Hornby's financial updates to the Stock Market

[Coryton]

It would be interesting to hear what the sales are like for the company that own the Bachmann, Farish etc etc range . If they are similar then the hobby is in a worrying state. My own fear is that the whole hobby is now in the hands of the collector, who are expecting more & more accurate detail and is pricing only those with a large disposable income out of the market so the market is getting smaller & smaller, especially as this group does seem to be the much older generation. Going through the Bachmann & Hornby websites there are fewer locomotives...even tank engines that are under the £100 level. Very few coaches under £25 and few wagons under £10.

 

 

If Bachmann and Hornby are both heading in the same direction, it suggests that they've correctly identified where they can make money. 

 

Having said that, Hornby do seem to be catering for the lower-price, less-detailed end of the market in some cases, such as the new Mk 1 coaches. Both Railroad and non-railroad are less detailed than Bachmann, but also considerably cheaper. I suspect locomotives are much more likely to sit in a display case and never be run than a coach.

[40F]

FT coverage.

 

http://www.ft.com/cms/s/0/b8427dac-cfce-11e5-92a1-c5e23ef99c77.html#axzz3znH8aGun

 

It is cheaper to buy the paper than click on this link

[andyman7]

Let's suppose that Hornby is broken up (and of course it's by no means clear that this will happen). 

 

There are two things of interest to most of us here - the tooling and the brand itself.

 

The history of model railways in the UK is a complicated one of brands and tooling changing hands, and there's no reason in principle that the two have to go together.

 

Clearly there are various possible scenarios.

 

Probably the most disturbing for most of us here would be for the name to be split from the tooling, and the name used to sell something cheap and nasty (yes worse than the current train-set 0-4-0 - think of the battery powered cheap plastic train and a loop of track type things that make an appearance at Christmas each year). This could probably generate significant sales from people who don't know any better while the name gradually becomes (irretrievably?) tarnished.

Indeed - but we must recall that 'Hornby' was split from it's tooling in 1965 when Lines Brothers dropped the whole Hornby-Dublo range in favour of it's Triang models having acquired Meccano the previous year. If you want Hornby Dublo in 2016, a fair few of the Dapol wagons (made in Wales, not a million miles from the old Meccano factory in Liverpool) use the body tools from the former Hornby Dublo super detail wagon range.

[Coryton]

Am I right in thinking that a large percentage of Hornby stock due for the Christmas market in 2014, didn't actually arrive on to retailers' shelves until January 2015? This would have inflated January figures and deflated the pre-Christmas sales. If the analyst, who supplied the 2015/16 income projections, had not taken this into account, then the distortion would exaggerate the figures now being reported.

 

Their difficulty over pricing and consequent income projections, must have arisen from the fact that, prior to 2015, supplies of ,most items were artificially limited by production problems and many of us pre-ordered on the basis that the item would be sold out if we waited. Then the glut came. Any decent economist or accountant could have predicted the outcome. Either they had poor advice or they arrogantly ignored the runes and predicted that RRP would continue to rule as though the market was not yet saturated. They have been disabused of that notion. 

 

Bachmann have increased their prices but appear to have managed this issue in a superior way (as far as we know). So it is not about RRP, but about the panicked reaction when their assumptions did not pan out. Lost relationships and lost customer loyalty did not match their business school model of direct marketing.

 

Dysfunctional board room strategy is ruining the very great strides they have made in product development - in Hornby International penetration as well as domestic supply - even to the extent of trying to correct quality control problems with the Humbrol brand, by bringing production back to the UK. This is almost an Alice - Looking Glass situation, compared to around 18 months ago, and we were all guilty of saying that if they got their supply chain right, all would be well. Apparently, they thought so too.

 

Well if they're getting the product development side right but are let down by the top management, it suggests that there's something there for a successful restructuring of some form (unpleasant as that is likely to be for those being restructured).

 

As for Bachmann, they have had significant price increases, but they don't seem to have combined price increases with a policy of making life hard for their distributors - indeed they've limited discounting presumably to help small shops compete against the box-shifters. I find it quite refreshing to visit the Bachmann web site and just find a list of models and prices, not an on-line shop.

[The Black Hat]

If Bachmann and Hornby are both heading in the same direction, it suggests that they've correctly identified where they can make money. 

 

Having said that, Hornby do seem to be catering for the lower-price, less-detailed end of the market in some cases, such as the new Mk 1 coaches. Both Railroad and non-railroad are less detailed than Bachmann, but also considerably cheaper. I suspect locomotives are much more likely to sit in a display case and never be run than a coach.

 

It would be interesting to note if Bachmann are heading the same way. In what I have noticed, Bachmanns drought of releases has happened after Hornby had supply issues. Now that Hornby have the releases coming, it remains to be seen whether the amount of releases Bachmann have made is keeping them going. A lot of Bachmanns projects are delayed, so you hope its not affecting them the same as it has with Hornby now.

 

I do feel for the staff at Hornby. I know such news and a collapse in the share price sounds disastrous for them. While the general news its not good, the amount of debt the company has must be getting to levels that make it very difficult. Its a real shame as Hornby are managing to produce again, but have damaged the relationship with trade.

 

I also think that in part, Hornby's range is absolutely massive for no reason. Older tooling and even some railroad stuff can be made a lot less often, were as new models if priced right and what the public wants will still sell. Time to trim down a lot of what doesn't sell quickly as that will help reduce running costs if your already making less.

[Coryton]

Indeed - but we must recall that 'Hornby' was split from it's tooling in 1965 when Lines Brothers dropped the whole Hornby-Dublo range in favour of it's Triang models having acquired Meccano the previous year. If you want Hornby Dublo in 2016, a fair few of the Dapol wagons (made in Wales, not a million miles from the old Meccano factory in Liverpool) use the body tools from the former Hornby Dublo super detail wagon range.

 

Absolutely, but in this case the Hornby name was used for arguably a better range of models, and certainly not for something cheap and nasty trading on the brand name. Have a look at what Sports Direct did to the Karrimor brand...

[birdseyecircus]

I guess 2015 was the same but in 2014 nationwide retailer Smyths toys ( the biggest competitor to Toys R Us) did not sell any Hornby

products. Just cheapo car slot tracks and non descript train sets from unknown makes.

 

Paul

[JSpencer]

Yep, this is definitely the wrong time to start investing in cheap battery trains and other toot no one wants.

 

The other thing is, an item pops out and 2 weeks later, it's in the bargain bin. You don,t make profit giving stuff away, many people only make that purchase if Christmas or Birthday is coming up, I.e you expect to sit on stock for a year in this market.

 

With all the new stuff that flooded out, they need to ask, how are they loosing money if sales were increasing ?

[Coryton]

I guess 2015 was the same but in 2014 nationwide retailer Smyths toys ( the biggest competitor to Toys R Us) did not sell any Hornby

products. Just cheapo car slot tracks and non descript train sets from unknown makes.

 

Paul

 

Well who knows...come next Christmas we might find the same cheapo car slot tracks and non-descript train sets but instead of being unknown makes they'll have Scalextric and Hornby on the boxes...

[Clearwater]

It would be interesting to note if Bachmann are heading the same way. In what I have noticed, Bachmanns drought of releases has happened after Hornby had supply issues. .

Hopefully link will work. For those interested, Bachmann Europe plc's 2014 accounts from companies house:

 

https://beta.companieshouse.gov.uk/company/02392907/filing-history

 

Shows turnover of approximately £14m. I'd suggest Hornby's model rail turnover is higher but I've no evidence to support that assertion

 

David

[Mike Storey]

It would be interesting to hear what the sales are like for the company that own the Bachmann, Farish etc etc range . If they are similar then the hobby is in a worrying state. My own fear is that the whole hobby is now in the hands of the collector, who are expecting more & more accurate detail and is pricing only those with a large disposable income out of the market so the market is getting smaller & smaller, especially as this group does seem to be the much older generation. Going through the Bachmann & Hornby websites there are fewer locomotives...even tank engines that are under the £100 level. Very few coaches under £25 and few wagons under £10.

 

Granted Hornby do have their Railroad range but this I believe is only a limited range and Hornby don't produce a Railroad & a full cream version of each of their models and looking at some of the Railroad stuff that too is nearing the £100 level. So it seems to be pricing those that are happy to just play trains...no matter how old they are...away from the hobby.

 

When I was going from playing trains to more modelling railwways we had the likes of Hornby who were making more toy like models than todays range and the likes of Airfix & Mainline and while Airfix & Mainline were more detailed they were still reasonably affordable and then you had the kit manufacturers like Wills, Southeastern Finecast, DJH, Nucast & K's & Ian Kirk that were more expensive and more detailed for the more experienced modeller. Added to that you had companies like Crownline that di a whole range of conversion and detailing kits for the likes of Hornby, Lima, Airfix/Mainline to build something different or a more detailed model. So everyone was catered for from those who were just happy to play to those who wanted to model...and everyone in between.

 

My own situation now is that I'm modelling on an extremely tight budget...if I have a budget at all!!! so everything I buy has to come through either Ebay or through the bargain bucket boxes on trade stands at shows tends to be old 1980's/90's models and even that is starting to get a bit pricey, I witnessed an old Replica Railways )) gauge pannier tank being sold for £59 and sitting right next to it there was a Farish N gauge pannier tank going for exactly the same amount.

 

With absolute respect to your current fiscal position (and mine is not much better currently), those halcyon days that we all remember never actually existed. Our combined spending power is never going to change the tides of major manufacturers,

 

Inflation shows that the real price of most aspects of our hobby has not changed very much, subject to quality/detail changes. We had a period of real terms cost reduction for a while but that is over. I could not even attempt the era and location of the layout upon which I am about to embark, in those days. The available stock was simply unavailable, unless you could overcome the unfriendly kits of MTK - my two attempts were not good, and I gather I am not alone. They were relatively expensive boxes of junk, unless you were a decent engineer. We now have a range of eras, locos and rolling stock, and functionality (from enhanced DC through to PC driven DCC and lights and sound) that we could barely dream of on those days.

 

The barriers to entry to our hobby were far greater then than now, given that the competition is essentially computer games and whatnot, at prices well in excess of a model railway.

 

It is not the hobby, which has far more manufacturers involved than was the case some years ago, that is the problem, It is Hornby's attempt to turn it into a branch of Argos. If they disappeared tomorrow, what would the impact be? A number of competitors could step into the train set/first starter market pretty quickly. Hornby as a brand is like Hoover - and does anyone called Hoover still make a vacuum cleaner now? If so, not many people buy them, but we all have a vacuum cleaner and probably call it a hoover.

 

Steps back......adjusts umbrella........

[charliepetty]

HI ALL 

 

In keeping with the current time of years C Rail and Realtrack have forced to announce a profits warning, sadly we made one

 

Regards Charlie and Arran

If we did, are we having a party at Glasgow!!!!!!!!!!

[Coryton]

Yep, this is definitely the wrong time to start investing in cheap battery trains and other toot no one wants.

 

I wouldn't criticise the new Hornby Junior range, if it's anything like the recent Marklin "My World" trains. They are excellent for young children, robust enough to be laid out on the carpet like the old clockwork trains and can be left to young children to play with on their own in a way you couldn't with a regular Hornby train set.

 

The Marklin trains run on regular H0 track so there's some kind of upward compatibility into "real" model trains - there's even an adaptor truck from the simple magnetic couplings to regular H0 ones.

 

Given the rate at which the Marklin range is expanding, it must be doing quite well, and it seems very sensible for Hornby to emulate them.

 

In short, I see this as a very positive move...assuming it's as good as the Marklin product.

[Dunsignalling]

Let's suppose that Hornby is broken up (and of course it's by no means clear that this will happen). 

 

There are two things of interest to most of us here - the tooling and the brand itself.

 

The history of model railways in the UK is a complicated one of brands and tooling changing hands, and there's no reason in principle that the two have to go together.

 

Clearly there are various possible scenarios.

 

Probably the most disturbing for most of us here would be for the name to be split from the tooling, and the name used to sell something cheap and nasty (yes worse than the current train-set 0-4-0 - think of the battery powered cheap plastic train and a loop of track type things that make an appearance at Christmas each year). This could probably generate significant sales from people who don't know any better while the name gradually becomes (irretrievably?) tarnished.

So long as new models of quality equal to those released by Hornby in the past 18 months or so, continue to be produced, does it really matter what name is on the box? 

 

My money would go with the tooling, every time, and not be wasted on future tat bearing the Hornby brand any more than it is on the current tat that you mention.

 

John

[Coryton]

Hopefully link will work. For those interested, Bachmann Europe plc's 2014 accounts from companies house:

 

https://beta.companieshouse.gov.uk/company/02392907/filing-history

 

Shows turnover of approximately £14m. I'd suggest Hornby's model rail turnover is higher but I've no evidence to support that assertion

 

David

 

Given the much greater sales of train sets that Hornby must have, I would expect their turnover to be higher in model trains. However the margins on train sets are clearly much lower than for individual rolling stock and track etc., so profit is another story.

[Ozexpatriate]

In the UK the Group saw a strong sales performance in the key November and December period as sales opportunities were maximised in the run up to Christmas. Like for like sales in this period were up 17% overall year on year, though this masks some volatility within the period. However, subsequent trading since the start of the New Year has been in stark contrast, with a disappointing response to January product promotions combined with poor underlying sales resulting in negative year on year revenue growth and sales for the month being substantially below expectations.

A couple of things come to mind. I wonder how much the other brands like Scalextric are a factor here. Given that Hornby Railways is the core brand, we probably could presume that the impact is primarily on the railway side of the house.

 

Based on the new models introduced late in the year, I was confident that Hornby would have a strong December as evidently they did coupled with their aggressive Black Friday sales they pumped up turnover, if not profitability. The quote above makes me ask the question "did Hornby Railways release anything new in January?" and what was happening at this time last year for like versus like in 2015.

 

Hornby has not yet returned to full profitability since the Sanda Kan meltdown. It's been a close run thing for years, despite some commentators optimistic statements that all their problems were behind them.

 

Hornby did made great strides to once more produce the sort of products we want to buy. They are not dead yet and there are lots of models that many of us are anticipating.

 

For me, these include the remainder of the Collett coaches, the Pecketts the Merchant Navy and the SR cattle vans to name a few. I still hope to see these.

 

It might not be such a bad thing for Hornby to return to being a privately held company.

 

One thing that really makes me wonder is how in this financial condition, why on earth are they trying to launch so many new product lines at the recent toy shows?

Edited February 10, 2016 by Ozexpatriate

[robmcg]

Am I right in thinking that a large percentage of Hornby stock due for the Christmas market in 2014, didn't actually arrive on to retailers' shelves until January 2015? This would have inflated January figures and deflated the pre-Christmas sales. If the analyst, who supplied the 2015/16 income projections, had not taken this into account, then the distortion would exaggerate the figures now being reported.

 

Their difficulty over pricing and consequent income projections, must have arisen from the fact that, prior to 2015, supplies of ,most items were artificially limited by production problems and many of us pre-ordered on the basis that the item would be sold out if we waited. Then the glut came. Any decent economist or accountant could have predicted the outcome. Either they had poor advice or they arrogantly ignored the runes and predicted that RRP would continue to rule as though the market was not yet saturated. They have been disabused of that notion. 

 

As to the first paragraph, one can only say, "oh, yes, never thought of that" and then blame the analyst/tea-lady or whomever.

 

To the second paragraph, I think there has a been a change in the market which has been gradual over that last few years, the supply problems meant that s/h Bulleid Light Pacifics commonly reached £120 or more on Ebay, now they are available new from Hornby and many go out the door for little more than that, (£104 to me for Okehampton, Hornby club + no VAT)  and quite simply they won't sell well in shops at £145+.  At least not in bulk.  I doubt Hornby can build such models for under £80 these days.  So I wouldn't call it a 'glut', except in that there are fewer willing buyers at sustainable levels.

 

The Dec-Jan sales and income numbers for 2014-15/2015-16 respectively surely had someone competent to compile them, or maybe they thought management and board would know about the differences in these two years with regard to supply, inventory, sales, discounting, and the capacity for colouring the numbers?

[Coryton]

So long as new models of quality equal to those released by Hornby in the past 18 months or so, continue to be produced, does it really matter what name is on the box? 

 

My money would go with the tooling, every time, and not be wasted on future tat bearing the Hornby brand any more than it is on the current tat that you mention.

 

John

 

The name on the box wouldn't stop me buying something. If I knew that MainTrack (to make up a name) was using the ex-Hornby tooling I'd be quite happy to buy, and I would know enough to not buy something with the Hornby name on the box if it was rubbish.

 

But not everyone reads RMweb or the magazines. Many people will just see the brand name and for those who want to see children being brought into the hobby, it could be bad news. Also, it may not be rational, but I would be rather sad to see a name with such a long history and connection with UK model trains trashed.

[Ozexpatriate]

It would be interesting to hear what the sales are like for the company that own the Bachmann, Farish etc etc range . If they are similar then the hobby is in a worrying state. 

You can find them here.

 

Kader Holdings had a much stronger 2015 first half than they did in 2014.

 

They will publish their year-end report soonish.

Edited February 10, 2016 by Ozexpatriate

[gismorail]

With today's latest newspaper article 'Hornby on the Rocks' Evening Standard it has crossed my mind as to whether I would now risk putting in an order into the Hornby Website now just in case it goes bust before my order is fulfilled.      what do others feel ????

[Coryton]

With absolute respect to your current fiscal position (and mine is not much better currently), those halcyon days that we all remember never actually existed. Our combined spending power is never going to change the tides of major manufacturers,

 

Inflation shows that the real price of most aspects of our hobby has not changed very much, subject to quality/detail changes. We had a period of real terms cost reduction for a while but that is over. I could not even attempt the era and location of the layout upon which I am about to embark, in those days. The available stock was simply unavailable, unless you could overcome the unfriendly kits of MTK - my two attempts were not good, and I gather I am not alone. They were relatively expensive boxes of junk, unless you were a decent engineer. We now have a range of eras, locos and rolling stock, and functionality (from enhanced DC through to PC driven DCC and lights and sound) that we could barely dream of on those days.

 

The barriers to entry to our hobby were far greater then than now, given that the competition is essentially computer games and whatnot, at prices well in excess of a model railway.

 

It is not the hobby, which has far more manufacturers involved than was the case some years ago, that is the problem, It is Hornby's attempt to turn it into a branch of Argos. If they disappeared tomorrow, what would the impact be? A number of competitors could step into the train set/first starter market pretty quickly. Hornby as a brand is like Hoover - and does anyone called Hoover still make a vacuum cleaner now? If so, not many people buy them, but we all have a vacuum cleaner and probably call it a hoover.

 

Steps back......adjusts umbrella........

 

Absolutely agree about prices in real terms. Go back a bit further and you find many modellers being able to afford a single engine.

 

Not so sure about the Hoover analogy though. People might call a vacuum cleaner a hoover, but I don't think it ever meant most people would by from Hoover in preference to another make. We don't call train sets "Hornbys" but most people know that Hornby is who you buy a train set from, and wouldn't have a clue who Bachmann were or what their products were like.

With today's latest newspaper article 'Hornby on the Rocks' Evening Standard it has crossed my mind as to whether I would now risk putting in an order into the Hornby Website now just in case it goes bust before my order is fulfilled.      what do others feel ????

 

Buy with a credit card and then you're covered, aren't you?

[Legend]

Quite shocked and genuinely sorry about this, not least for their remaining UK employees. Let's hope they can get out of this.

 

I thought they had turned the corner, delivering a good quantity of new product. I did have concerns over their relations with retailers and it would appear these are more deep seated than I thought given the comments of some in preceding messages. A company that's hard to deal with is really a damning situation. That needs to be resolved quickly along with their computer system. The stock write off of £1m ( what were the stock levels before) sounds very large. I would certainly not got away with that in my previous job. Resignations would be expected to be tendered!

 

It's difficult to know what to advise. Certainly dumping some stock at low prices has damaged the brand even though I have to say I've taken advantage of this. On the other hand had they maintained high prices I wouldn't have gone near them anyway, so they at least got some income from me.

 

They are not getting any sympathy from the Model Railway media either, but I don't think the failure to supply free samples is in any way the main cause of their troubles . I haven't noticed a lack of coverage of their new King for instance. Bottom line is the mags simply have to buy or borrow their models instead of having them supplied free from Hornby.

 

I think immediate priorities are

Get your banking position resolved

Sort out computer system. You certainly need to invoice on time and update inventory. Really these are basics!

Restore relations with retailers probably by giving them more of a margin to play with( which means Hornby reduces their own margin. I know it sounds like this is wrong thing to do in short term , but long term will pay off)

Maintain direct selling but stop selling at deep discounted prices

Continue to develop range at reasonable prices eg Collett coaches.

Maximise brands or geographical segments that are doing well.

 

Increasing prices is not the answer. There is a limit to what the general enthusiast will pay. I do wonder if there is a mass movement away from high cost hobbies to more moderate ones. That could explain why Airfix is doing relatively OK( per Trains4u). It certainly mirrors what I've been doing cutting my expenditure on model railways (mainly that's been Bachmann items, actually spent more with Hornby last year) and re awakening an interest in model airliners .

[Coryton]

Quite shocked and genuinely sorry about this, not least for their remaining UK employees. Let's hope they can get out of this.

 

I thought they had turned the corner, delivering a good quantity of new product. I did have concerns over their relations with retailers and it would appear these are more deep seated than I thought given the comments of some in preceding messages. A company that's hard to deal with is really a damning situation. That needs to be resolved quickly along with their computer system. The stock write off of £1m ( what were the stock levels before) sounds very large. I would certainly not got away with that in my previous job. Resignations would be expected to be tendered!

 

Well possibly they have turned the corner, but just need a bit more time to consolidate.

 

Whether they will get that time or not is another question.

 

I suspect we're being a bit alarmist here but I'd rather speculate on this than what might have caused a train crash.

[Ozexpatriate]

Quite shocked and genuinely sorry about this, not least for their remaining UK employees. Let's hope they can get out of this.

 

I thought they had turned the corner, delivering a good quantity of new product.

I didn't expect this announcement and hope too that they will continue, even if there is some consolidation. What I am most disturbed about is that January should have been very predictable.

 

I am saddened but not shocked.

 

They are not getting any sympathy from the Model Railway media either, ...

What goes around comes around. I agree that it's not about free samples.

 

Increasing prices is not the answer. There is a limit to what the general enthusiast will pay.

I think it's more to do with making careful choices about what you do manufacture and in what volumes, more than it is about the pricing. People can't buy everything but will buy quality product occasionally.

 

Hornby is making too much stuff people don't want. Who is buying "Master of the Glens" trainsets? They promoted them heavily in January.

[Willie Whizz]

Why?

Airfix kits and Humbrol paint are the only Hornby brands selling well right now...

 

On what basis are you making that assertion?  It seems to be the general understanding that it's impractical for anyone outside the business itself to be sure about this, since the published financial information doesn't specify it down to this level of brand segmentation; and although Hornby themselves will (should!!) certainly know, the information remains within Management Accounts that are produced 'for internal use only'.