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As reported in a few places, Hornby (the model railways people) has bought 25% of Warlord Games for £1.25m.

Olly Raeburn, CEO of Hornby, said: “We are absolutely delighted to be able to join forces with Warlord Games, a business we have always admired. We very much look forward to working with the team there to maximise the potential of the business and use their significant experience and expertise for the benefit of the wider group.”

John Stallard, CEO and founder of Warlord, added: “We are very much looking forward to working closely with Hornby as we have been big fans for many years. We see this as a huge opportunity to continue to build Warlord long into the future, as well as to contribute in any way we can to the future success of Hornby and its stable of iconic brands, as there are innumerable opportunities and synergies in sales, marketing and production.”

The acquisition is being funded by an increase in Hornby’s current loan facility; Phoenix UK Fund Ltd, the company’s subordinated lender, has agreed an extension to the term and the amount of its existing secured credit facility. The facility is being extended from £9m to £11.25m and the term extended by 12 months to 31st December 2024.

It'll be interesting to see what happens with both companies.



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The borrowing to acquire makes me nervous.

Hornby have of course been around a long, long time. Indeed my Dad has original Hornby clockwork trains from his own childhood.

Whilst a very cursory Google shows they’ve emerged from an earlier slump in sales, borrowing to acquire will always, always make me nervous.

For reference, Hornby also owns Corgi, Scalextric, Airfix & Humbrol (amongst others).

 Mad Doc Grotsnik wrote:
The borrowing to acquire makes me nervous.

Agree.

Interesting, makes me wonder if they're diversifying to hedge against a decline in model railroading. Maybe they'll produce more 1/48 or 28mm scale stuff so there's crossover sales from gamers that want terrain.

I wonder what that means for the plastic tank kits made in collaboration with Italeri? I assume they'll be in competition with Airfix, even if the scales different (1/56 Vs 1/72).

It'd be interesting to see a lot more scale compatible stuff, and what Warlord can do with access to Hornbys production stuff.


Also concerning they've increased their loan facility by £2.25m to buy a £1.25m stake in another company, what happened to the other £1m?

 ScarletRose wrote:
Interesting, makes me wonder if they're diversifying to hedge against a decline in model railroading. Maybe they'll produce more 1/48 or 28mm scale stuff so there's crossover sales from gamers that want terrain.

My initial thoughts as well. Either way, I'm always down for more BA terrain that I don't have to build myself.

I first learned of Hornby from a BBC doc with James May I watched a few weeks ago. Went to their US website and it just mostly just Airfix and Warlord stuff so I guess I'm not that surprised.

borrowing to acquire will always, always make me nervous.

It rarely turns out well.

 Monkeysloth wrote:
I first learned of Hornby from a BBC doc with James May I watched a few weeks ago. Went to their US website and it just mostly just Airfix and Warlord stuff so I guess I'm not that surprised.

The documentary is worth watching, especially for fans of Hornby.

GrosseSax wrote:

 ScarletRose wrote:
Interesting, makes me wonder if they're diversifying to hedge against a decline in model railroading. Maybe they'll produce more 1/48 or 28mm scale stuff so there's crossover sales from gamers that want terrain.

My initial thoughts as well. Either way, I'm always down for more BA terrain that I don't have to build myself.

Right now Hornby is doing really well. Or at least model railways are doing well as there multiple model train magazines on the shelf when I got past the newsagents.

That said I'd class it very much as an "old mans hobby" and I'd wager there are not many of the young getting into it. I suspect those at Hornby are looking around and realising that a lot their assets are in the same boat; being very reliant on a nostalgic older generation with far fewer younger generations getting in. So diversification makes a lot of sense in reaching out and tapping into other markets. At the very least it might mean that they are in a more robust position in the future if/when their market contracts as newer older generations might well hold different nostalgic interests and not be drawn to model railways.




I do agree that borrowing is a risk, one big thing GW has done for years that has left them in good standing is avoiding borrowing. Sure it meant they grew slower, but it also means that when things get tough, GW hasn't got lenders leaning on them and draining the coffers. That said it sounds like whilst the loan amounts are huge; they are looking to repay by 2024; or at least renegotiate/borrow to payoff etc... They are big numbers and in the end it is only 1/4 of the firm -a big chunk but not the lions share.

Lol - the internet...

Borrowing to make business acquisitions is commonplace and not especially risky - provided it's a good acquisition.

 Snord wrote:
Lol - the internet...

Borrowing to make business acquisitions is commonplace and not especially risky - provided it's a good acquisition.

Except in the UK, we lost a lot of big high street names because they borrowed to acquire and expand Soon as an economic downturn hit, they could no longer service their debt and away they went.

Hornby haven’t had it easy of late, with only the COVID lockdown seeing them back in the black. Whilst the £1.25m isn’t a huge sum in the grand scheme of things, it’s still borrowed money.

For a clearer idea of their overall picture, here’s some info.

The March 2019 end of year report showed progress, having stabilised the business, closed unnecessary offices and returned to their historic home in Margate. Sales grew to £37.8m, losses narrowed to £2.8m [22]

The COVID-19 pandemic in 2020 was one element credited in a sales growth of 30%, which was announced in the 2019/20 half year results which covered a period to March 2020. Half year sales of £21m (up from £15.9m) and the first profit in 8 years.[22]

So their overall borrowing facility is going to be quite high compared to their income etc.

The UK highstreet is almost like a wasteland now compared to what it was 20 years ago! It doesn't help that it seems every government/council/landlord has squeezed them so hard its almost impossible to run a highstreet shop. But yeah a LOT of our big names all expanded fast and died to debt.

Granted they were likely talking figures way bigger than Hornby is here, but at the same time they were also earning way more as well.


The big trap is that a firm borrows to expand and gets trapped into a never ending borrowing cycle. Borrowing to expand and having to borrow to expand again etc... to maintain pace. So even if they chipped away at the original debt, there's new debt to keep chipping away at. It's a house of cards situation where its all fine until an economic downturn and then the company can't just stop repaying.

Common misconception about the model train hobby is that it's only for old blokes - go to any model train show and you will get loads of kids there, I would say actually more than you get at wargaming and model (plastic kit) equivalents. All building their own layouts with the help of their dads and collecting engines.

I can't explain it as steam trains are very much my dad's generation (who is now in his 70s), but there it is.

 Pacific wrote:
Common misconception about the model train hobby is that it's only for old blokes - go to any model train show and you will get loads of kids there, I would say actually more than you get at wargaming and model (plastic kit) equivalents. All building their own layouts with the help of their dads and collecting engines.

I can't explain it as steam trains are very much my dad's generation (who is now in his 70s), but there it is.

I'm guessing lots of parents getting their kids into the hobby, same as we are seeing in wargames.

Honestly its very pleasing to hear! Esp in this day and age where digital options are very heavily promoted and easily accessed. Now there's nothing wrong with digital, but it is really good to hear that there's a lot of attention from younger generations into physical hobbies

Herzlos wrote:
I wonder what that means for the plastic tank kits made in collaboration with Italeri? I assume they'll be in competition with Airfix, even if the scales different (1/56 Vs 1/72).

considering Warlord has done partnerships with Airfix already, then no

 Snord wrote:
Lol - the internet...

Borrowing to make business acquisitions is commonplace and not especially risky - provided it's a good acquisition.

Also how alot of crooks have bought and destroyed buisinesses with the colllusion of the banks

beast_gts wrote:
For reference, Hornby also owns Corgi, Scalextric, Airfix & Humbrol (amongst others).


.

With this context I'm not sure how relevant any discussion of model trains is. Seems Hornby is a general toy and hobby company with several brands targeting different markets.

Hmm, I wonder if "Phoenix UK Fund Ltd" has any connection to Phoenix Asset Management Partners Ltd that owns bloody Hornby.

In essence Hornby borrowed this money from themselves, and as PAMP seem quite solvent, holds next to no risk.

its interesting, Hornby as it "toy trains" are busy pricing themselves out of the market and wreaking that "hobby" as basically kids can't afford it

but they do have a lot of WW2 vehicle stuff as drawings and I know a few who have said for years they needed a 1:76 (ish) scale table top game playable with all the tanks etc

there is also a decent crossover in the terrain side and for designing terrain stuff

hope it goes well

leopard wrote:

there is also a decent crossover in the terrain side and for designing terrain stuff

hope it goes well

Which is presumably why Battlefront bought GF9 a while back.

Ditto on hoping it goes well for both companies in this instance.

 Azreal13 wrote:
Hmm, I wonder if "Phoenix UK Fund Ltd" has any connection to Phoenix Asset Management Partners Ltd that owns bloody Hornby.

I hope there're no connection to this Phoenix Foundation. With this I can live - and they have MacGyver!

Sadly, it's nothing as interesting.

https://www.phoenixassetmanagement.com/phoenix-uk-fund/

Official announcement:

We are delighted to announce that international model and collectibles group, Hornby PLC have purchased 25% of the equity of Warlord Games Ltd. with an option to acquire more of the business in the future.

We know that change is sometimes a scary proposition but we want to allay your fears – it's business as usual for us here at Warlord HQ! The existing management team will remain in place to drive the business as we always have - with our fantastic customers foremost in our minds and the innovative and fun approach we built the company on 16 years ago.

Indeed we all see great synergy with the existing Hornby brands such as Airfix, Humbrol, Scalextric, Corgi, et al. There are many great opportunities for both companies by pooling resources, talent and experience thereby accelerating the growth of the businesses and your favourite game ranges!

(And I think Kid_Kyoto's right - Hornby is now a brand umbrella rather than just a model train company).

Hornby basically borrowed 1.25m from themselves to fund the acquisition.

A figure barely worth noting and their share price stayed near enough the same level before and after the news was announced.

Its a possibility that Hornby will take full control of Warlord. I cant see a reason for the initial stake otherwise.

Hornby don't really have a stellar recent history. This could be an attempt to create a house of brands, with which they hope to lure investors or potential buyers.

Hornby/Phoenix could get Warlord to service the debt of their own purchase. Such is business.

I've said for a long time that model trains and miniature wargaming are basically the same hobby. It just depends on which sounds you make while you're pushing your little guy around the table: "choo-choo" or "pew-pew".

 SgtEeveell wrote:
I've said for a long time that model trains and miniature wargaming are basically the same hobby. It just depends on which sounds you make while you're pushing your little guy around the table: "choo-choo" or "pew-pew".

I just want to point out that with model trains you don't have to push them, you turn the nob and they trundle along to the power of mystical electricity!

 Overread wrote:

 SgtEeveell wrote:
I've said for a long time that model trains and miniature wargaming are basically the same hobby. It just depends on which sounds you make while you're pushing your little guy around the table: "choo-choo" or "pew-pew".

I just want to point out that with model trains you don't have to push them, you turn the nob and they trundle along to the power of mystical electricity!

you haven't seen mine, which go nowhere without the aid of the magical finger and have the mysterious ability to stop totally at random

that said I have yet to manage to get a PC to make anything on a gaming table move.. though there is a marine tank sitting with the potential for an ESP32 and some servos & LEDs..

most amazing thing I guess is just how little it cost to buy 25% of Warlord games

 SgtEeveell wrote:
I've said for a long time that model trains and miniature wargaming are basically the same hobby. It just depends on which sounds you make while you're pushing your little guy around the table: "choo-choo" or "pew-pew".

I would argue that model train people are much more into the diorama building aspect.

 RaptorusRex wrote:

 SgtEeveell wrote:
I've said for a long time that model trains and miniature wargaming are basically the same hobby. It just depends on which sounds you make while you're pushing your little guy around the table: "choo-choo" or "pew-pew".

I would argue that model train people are much more into the diorama building aspect.

well that and trolling the rivet counters and similar. Saw a wargaming book oh 30 years back that suggested finding a model railway bod and talking to them, and watching them, but not letting them make a board or you would get exactly that, a diorama, it would look wonderful but be terrible for gaming.

its a bit like how my model railway has spaces for little plastic soldiers to stand on the tracks and space to arrange the level crossing crash when the crossing finally goes in

note that these days also you don't even have to make the "choo-choo" sounds, you just press a button and the darned thing makes noises all on its own

oh yes, you can find model railway and wargamers quite gladly drowning their sorrows over the every increasing prices of both hobbies as well

The key difference is that wargamers need space to move around the board whilst the train hobbyist is mostly moving trains on rail; so the rest of the board is more decorative/scene setting. Though areas like a train yard might have parts they move around a lot to create loading/unloading and other mini-dioramas in the main setting.

I'd also argue that they get scale better. Wargames are often a bit of a scale mess in terms of things like buildings often being super small compared to the models and such.