Hornby's financial updates to the Stock Market

[runs as required]

How many City analysts have actually run a logistics operation or a business? ....etc.

That point is one that interests me. What does a CA's CV look like?

 

When I still worked as a university teacher I had a 'project office' responsibility - giving students nearing the end of long courses experience on live consultacies  - including BR as clients (that's how long ago it was).

A common feedback was that our students delivered so much more Bang for the Bucks than the 3 or 4 big international consultancies - you can guess who they were. 

 

dh

Edited February 20, 2016 by runs as required

[Mike Storey]

That point is one that interests me. What does a CA's CV look like?

 

When I still worked as a university teacher I had a 'project office' responsibility - giving students nearing the end of long courses experience on live consultacies  - including BR as clients (that's how long ago it was).

A common feedback was that our students delivered so much more Bang for the Bucks than the 3 or 4 big international consultancies - you can guess who they were. 

 

dh

I found that with many placements we took on - they were very eager to make an impression as they needed a job later - but then they would have been a bigger bang for the cost as they were free plus expenses (short term) or paid just basic clerical rate (longer term).

Edited February 20, 2016 by Mike Storey

[Clearwater]

Funnily enough I work in the public sector too............

 

Possibly, but I disagree. Having run my own web business that imported, retailed and distrubuted products I have some idea. As a Luddite and having run and successfully outsourced my logistics operation (from inbound to despatch), the fact that it is on 3 continents and multiple channels and several factories does not in itself require fancy IT. You only need the fancy IT when you have a business need for high levels of effective interfacing between those elements, often based on timing or complexity or risk. Well trained staff with clipboards, spreadsheets and email can fulfil the same function for next to nothing in a normal warehouse. There is nothing invalid about my analysis since nothing you have suggested provides any justification for a complex, risky and expensive IT system since Hornby do nothing in their business which is properly high risk, complex or time critical AFAIK. There core UK operations are the design, sales & marketing, plus box shifting in the warehouse. The lead times are huge and key elements of their supply chain are sufficiently fluid as to make timings very flexible.

 

I'm more than happy to be proved wrong, that Hornby do have a degree of criticality on their business operations that justifies the risk and cost of this system (which still doesn't work), but I can't see it. Where is the added business value and ultimately extra profit it will generate? Does saving a day or two in the production to retail shelf process generate sufficiently enhanced profits to pay for such a system? Not selling model trains it doesn't.

 

When their production processes were fully sorted, when their direct sales route was operating properly and profitably, when they actually had some idea what their stock levels were (which does not require any IT at all), then perhaps look at some system, but before that you are diverting business finance and resource away from the core activity of flogging trains, kits and paints to punters at decent margins. This is one of the fundamental problems with ERP implementation, it takes management's eyes off the ball. Hornby sells models. It's focus should entirely be on that, and as we've seen with even the basic operation of the website, they have lost focus on that. ERP will never overcome poor strategy, botched marketing or a less than ideal supply chain. Remember the bulk of Hornby's sales (70 odd %) are in the UK. That's less than 30% everywhere else. And over 70% of overall sales are trains, so as I've pointed out before the core business of Hornby, the driver of revenue (and presumably profit but we don't have figures) is selling model trains in the UK. Everything else is peripheral, so investing in some expensive IT system to help you sell stuff in the US or FRance is arguably nuts, since it is a tiny and probably not very profitable area of the business. The UK design, marketing and box shifting doesn't require it. Overseas was seen as a 'growth' area, but again my argument is you put in the fancy system when your core business is stablised and producing the cash to fund it, and/or the growth areas are actually growing sufficiently to justify the resource. Not before, and drain the business of cash and management time trying to get it to work.

 

How many City analysts have actually run a logistics operation or a business? They know no more about Hornby's operations or how to improve them than my cat does. In fact most of them can't even run a bank (not actually difficult) or count, as we all found out in 2008. Didn't see many of the complaining about Ames' strategy a couple of years ago, yet here we are with £1m stock loss, growing financial losses etc.

Where do you get your 70% figure relating to trains? In my view, H provides insufficient disclosure in their accounts to work out profitability of individual lines. Hence the comments in this thread saying "we don't know what the problem is"

 

On the city analyst point, I think you are conflating several separate points and issues.

 

Firstly, Hornby Plc is an absolutely micro stock. From memory, the FtSe 100 will all have market capitalisations of over £2bn. The big stocks, which attract the most coverage from analyst, will be over £10bn. At c 50-100m Hornby simply isn't going to be on analysts' radar.

 

A good analyst will know a huge amount about their coverage sector. If they don't, they won't survive. A top analyst will spend their time with CEOs and CFOs and with large scale investors. If they don't know their sector in enough depth to be able to talk and convey the equity story they would be found out very quickly and would be fired. their job as analysts is to help investors value the stock. They will need to know enough to ask pertinent questions of management and that may well include questioning how the supply and logistics chain is managed. They may then write investment reports critical or supportive of management. However to write that repot, you need to understand the business.

 

To then blame those city analysts for the management of banks' is as analogous to blaming Hornby's product development team for other aspects of that business's failings. The city analyst's job is to understand and report on stocks in a given sector, not manage that bank.

 

Whatever the business, public or private, managing an entity with turnover of multi billions and hundreds and thousands of staff globally is not an easy task. To suggest otherwise is overly simplistic

 

David

[highpeakman]

That's what discussions and forums are for. We don't know the full facts, and as investors know, getting the full truth out of management can be very difficult, so frankly no one knows exactly what is going on, perhaps even those with sizeable shareholdings in the company. Given the surprise £1m write off, do even the management? It doesn't mean we can't comment based on available information. That is exactly potential investors and commentators have to do all the time.

 

I don't think I suggested that there should be no comment or discussion.

 

I have already made several myself on this very thread.

[jjb1970]

I think an ERP is like most other purchase and investment projects in that success depends upon an informed customer that knows what they need and understands what they are buying. Too often people blame the product when things go wrong when often (not always) it is not the product which is inherently wrong but more that it is not the right product for the application and a customer that thought that what they were buying was something else entirely. That is sometimes down to sharp sales practices but it is often down to inept procurement and project management on the purchasers side. At the moment we are speculating that a problematic ERP introduction is part of Hornby's problems, to speculate on the reasons for a scenario itself based on speculation would be taking things too far I think. Whilst I've experienced the problematic roll out of ERP systems I am actually a big fan of such packages as once they settle down and work they are transformational and free up a vast amount of effort from managing routine process which can be spent on other things (that efficiency gain can be exploited in other ways I know). Based on my limited experiences I think two things are absolutely critical if rolling out an ERP, the first is you must understand your existing processes (it transpired neither of the businesses I worked for making a transition did) and staff engagement and training is essential. Those two things may be obvious but in both cases I witnessed they were sorely lacking.

[Edthefolkie]

I haven't read all the IT related replies about all this, but some of them ring bells for me. I've been retired for some years now but used to have to look at automation products which our (financial) firm needed to tie together about 30 disparate systems. We had merged or taken over several other organisations.

 

At one site there were hordes of people supporting mainframe IBM kit which didn't and couldn't talk to the different kit at our end, 100 miles away. Phone calls and bodge-ups (kit bashing?) allowed it all to sort of work but we needed a product to join all the dots and remove the necessity for specialists. Naturally they turned to consultants (no names, but by God did they know how to use mobiles, take notes and submit expenses claims!)

 

So the consultants presented us with about 12 products from large and small European and US software vendors. All of them said that their product was the canine's gonads. NONE of them could actually interpret and action alerts between three or four different systems. One (we were already using one of their products) could do a bit of the job, and after a lot of brain bursting effort we actually had something which would tell us when a file turned up from the remote site - and similar basic stuff. Now this was 15 years ago, and things have moved on. My employer was hoovered up by another bank around 2008. All in the past. Am I bitter? - no, but I still have weird dreams!

 

But if Hornby, who had already suffered the disaster of their Chinese manufacturer going off into the sunset, got into a situation where some ERP/ERM salesman and a bunch of consultants had sold them a complicated fix which didn't work at first go (or probably fifth go), I can understand recent events. As jjb1970 says above, you need much more than the software solution - you need all areas to buy in to new ways of working. I could go on but don't want to lose my nice pension!

Edited February 20, 2016 by Edthefolkie

[Porcy Mane]

CKD Kits - One of the points made against this suggestion has always been that it would not save as much as you think because the parts, 

 

Just to be clear, I've never said that availability of CKD  models should be made to lower production/packaging cost thus achieving cost savings for the end purchaser. It was so that those of us that like to tinker/alter/improve/model would have an easier time.

 

Reading about modern production/assembly techniques particularly if models were left undecorated, it seems as though a moderate saving could be made as assembly and hand painting of fine items, seems to be the most labour intensive part of the operation.

I also fully understand that the availability CKD kits of the 1960's (not just Tri-ang/Hornby but major multi-nationals) was a bye-product of trying to circumvent restrictive import/export practices of other nations.

I wonder if Tri-ang ever made a profit on the CKD kits they sold in the UK?

 

P

[Hroth]

Just to be clear, I've never said that availability of CKD  models should be made to lower production/packaging cost thus achieving cost savings for the end purchaser. It was so that those of us that like to tinker/alter/improve/model would have an easier time.

 

Reading about modern production/assembly techniques particularly if models were left undecorated, it seems as though a moderate saving could be made as assembly and hand painting of fine items, seems to be the most labour intensive part of the operation.

I also fully understand that the availability CKD kits of the 1960's (not just Tri-ang/Hornby but major multi-nationals) was a bye-product of trying to circumvent restrictive import/export practices of other nations.

I wonder if Tri-ang ever made a profit on the CKD kits they sold in the UK?

 

P

My understanding was that the CKD kits were to circumvent UK purchase tax, the rather convoluted predecessor to VAT.

[Willie Whizz]

My own experience suggests two key issues often impact adversely upon new or major changes to large-scale IT systems:

1. The need to "keep the wheels on the wagon".  During the planning stages, much of the work must necessarily be done by staff who also have to stay on top of their day job - which often means it is done skimpily or without great depth of thought (especially in terms of how the new systems and processes will impact on particular tasks and roles, until it is too late to be designed-in).  And then during the implementation stage the business/organisation cannot simply shut down for a week or two while everything is changed over and staff are retrained; and invariably some Luddites will simply refuse to engage until you prise the proverbial quill-pen from their 'cold, dead hand'.
    
2. Failure to take the opportunity to start with a clean sheet of paper.  Too often the thought-process comprises:  "How can we (further) automate what we already do", rather than "Let's step back and re-think what we're actually trying to achieve here, from first principles".  So little actually changes for the better; and sometimes things can even get more complicated.

As for consultants ... I worked with a couple of very senior and very wise ones some years back, who 'confessed' to me in a moment of frankness that, in any typical consultancy report, about 70% or more of the recommendations come from listening to the ideas and complaints of none other than their client business's own staff (who are otherwise generally ignored, dismissed or simply never asked for an opinion by their company's management!); some 20% represents notions of 'good practice' gleaned from similar projects undertaken for other clients; and a mere 10% or often less represents genuine 'original thought' by the consultancy.

 

I worked about 30 years for one of the major banks, and  every 7 years or so they called-in prestigious and very expensive management consultants to review the regional and area management structures of the Bank and how they should be revised to meet modern needs and reduce costs.  Every single time, they ended-up re-inventing the organisation structure that had been in place immediately prior to the current version; only the geographical boundaries involved were marginally different!  We concluded that, as that old French philosopher used to say (nearly):  "The more things change, the more it's the same old same old ..."

[antrobuscp]

Just to be clear, I've never said that availability of CKD  models should be made to lower production/packaging cost thus achieving cost savings for the end purchaser. It was so that those of us that like to tinker/alter/improve/model would have an easier time.

P

Apologies. My comments were intended to be general although I can see my use of the word "you" would have made it appear to be specific. Cost saving was in my head, though, because the subject of CKD models usually comes up in that context, and this has been a thread partly about financial matters, and latterly business software and its implementation.

 

i can certainly see the appeal where the purchaser currently has to disassemble a model to make modifications/improvements or to model a variant of the type.

[Andy Hayter]

Rugged Peak

 

Regarding your post #847, I do agree  that simply purchasing material from China, does not require the need for an ERP.  The purchase and ownership of moulds in China adds a complexity but again in itself does not demand the need for an ERP.

 

My concern was for the European operations, with centres in Spain, France and Italy (with probably 2 non-intercommunicating systems) - all of whom are also purchasing production in China and onward selling. 

 

Further if we go to Germany where there is no production but there is a sales and Distribution network, we have  a situation where pre-ERP they are purchasing and selling Lima models in a Lima system, Rivarossi in a Rivarossi system, Electrotren in their system, Jouef in their system and for all I know, Humbrol, Airfix, Corgi and Hornby Railways each in his own system.  This is the proverbial bu@@ers muddle that an ERP system takes you away from. 

[Kickstart]

CKD Kits - One of the points made against this suggestion has always been that it would not save as much as you think because the parts, at least in some cases, would have to be separately packed/protected, someone has to make sure that all necessary parts are included in the correct numbers, etc., thereby making the labour cost saving much less than might be thought. There is also the cost of producing assembly instructions and stocking parts that might be broken or disappear during assembly.

 

If I remember rightly, 81A Oldoak gave some details of the costs of actually assembling the models in China. If memory serves me OK these costs were very low.

 

All the best

 

Katy

[Grovenor]

today's installment

https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=8&cad=rja&uact=8&ved=0ahUKEwjck8HV3YnLAhUF7RQKHW3iDogQqQIIOTAH&url=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F188d2618-d5a0-11e5-829b-8564e7528e54.html&usg=AFQjCNFxEePWA8cKfaAFJhabuPC3Obwm2A

Regards

Edited February 21, 2016 by Grovenor

[robmcg]

today's installment

http://www.ft.com/cms/s/0/188d2618-d5a0-11e5-829b-8564e7528e54.html#axzz40puMToNV

Regards

 

Could you offer a synopsis of the FT article for those of us too stingey to subscribe?  

[MarkSG]

Could you offer a synopsis of the FT article for those of us too stingey to subscribe?  

 

There's actually a (legitimate) way round this. The FT allows you to read an article for free if you've come to it directly from Google, as they still want to encourage search engine traffic.

 

So the solution is to copy the URL as posted above (discarding the hash fragment at the end) and post it into a search box on Google. The first result for that URL will, of course, be the URL. So follow the link. And, hey presto, you can read it!

[Grovenor]

Could you offer a synopsis of the FT article for those of us too stingey to subscribe?  

Sorry, i was not asked to subscribe so did not think about it, I have edited my post to give the 'via google' link.

Regards

[robmcg]

Sorry, i was not asked to subscribe so did not think about it, I have edited my post to give the 'via google' link.

Regards

Thankyou Grovenor,

 

It reads as if the FT thinks kids don't want trains or trainsets any more and Hornby is stuck with fussy die-hard older buyers who are critical and fussy, and Hornby no longer has good control over supply from China, with long lead-times on products..

 

Rather negative thinking perhaps?  Not sure why the writer compares Hornby to a Sussex fastener supplier.

 

For the UK model railway I see a good future if costs, marketing and stock control are brought into line. I have bought a brand new Okehampton and it is a superb piece of lowish-volume specialist production.

[Hroth]

Where DO these newspapers get their pics?

 

I suppose that one is meant to indicate that Hornby are "off the rails".

 

Like the curates egg, the article was good in parts, though I struggled to reconcile the situation Hornby is in with the troubles of a fastenings company that no-one but those in an industry requiring fastenings has ever heard of.  And from the tone of the second to last paragraph, it seems that railway modellers who have to put a little time and effort into their hobby are of less value than kids "who can build virtual armies of robots in an afternoon."

 

Where can we get badges reading "I'm an Ageing Diehard Hobbyist and PROUD of it"?

 

Oh forget it.  I know someone with a badge making machine, I'll make one up for myself in an afternoon...

[Pandora]

Searching the Internet and reading the Statutory Declarations filed by Hornby,  Hornby declared they were doing so well  , (thanks to their Microsoft ERP AX system), they filed a declaration last November,   they were  accelerating  their  restructure and reorganise ( ie dismiss) their overseas managers etc.  Then January appeared and post Christmas  sales slumped, hence the profits warning and prediction of  major losses / bank covenant breach.

Perhaps those "thank you very much but here is your P45" employees were the ones with the finger in the breach of the dyke wall, keeping the goods going out, and the monies coming in.

Edited February 21, 2016 by Pandora

[Revolution Ben]

Hello all,

 

I think the point about the fastenings company was precisely that it was not known outside its specialist market.   Therefore, when in 2009 it found itself in a broadly similar position to Hornby now, it was able to change practices and slowly turn itself around away from the glare of disproportionate market interest.

 

However, the article did not appear to explain why it is easier to turn an unknown company around than a well known one.

 

As to the market, I think from the FT's point of view it's all about the numbers:  There are always far more small boys (who should, apparently, be Hornby's target market) than older hobbyists.

 

What I don't really understand is why the train-set market and the adult model market cannot co-exist.  Fleischmann seem to have provided fine entry-level sets with play value, and decent high-end models, for years using the basic principles of putting quality and functionality at the top of their list of priorities.

 

cheers

 

Ben A.

[RJS1977]

I think the two markets can (probably) co-exist.Unfortunately I think at the moment the balance has swung too far towards the adult collectors and there isn't enough available for the young/those who can't afford/justify purchasing the expensive models.

[RJS1977]

Where DO these newspapers get their pics?

 

 

 

Left for Titfield!

[raymw]

The photo, also used by the Telegraph in another article  http://www.telegraph.co.uk/culture/tvandradio/9822268/Timeshift-The-Joy-of-Train-Sets-BBC-Four-review.html is from a stock photo agency, as most of them will be.

 

edit to add - in this case http://www.alamy.com/ (see if you can find a better toy train photo on there)

Edited February 22, 2016 by raymw

[Dunsignalling]

I think the two markets can (probably) co-exist.Unfortunately I think at the moment the balance has swung too far towards the adult collectors and there isn't enough available for the young/those who can't afford/justify purchasing the expensive models.

The young will make their own decisions, mainly to buy things other than model railways from what I can see.

 

I can see no point in any of us lobbying for products we imagine/assume other people may want to buy, we will be wrong a lot more often than we are right. 

 

As for the more expensive models, one either wants them or not and they are either worth the price or not. I only buy models within my area of interest and have got very good at resisting "irresistible" models that don't fit in - I have only weakened three times in the past four years and I've thought up a good excuse for one of them!

 

Whether you are a collector or a runner, if you have a "scatter-gun" attitude to purchasing based solely on the attractiveness of the model - you are in for an expensive ride. I decided to become more disciplined when I realised I'd begun having clear-outs every few years of items I never took out of their boxes after the first month of ownership. 

 

If you develop a theme, based on a company/region within a chosen time-scale, buying models that properly "go together" becomes easy and you will end up with either a more coherent collection or a more convincing layout; you will enjoy the models that you do buy a lot more, and you'll save money, too.

 

IMHO, if you have to resort to using the 'J' word, you really don't want the model that much. On the odd occasions when I have found it creeping into my thoughts, I crossed the model off my shopping list immediately. In retrospect, I've never regretted not buying any of them.

 

John

Edited February 22, 2016 by Dunsignalling

[Rivercider]

The photo, also used by the Telegraph in another article  http://www.telegraph.co.uk/culture/tvandradio/9822268/Timeshift-The-Joy-of-Train-Sets-BBC-Four-review.html is from a stock photo agency, as most of them will be.

 

edit to add - in this case http://www.alamy.com/ (see if you can find a better toy train photo on there)

Cor,  6124 appears to be a super model then!

 

cheers