Hornby putting together £15m fourth fundraiser
HORNBY is to tap up investors for £15m with its fourth fundraising in six years as the model train maker looks to reinvigorate key brands, writes Simon Foy.
The firm behind Scalextric cars and Airfix models, said it plans to issue 41.7m shares at 36p each through a placing and open offer. The book will be run by Liberum Capital.
Shares rose 6.9pc to 38.5p.
All aboard for the latest Hornby fundraiser! If only the country’s trains had arrived with the same frequency as the toy maker has run into trouble, Chris Grayling wouldn’t be out of a job. This time Hornby is looking to raise £15m from investors to bolster its finances. Boss Lyndon Davies says the money will enable the model train specialist to fix its balance sheet and build a “solid foundation for the next steps in our journey”.
And what a journey it has been, one filled with more delays and disruption than the Monday morning Southern Rail service from Brighton to London.
Cumulative losses since 2012 stand at £50m and without the continued support of its lenders and investors Hornby would have been derailed long ago. Only a combination of clemency from its banking syndicate and the generosity of long-suffering shareholders has kept the company on the tracks. This is the fourth time in nearly as many years that it has had to get out the begging bowl.
Of course, Davies is insisting this time is different and to be fair to him, there are signs of progress. Annual losses halved last year from £10.1m to £5.3m, and continued to fall at the half-year stage as well. Turnover has also recovered.
Long-running supply problems that meant stock arrived late have been smoothed and Davies has ended persistent discounting, which he argues had denigrated the storied Hornby brand. Full-price sales will rebuild “integrity”, he believes. The proceeds of the fundraising will be used to speed up investment, improve its online offer and repay some debts.
It sounds like a sensible plan and at least the fundraising is probably already in the bag thanks to Hornby’s unusual shareholder structure. Almost 90pc of the company’s shares are in the hands of two institutions – Phoenix Asset Management and Artemis – both of whom have agreed to take part in the placing.
Davies has promised to share 15pc of the proceeds with staff if and when Hornby returns to profit. Still, that’s a very big “if ”. He has conceded it is unlikely to climb out of the red for another three to five years. Perhaps Grayling could lend a hand.
A textbook lesson in failure
School’s almost out for John Fallon, whose final outing as boss of Pearson saw him score bottom of the class marks again.
He will leave the education publisher after seven years with a report card that would make his parents wince.
Fallon’s attempt to transform Pearson into a specialist digital publishing house by offloading assets such as the Financial Times made sense up to a point, but it has been slow and painful for shareholders.
The company has averaged a profit warning every year under Fallon, which must be some sort of record for the boss of a FTSE 100 company. The share price has halved, meaning more than £6bn of value has been destroyed in that time.
Pearson’s big problem is that its core business of selling course materials to American students is in steep decline and the company’s response has been too ponderous. Printed textbook sales have fallen from more than 20m a year to fewer than 4m.
Revenues from the US have nearly halved but the country continues to count for a quarter of sales and the transition online has been hampered by the arrival of Amazon in the secondhand market. Competing with the logistical might of Jeff Bezos has proven to be a fool’s errand and digital sales are not nearly as profitable as ones for printed versions.
Pre-tax profit more than halved to £232m last year and is expected to be even lower in 2020. Presumably there are no plans for a class reunion. Follow Ben on Twitter @benjaminmarlow
‘Fundraising will be used to speed up investment and pay debt. It sounds sensible’