Hornby cements deal for Airfix, Acquisition news and company results Options

[Doug]

Hornby is to rescue Airfix from administration, adding the maker of model aircraft, tanks and ships to its stable of brands.

The deal, to be announced today, will unite some of the best known hobby brands after Hornby agreed a £2.6 million deal with the administrators, Grant Thornton, to buy the Airfix brand, as well as Humbrol, the paints and model accessories business, and Young Scientist, which makes chemistry sets.

It is thought that Hornby, which saw off competition from rivals including Germany’s Revell to secure the brands, is planning to restructure the business and transfer distribution and sales and marketing operations to its head office in Kent.

It is also likely that Hornby will outsource the manufacture of Airfix kits to China, where its trains and cars are produced at a lower cost and to a higher level of detail than those of the Airfix models.

The model train maker is expected to reinvigorate Airfix’s marketing and distribution and extend the product range with models aimed at younger enthusiasts.

Humbrol, the parent company of the brands, collapsed into administration at the end of August with the loss of 31 jobs.

The Hull-based company ground to a halt after the insolvency of Heller, a French company that owned the moulds for Airfix kits, squeezed cashflow and disrupted the supply chain.

Changes in leisure activities also played a part, with children less likely to devote time to constructing a Spitfire replica than playing computer games.

The acquisition is in line with Hornby’s strategy to become an international hobby business with a broad range of brands. It bought Heico, of Germany, a distributor of model railway accessories, last month, extending its reach in Europe.

Hornby made pre-tax profits of £8.2 million last year but turnover fell 2 per cent to £44.1 million, hit by weak consumer confidence in Britain.

****************

On the news, Hornby shares are at 264.75p, 16.00p Up (6.43%).

****************

Frank Martin, Chief Executive of Hornby commented,

' We are delighted to have acquired Airfix and Humbrol, both of which are iconic
brands in the hobby market. The strategic fit with Hornby is excellent. Hornby
has similar distribution channels to Humbrol/Airfix, and we therefore plan to
integrate the business into our existing structure, which gives the business the
right platform and a more streamlined base from which to grow.

' We have taken steps to re-align the cost base of the manufacturing and
assembly process, to create a solid base from which this business can thrive. We
can focus on product innovation, improving the marketing and driving sales
growth.

' Hornby has the expertise and track record of re-invigorating hobby brands. A
detailed integration plan has already been put in place, to ensure that we
improve the profit performance rapidly.

' This acquisition consolidates the Group's strategy to build an international
hobby business with a broad range of brands, allied to a tightly controlled
cost-base. We are making good progress across a range of markets and
territories.'

Keith Hinds, joint Administrator at Grant Thornton said:

' I am delighted to be able to announce this successful sale. This transaction
provides the best opportunity to preserve and develop what is an iconic brand.'

****************

Together with the news of the Airfix acquisition, Hornby Plc today announced its
interim results for the six months to 30 September 2006.

Hornby's two main products in the UK are Hornby model railways and Scalextric
slot car racing systems. It also operates a number of overseas subsidiaries
including Hornby Italia in Italy, Hornby Deutschland in Germany and Electrotren
in Spain.

* Pre-tax profit of £1.4 million
* Sales of £17.9 million
* Overseas subsidiaries making good progress
* Hornby Digital Railway system introduced
* Acquisition of Heico Modell in Germany completed
* Acquisition of certain assets of Humbrol Limited announced today
- Brands include: Airfix / Humbrol Paints / Young Scientist
* Dividend increased by 9% to 2.5p (2005:2.3p)

Frank Martin, Chief Executive of Hornby, said,

' The group is making excellent progress towards our objective of building an
international hobby business and reducing our dependency on the UK market.

' We are delighted to announce today that we have agreed to acquire certain
assets of the Humbrol business. The brands include Airfix, Humbrol Paints and
Young Scientist. This is an important acquisition and we believe that these
brands can be re-invigorated in the same way that we have been able to develop
our existing brands over the past few years.

' Looking ahead to Christmas, we are in good shape. We have an excellent product
range and current indications are that we will experience a significantly
stronger performance in the second half.'

[neil_s_wood]

Thats good. I'd hate to see Airfix go under. It would be good if they did some kits which were usable on model rail layouts.

Just on the subject of Hornby Europe, on another forum which is dedicated specifically to German model rail there was the comment made that Hornby were not going to make any inroads in Germany because they had not bothered to publicise themselves or even take the trouble to have the Hornby International site in German. I had a look and they are right the site is only in English. I wonder if they have lost interest in making inroads into Germany as not having their website in German is a pretty big mistake for Hornby to make. They have done well with the Spanish arm Electrotren who have a multilingual site which is even better than Hornby's. I'd be interested to know why this is?

[pedromorgan]

Very interesting.

There's lots of management bull but it also says quite catagorically that heller owned the moulds which i didnt believe was the case. i thought they were owned buy humbrol but kept buy heller for manufacturing purpouses.

so this begs the question about what hornby have actually bought??

2 brands for £2.6m
thats a heck of a lot of brand!

Peter

[pedromorgan]

Hello neil. i think the americans have been a bit underwhelmed buy the re-release of the riv stuff as well. where was the blaze of publicity?? i havent even seen an advert!

Very poor marketing i think. people still think the big boy is the old 1980's model. they havent even bothered to tell epople it was retooled.

Peter

[Doug]

The news of the results is not being taken too well.

223.50p, Down 25.25p (-10.15%)

UK smallcap opening - Hornby lower after disappointing H1

LONDON (AFX) - Disappointing half-yearly numbers from Hornby put the brakes on the share price, 16-3/4 pence lower at 232. The company blamed the World Cup and prolonged hot summer weather.

Altium's David O'Brien cautioned that the H1 shortfall leaves a lot of work to be done in H2. The analyst has mixed views on the acquisition of certain assets of Humbrol from administration, notwithstanding management's prior experience of the business purchased.

His estimates, target price and recommendation are under review.

[Makemineadouble]

This news was not well received by the market currently the Hornby share price is down 10%

[Gary]

Hornby sales are down significantly in the UK. Hornby say the summer that we have have had in the UK has not been condusive to indoor hobbies. This hasn't stopped Electrotren of Spain making progress though and they say a range of new models has helped here. What has happened to the new models destined for the UK? They will now appear after Xmas! Lets face it though. Its a very competitive trading environment out there right now and from a railway modellers perspective we have never had it so good!

I would expect to see the massive Lima kit range including Pocher to appear under the Airfix banner in the coming years so there will be a massive amount available for both railway modellers and car fanatics from this source.

Happy modelling
Gary

[pedromorgan]

The new hornby stuff was noticible buy its absence last years warley show. its a bity its happened again. people save for the warley show so people are willing to spend.

"I would expect to see the massive Lima kit range including Pocher to appear under the Airfix banner in the coming years so there will be a massive amount available for both railway modellers and car fanatics from this source."

I had forgotten about poucher!! nice one gary!
Do you know what was in the kit ranges? i have no idea. i have only heard of them.

"Its a very competitive trading environment out there right now and from a railway modellers perspective we have never had it so good!"
it dosent change the facts though. the new bachmann stuff will be on the shelves. the new hornby stuff wont.

Peter

This is a great topic. i have been waiting for something like this to happen!!

[Gary]

I would also speculate on whether Hornby will now be approaching Dapol so that the former Airfix kits can be reunited with the Airfix brand. Hornby have done deals with Dapol in the past and the Dapol kits don't really fit in with Dapols N gauge strategy.

What happened to some of the Kitmaster kits such as the Garrett and Mk1 Coaches?

And then there are all the Cooper Craft Kits, and Ratio and Wills and so on.

They could all in time be bought by Hornby and placed under the Airfix banner so there is the potential for a complete kit and scratch building rejuvination among railway modellers.

The Jouef kit range was massive and Lima inherited this and consolidated it with their own. OK the kits are not up to current standards from Faller or Vollmer and so on however neither would the price be!

Happy modelling
Gary

[pedromorgan]

Many of the kitmaster moulds were left outside the factory and rusted. they were then smashed with a sledge hammer. (including the garrett and stirling single (oah the humanity!!) etc.... all the ones that are left are now made by dapol.

I dont think cooper craft and wills fits in with airfix but the ratio coaches would be fine. cooper craft and wills kits are not really beginners kits for children.

Also you have to remember that many of these old moulds are getting worn out.

I am fairly young and i have only recently discovered the ratio coach kits. they are great but we need 5 times as many.

Peter

[Gary]

Many of the kitmaster moulds were left outside the factory and rusted. they were then smashed with a sledge hammer. (including the garrett and stirling single (oah the humanity!!) etc....

OK. What chance Hornby producing Airfix kits from moulds used for their current RTR range?

Wagons and coaches more so than locomotives.

Happy modelling
Gary

[pedromorgan]

Dont worry garry. i am sure it was quick and they didnt feel any pain.

I would love a simple. pile it high sell it cheap wagon kit range.

But manufacturers dont tend to like doing this. it means that some people buy the kits rather than buying the RTR models.

Athearn Blue Box range being a good examply. although it is technically still available, you try finding one!! then horizon (owners of athearn last time i checked!!) complain that they dont sell so i suspect they will stop making them soon.

But the UK has probably a greater cottage industry culture than any other country. so mabye it might work in the uk. but it would need hornby to set up a subsiduary i think. it needs people to concentrate on it.

Peter

[pedromorgan]

i forgot to say jouef did for a while sell its mk3 coaches as kits.

Peter

[pedromorgan]

Sorry to have 3 posts in a row but i have only just read this.

"Hornby has the expertise and track record of re-invigorating hobby brands. A detailed integration plan has already been put in place, to ensure that we improve the profit performance rapidly."

Sorry mr martin but you dont have that track record YET.

peter

[pedromorgan]

there is a thing about it on news 24.

dosent say any more than we already know.

But what have they actually bought?????

Peter