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