Batsford, Zak Mir and Alan Green

Nick Batsford, CEO of Tip TV, was joined by Zak Mir, technical analyst for Zak’s Traders Café, and Alan Green, CEO of Brand Communications, on the Tip TV Finance Show to discuss the Chinese import and export data, the falling commodity prices, an outlook for Centrica and Hornby and a view on global producers.

Weak Chinese imports trigger risk-off

Batsford highlighted FX Street, who noted that exports in China dropped 6.8%, whilst imports fell 8.7%. Weak exports is not surprising with global demand being relatively low, but falling imports is a more serious issue for China as it highlights weak consumption. They continued that the global economy is to continue to face aggregate demand deficiency, and interest rates are likely to stay closer to zero, the new normal, so long as Chinese consumption does indeed remain weak.

Commodity melt down threatening the Santa rally

Mir outlined that we don’t know where commodities are going or how bad the situation is going to get, but with oil now falling as well there is certainly a chance for this melt down to impact the potential Santa rally. Green agreed with this, and commented that commodities may well put the brakes on a Santa rally.

Outlook for Centrica and Hornby

When concerning Centrica, Green believed that it shares have opened this morning lower, and with a trading update on Thursday unlikely to change the situation, he expected more downside for the stock.

In terms of Hornby, he expressed that we are seeing a convergence of the 50 and 200 day moving averages, and their upcoming trading statement may spark a recovery heading into next year. Green added that this is a pivotal time for Hornby.

Incredibly low prices impacting producers

Batsford highlighted Elliott, who commented that heavily weighted to both energy and precious metals, both Bloomberg’s Commodity Index and the older Commodity Research Bureau’s Index of basic materials and food are down at the sort of levels not seen in this century. Trading approximately 22% below 2009’s lows, and 65% below 2008’s record high, its impact is being felt by producers all over the world.

– See more at: http://www.tiptv.co.uk/finance/daily-market-roundup-commodities-applying-the-brakes-on-a-santa-rally-outlook-for-centrica-and-hornby/#sthash.gpvAqMDE.dpuf

Hornby (HNBY) transforms profits into another loss

Unbelievably in its big transformation year, Hornby has managed to turn last years small interim profit into major losses for the half year to 30th September.  As group sales fell by some 5% that is perhaps not surprising.

Underlying profit before tax of £0.2m  has been transformed  into a loss of £3.4m and the statutory loss has shot up from £0.5m to  £4.5m.

After all this time the same management is trotting out the same old excuses – supply side disruptions caused by managements transformation plans. How long can this be allowed to continue. This time it is Europe which gets the blame, rather than the UK where sales did rise by 10% .And then management concludes that these transformations will give it a platform to move forward. – it is not a platform which Hornby needs but a repair yard and it does not seem to have one.

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Hornby (HRN) Signals Yet Another Warning

Not only has Hornby issued yet another  profits warning, it is caused by the same old reason which has plagued the company for years – supplies.  They introduced a new Enterprise Resource System ( as these things are now grandly called ) in the UK in June & July and it had a significant adverse impact on trading, as Hornby’s new systems tend to do but lessons have been learnt and over the 10 weeks to 8th November, UK revenue was up by 9% over last year and  a strong end to quarter 3 is expected.

But why couldn’t they get it right in the first place.  Which particular bit of management got it wrong and what has been done about it.

The Board  then decided to hurry up and implement the new system in Spain in October and in Italy, Germany and France in November. And surprise, surprise no lessons had been learned. They got it all wrong again but on a much greater scale.

The disruption in Europe has been significantly  greater than expected and adding in the UK mess up, revenue and profits for the current financial year will be lower than market expectations.   What Hornby is really trying to say is that this years profit will not be a lower profit at all, it will actually be an underlying loss of £2.0m

Shareholders need not fear however, profits will recover next year which in Hornbyspeak presumably means the losses will get bigger..

 It was only in mid September that the Board announced that it was confident that this years financial results would show progress on last year, when finals to the end of March had shown a reported loss before tax of £0.1 m and underlying profit before tax of £1.6m. So the Board thinks a loss of £2m is an improvement on on a profit of £1.6m
Then on the 6th May The Board updated that the current year would be the first year for three years that Hornby has delivered a pre tax profit.
If they can not make even a reasonable guess about the finances of the company they run, how could they hope to manage and bring in new and fundamental systems.
If the Board can get its forecasts so disastrously wrong, if it mismanages a new ERS system in the UK and then makes an even worse hash with the same system in Europe, it has some explaining to do. Come on Hornby Board, we are waiting. Perhaps it will be a long wait
Surprisingly,whilst the shares did fall on the news it was only by a smidgeon.
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