MECCANO's Demise
A Contemporary Newspaper Report

Derailment on the Nursery Floor

Sixty-odd years ago, a Liverpool metal-worker called Frank Hornby took home a sheet of copper, clamped it to the kitchen table and cut it into strips. His two young sons, Roland and Douglas, helped him to bore some holes: they bolted the bits together to make a rudimentary model crane and thus Meccano, one of the best and most ingenious toys invented this century, got itself born.

A good, cosy, rose-coloured success story - carried on by Hornby trains after the First World War, Dinky Toys in the 'thirties; and trading profits nearing the £1 million mark in 1956. But last week, in the middle of the biggest toy boom Britain has ever seen (£44 million net sales last year) the Meccano company ended its independent existence in a sour, unhappy mess of mounting losses, angry shareholders and un-met forecasts. The business, once valued at over £3 million, is being absorbed into the vast Lines Brothers' nursery empire at an effective price of around £800,000.

Roland Hornby, still chairman and joint managing director at 74, blames it all on the trains. “Everyone's gone off them - all over the world. Modern houses are too small for a decent layout and all the parents are spending their money on cars, washing machines and hire purchase. Trains were a third of our business, and last Christmas was a complete disaster.” In fact, on top of the £250,000 pre-tax loss he expects for 1963-64 there is another £600,000 to be written off - almost entirely on OO gauge locomotives, remotely controlled hopper trucks and lovingly-devised triple point shunting systems which today's schoolboys (or fathers) no longer want.

But Hornby now gives the impression of a man bewildered by the downward rush of events. Certainly, at the meeting only last August, when the writing on the wall ought surely have been seen, he gave shareholders a most confident report (“trading fully balanced in 1964, and once more on a satisfactory and profitable basis”) and no warning at all that the previous year's loss was to be almost doubled. And in fact Meccano's troubles go far deeper and further back than a sudden collapse of the signal-and-guard's-van market. This is the picture of a once-great pioneering company fallen behind in almost every aspect of its activities.

“So many people climbed on our bandwagon,” says Hornby passionately - and with some truth. But, unfortunately that is no defence in a hard, cold commercial world.

In die-cast model motor-cars, Dinky Toys had the field to themselves for twenty years. But, down in Swansea, Philip Ullman and Alfred Katz, of the fast growing Mettoy company, saw gaps in the market and started putting opening doors, independent springing, and real windows on to their “Corgi” range. And in Hackney, Leslie Smith and John Odell, of Lesney Products, came up with their brilliantly successful “Matchbox” toys, which put Cortinas and Minis, and Rolls-Royces on the nursery floor at a third, or even a quarter, of the Dinky price.

In constructional toys, Meccano remains, as Hornby told his shareholders last year, a “magical name” but not so uniquely magical as it once was. Every toy maker in the world has some kind of erector set nowadays - pop-together, prong-together, interlock or screw. And plastic is a lot cheaper than metal, if not always so durable - as Ralph Ehrmann's meteorically-expanding Airfix group has profitably demonstrated.

Even in trains, the view is not all-exclusively black. While Hornby flounders the Lines Brothers (who built up from a South London rocking-horse factory to the biggest toy company in the world) picked up the little Rovex business, then exclusively supplying rails and engines to Marks and Spencer. And as one of their admiring competitors says: “They found an acorn, and grew it into a tree” - a tree which, incidentally, now produces more than a third of their profits. More recently Mettoy acquired the agency for Jouet's fantastically cheap and successful French model railways, (cheapest set, fully electric, 35s.) which they sell under the “Playcraft” label through - among other outlets - Woolworth's 1,100 branches. After 18 months they claim “getting on for a quarter”, by price, and a lot more by volume.

No-one can say Meccano haven't struggled to change, but their promotion and judgemental seem to lack force these days. They went into house-building sets by acquiring “Bayco”. But that was completely eclipsed by Courtaulds' “Lego” off-shoot, whose displays last Christmas seemed to fill every toy-shop window in the country. They sniffed for several years over the vastly popular electric road racing circuits (“there's nothing to it,” Hornby still says wonderingly, “just cars and racing”). But seeing Lines “Scalextric and Aifix's motor Racing” make a packet they went in, belatedly, with a French import, “Circuit 24”, and have just had to withdraw it as a total flop.

Other rather desperate sounding things are being test-marketed - adjustable roller skates; self-hardening Plastercine - but how much will survive the Lines merger remains to be seen. Already, in the past 5 years, the labour force in Liverpool has shrunk from 4,500 to something nearer 2,000.

Lines' Offer, of one share for every eight Meccano, values the equity at 2s. 10½d. - a sharp and sickening drop from Thursday's market price of 7s. 6d. for the ordinary and 5s. for the “A.” which only carry a quarter of a vote.

Quotations did not drop the whole way down to the offer level however - only 3s. 6d. This is mainly a reflection of doubt over the position of Mr Harold Drayton's British Electric Traction group, which holds roughly 30 per cent. of Meccano acquired in 1949.

As Mr Hornby, with his wife, fellow directors and the Meccano workers trust, have accepted with over 52 per cent. of the votes, the deal is clearly a fait accompli. But the hope is that, with the powerful Drayton interest (now showing a £12,000 loss after 14 years' patience), a better price might be negotiated for the outside holders.

Mr Drayton is in South Africa, and the B.E.T. board are holding their own counsel till they see the formal documents. Obviously no-one should sell or accept till their reaction is known. But even then there will be a further problem, as Lines itself has had a steep slump in profits (from £1.3 million after tax in 1960 to £411,000 last year). The shares yield 4.3 per cent. (against well under 3 per cent. for Mettoy, Lesney and Airfix) and the question is, how long will it take to get back to 1961 dividend level. Chairman Mr W.M. Lines was only cautiously hopeful in his last report, and sorting out Meccano's troubles may delay the process even further. Cash in hand may well look more attractive than another long pull with the kiddiewinkies.