Hornby APPOINTS NEW CEO

[andyman7]

I think the big possibility is Corgi at long last getting the sorting-out it so desperately although effectively that might put it onto direct competition with the other diecast range - that could get interesting.

 

 

1. Corgi and Oxford Diecast ranges amalgamated with a spot of badge engineering for marketing purposes,

 

The toy/hobby world is an extremely incestuous one. I doubt many on this forum will be aware that when Oxford Diecast was still made in the UK they were manufactured in the Corgi plant in Fforestfach, Wales. It's one of the reasons that the Oxford Routemaster was effectively the Corgi one shrunk to 1:76. So it's more a case of what comes around, goes around.

There are 2 things that strike me in this. The first is that Lyndon Davies was originally part of the original Corgi setup in Swansea so he knows that market inside out, they also had a previous relationship with Hornby as they produced the Scale Autos when Skaledale first came out.. The other is that Oxford have their own dedicated plant in China which according to Lyndon(when Oxford Rail first started) had produced Model Railway stuff for other companies. There is no evidence that this was ever for Hornby but it could be that in the future they would(under Hornby control) have access to the production facilities at the Oxford factory.

Posted even as I was typing!

[Gerald Henriksen]

Is it unreserved good news? I don't think so .  I would suspect that Oxford may now bow out of  the model railway market or get absorbed. After all can you see the guy at the head of both companies competing with himself, even if he has turned over the reigns to his daughter . I don't think so. Definitely a conflict of interest there.  If so it may also remove the newest Lowest cost competitor from the market . This is not good. Oxford was like a breath of fresh air , so I'm a bit disappointed overall.

 

Simon Kohler, well I'm sure hes a nice gentleman and many on here love him because you stopped and chatted to you at exhibitions, so a genuine amiable public persona. But did anything ever change through discussions with hin? Also he brought in higher prices , I'm thinking M7 here because he knew the enthusiast would pay for it. So good news for Hornby max revenues I suspect not good  for the market as prices will go up.  Bachmann, Dapol and DJ are much of a muchness pricewise (Bachmann leading the way of course) . The breath of fresh air in pricing was Oxford...................

 

Add in Railroad/ Main range confusion, and I remember a few years ago Hornby announced they would only be supplying DCC fitted locos .  Not sure Simons return is so good!

 

My take, from reading between the lines when Mr. Kohler had his blog, is that his ability to make decisions was in many ways more illusion than reality thanks to either interference or lack of approvals from the higher ups running Hornby.

 

As such I think it is difficult to read too much into what happened once Hornby started struggling and placing the blame entirely on Mr. Kohler.

 

The danger here of course is that the new management above Mr. Kohler may be more of the same given the mismatch between what Oxford promised - "in pursuit of excellence" - and what they consistently delivered - cheap models that sort of looked like the prototype.

 

In short, the jury is out.  While Hornby have made great strides in the last couple of years, delivering market leading newly tooled models like the Peckett, their is a danger that the new management at the top doesn't care about accuracy and rather just wants to shove stuff out the door as cheap as possible in the belief that the market will buy whatever they put their corporate name on.

 

We will see in about 2 years when the results of any changes the new management make finally make their way through the system and into announcements.

[Chris116]

So Bachmann take over EFE and Hornby now have Oxford under their umbrella! Interesting times.

[davefromacrossthepond]

There are so many combinations of "if/then" scenarios with this that I'm sure this thread will have a couple more dozen pages in the next day or so.  For my part - keeping my fingers crossed that this works out well for everyone!

[Ron Ron Ron]

So Bachmann take over EFE and Hornby now have Oxford under their umbrella! Interesting times.

 

 

No they don't.

Not yet anyway.

 

.

[Chamby]

 

... After all can you see the guy at the head of both companies competing with himself, even if he has turned over the reigns to his daughter . I don't think so. Definitely a conflict of interest there........

There is a very clear business model here and it works very well re: developing dominant market presence. Think: Audi + VW + Seat + Skoda. Could be a very smart move.

[SteveC32]

Hmmm. Oxford Diecast is a good brand that listens to customers and produces great products at sensible affordable prices - it worries me that Hornby are “exploring the opportunity to invest in LCD”, I hope that isn’t code for ‘taking over’. Having Lyndon Davies as Hornby CEO could be a good move, but although it is true that Simon Kohler is a great bloke it has to be said that Hornby lost its connection with/understanding of their customers and what they want under Simon’s tenure as Marketing Director so I’m less than impressed with that appointment. I hope Lyndon will make Hornby staff see that selling quality products that customers want at sensible prices will sell volume and improve the balance sheet / profitability of Hornby (it’s better to sell more at lower margins than low volumes at ridiculously high margins). I also hope he will allow “disrupter retailers” (like we see in other retail sectors) so that we see genuine price competition between retailers which will further benefit us as customers, and ultimately Hornby as well, as it will boost sales.

[jjb1970]

If the head of a company accepts the role of CEO with a direct competitor (Oxford and Hornby both produce OO model trains and diecast models) it indicates that there will either be closer integration between the two companies in some form, or it'll end in tears and tantrums very quickly. I think the comment about Hornby considering investing in LCD is a pretty big hint that the relationship may be headed to something more than just having some sort of time share on a head honcho.

 

There are some very obvious opportunities for the two companies to integrate and compliment each other. The Corgi diecast range has been struggling and Oxford's experience and track record in that sector could be just what the Corgi brand needs. Equally, despite a lot of hypes when the Oxford railway range was launched it has been pretty disappointing for the most part and seems to be positioning itself somewhere between Hornby/Bachmann and Railroad offering potential for Hornby to lead on railways with Oxford perhaps replacing Railroad as the lower priced range. Hornby could do worse than look at how Piko have developed their ranges with top end Classic, serious enthusiast Expert and entry level Hobby ranges.

[jjb1970]

There is a very clear business model here and it works very well re: developing dominant market presence. Think: Audi + VW + Seat + Skoda. Could be a very smart move.

They're all sister companies though, not independent companies sharing a CEO.

[Dunsignalling]

Hornby model, Oxford price?

At several exhibitions earlier this year, certain retailers were getting pretty darned close to that with (some) Radials, anyway.

[bertiedog]

It sounds an interesting move, It must mean both companies output is in sync to say the least, bu it stifles competition, and that is not good in the longer term. Oxford remain in theory independent, but it is a take over in all but name of a rival maker, not just in railways but the die cast business, which will be affected more as far as customers are concerned.

It must mean a range contraction, as duplication must be eliminated, and Hornby's backers are going to want to see a return on any investment made in the previous rival.

Loss of a rival like this can only mean less for the consumer, the range will be consolidated, and the general pricing pressure will be upwards. It does give Hornby access to the production facilities of Oxford for it's various products, not just railways, and I suspect that is the main reason for the move.

The CEO brings expertise, and with the other changes Hornby feel safer now a rival is under some control. It had been noticeable for a time that Oxford had been quite quiet in developments generally, this manoeuvrer explains a lot..........

It cannot all be bad for the consumer, Hornby have bought further time to reconstruct themselves, and it protects the long term prospects for them, but maybe not in the end the staff at Oxford.

Edited October 3, 2017 by bertiedog

[jjb1970]

In terms of competition I don't really think a Hornby - Oxford tie up will change anything. In OO trains such a company would still be faced with Bachmann as it's main competitor, Dapol as a lesser competitor and with Rapido (and their various clients), DJM, Hattons and Kernow operating in niches.

[Legend]

There is a very clear business model here and it works very well re: developing dominant market presence. Think: Audi + VW + Seat + Skoda. Could be a very smart move.

Yes but they are distinct brands producing distinct models. They are not both competing to make a Mk3. Imagine the CEO watching while the company he owns decimates Hornbys sales of Mk3s. Sorry won't work . Do you think Oxford will bring out an 87 or 86 now ? I don't think so. I expect Oxford Rail to quietly disappear

Edited October 3, 2017 by Legend

[jjb1970]

A car analogy would be something like Elon Musk taking the role of CEO of Ford whilst assuring the world that there was nothing to see here with regards Tesla, oh by the way Ford may invest in Tesla.

[Legend]

In terms of competition I don't really think a Hornby - Oxford tie up will change anything. In OO trains such a company would still be faced with Bachmann as it's main competitor, Dapol as a lesser competitor and with Rapido (and their various clients), DJM, Hattons and Kernow operating in niches.

I think Bachmann has ceased to be a competitor at the Oxford end of the market . They are obviously going for high margin, high specification, lower volume . A mk2 with all DCC gubbins @£70 v a mk3 @ £30. From my postings you will gather I prefer the basic low cost end of the market so to me the loss of Oxford is not good news. I do wonder if Oxford has lost its appetite for Model Railways anyway. There have been no new announcements for a while and they can't even say if their Mk3s will have lights or not, despite models being on display for 8 months. Doesn't exactly suggest they are fully engaged. Perhaps the unfortunate duplication of the Adams and the poor reception of the `Dean Goods has had an effect.

Edited October 3, 2017 by Legend

[Dunsignalling]

Hmmm. Oxford Diecast is a good brand that listens to customers and produces great products at sensible affordable prices - it worries me that Hornby are “exploring the opportunity to invest in LCD”, I hope that isn’t code for ‘taking over’. Having Lyndon Davies as Hornby CEO could be a good move, but although it is true that Simon Kohler is a great bloke it has to be said that Hornby lost its connection with/understanding of their customers and what they want under Simon’s tenure as Marketing Director so I’m less than impressed with that appointment. I hope Lyndon will make Hornby staff see that selling quality products that customers want at sensible prices will sell volume and improve the balance sheet / profitability of Hornby (it’s better to sell more at lower margins than low volumes at ridiculously high margins). I also hope he will allow “disrupter retailers” (like we see in other retail sectors) so that we see genuine price competition between retailers which will further benefit us as customers, and ultimately Hornby as well, as it will boost sales.

Ain't necessarily so, the comparator is unit sales price x number of units - gross cost of production and distribution. Lower unit profit is a killer unless the reduced prices boost volume sufficiently for the total profit to exceed what can be realised under a Low Volume, High margin regime. 

 

Sorry, but it's an industry that is almost certainly in gradual decline in that its customers are dropping off the perch faster than new ones can be attracted. Hornby et al need their slowly shrinking but largely still prosperous customer base to buy more models each, hence the explosion of previously unmodelled locomotives coming to market.  What we have been seeing is essentially "Making Hay while the Sun shines".

 

That's the simple, brutal reason why most players need to make greater unit profits.

 

The days when we had a choice of about a dozen locos from a manufacturer (and the same dozen for a dozen years without even a change of name or number) are thankfully long gone.

 

Quite simply, the range on offer nowadays means we can buy what we really want rather than settle for what comes closest to it.The flip side of that coin is that overall sales of the niche locos currently in vogue are much more finite, however they are priced. Low volume / High margin is, increasingly, the only game in town. 

 

John

                                                                    

Edited October 4, 2017 by Dunsignalling

[jjb1970]

The big mistake Oxford Rail made was in expectation management. Initially they led the OO world to believe that they'd be setting standards and producing premium products which kind of indicates that they'd produce models of the same standard as Hornby full fat, newer Bachmann and Rapido but they just haven't. If they'd said from day one their business plan was to offer value for money models that might lose a little compared to the best models but still be good enough for most enthusiasts I think they might have avoided a lot of the negativity they've faced.

[Clearwater]

A merger is complicated by the Oxford ownership structure. They are owned by LCD Enterprises Ltd which is owned by the Davies family. Tricky to work out where they came up with the name! LCD also owns 50% of a HK entity - I presume what actually manufactures in HK.

 

LCD Enterprises hasn't lodged, on my quick look, consolidated accounts. However,Oxford Diecast's financials are strong. Operating Profit of 440k on turnover of c£4m is not shabby. If you add back depreciation of c£330k, you get EBITDA of around £770k. At a 6x valuation multiple, that's worth say £4.5m. Hornby's current market cap is around £22m. A straight merger suggests Oxford would be around17% of the business. If you assume there's some other value in those businesses, I reckon a group could emerge whereby LCD is around a 25% owner of the Hornby business. The lawyers and accountants will be doing some work about how the structure needs to work, eg Hornby offers LCD 25% of its equity in return for Hornby owning 100% of LCD.

 

If Davies can turnaround Hornby to achieve the same EBITDA margin he has on Oxford (c20%), the combined group would be achieving EBITDA of around £9m. Using 6x, that gives a valuation of £54m. If LCD/Davies own 25%, that equates to taking their current £5m to £13.5m. I've not worked out the rate of return, but more than doubling your money is usually pretty good! [caveat - this is pretty back of the envelope stuff].

 

If I were Phoenix and I was bringing Davies in, I'd want him to have a material stake. What puzzles me, is why announce his appointment as CEO before concluding the investment/exchange of shares regarding LCD? As others point out, there's a major conflict of interest to resolve

 

David

[Dunsignalling]

There has been a previous, fairly recent linkage between Oxford Diecast and Hornby anyway.

 

Despite owning the 4mm scale Corgi Trackside and Original Omnibus Company brands themselves, Hornby's Skaledale vehicles were sourced from Oxford Diecast.

 

John

[The Stationmaster]

In terms of competition I don't really think a Hornby - Oxford tie up will change anything. In OO trains such a company would still be faced with Bachmann as it's main competitor, Dapol as a lesser competitor and with Rapido (and their various clients), DJM, Hattons and Kernow operating in niches.

 

And the situation in 12 months from now?  One thing which might change - coming back to that 'Chinese wall'  is what might happen with Oxford talking on commissions and what potential impact that might have if knowledge of what's underway leaks through the wall to Hornby (or indeed vice versa).   Might help avoid duplication so perhaps a positive effect but equally might stifle the way people would be prepared to commission from either Hornby (ok - basically livery/detail jobs) or Oxford (who seem to do quite a good job when being led by a commissioner who makes sure things are right).

 

Time will tell.  And of course all might change even further if Hornby really do start buying a stake in LCD and thus become a potentially important shareholder in Oxford.  

[BG John]

Where are my Oxford GWR brake vans, that were supposed to be out by the end of September? I thought that Hornby had got quite good at bringing out new products on time, but their new CEO doesn't have a good track record with that.

[Mike Storey]

Ain't necessarily so, the comparator is unit sales price x number of units - gross cost of production and distribution. Lower unit profit is a killer unless the reduced prices boost volume sufficiently for the total profit to exceed what can be realised under a Low Volume, High margin regime. 

 

Sorry, but it's an industry that is almost certainly in gradual decline in that its customers are dropping off the perch faster than new ones can be attracted. Hornby et al need their slowly shrinking but largely still prosperous customer base to buy more models each, hence the explosion of previously unmodelled locomotives coming to market.  What we have been seeing is essentially "Making Hay while the Sun shines".

 

That's the simple, brutal reason why most players need to make greater unit profits.

 

The days when we had a choice of about a dozen locos from a manufacturer (and the same dozen for a dozen years without even a change of name or number) are thankfully long gone.

 

Quite simply, the range on offer nowadays means we can buy what we really want rather than choose what gets nearest to it.The flip side of that coin is that overall sales of the niche locos currently in vogue are much more finite, however they are priced. Low volume / High margin is, increasingly, the only game in town. 

 

John

                                                                    

 

That is true for relatively niche products, I agree. But Piko appear to be showing how to get back into high volume/lower pricing markets, albeit across a larger potential market than the UK, but one that has also been declining. Early days, but if their strategy is successful (in terms of eventual sales and profitability), it could change the assumptions you, and I, are making currently. I would hope that UK companies will be studying how on earth Piko are managing to do this, rather than just passively waiting for it to fail or succeed.

[Clive Mark]

I'm HORRIFIED.

 

The Oxford LNER Cattle wagon wagon fiasco might be funny ha ha .....but in reality it is one of the most stupid and unforgivable blunders in model railway history.

 

Unless Oxford acknowledge their crass mistake and retool this stupid product I will fear for the future of Hornby.

 

The Parkside kit for the 9 foot wheelbase LNER cattle wagon is the only option.

 

If the quality and accuracy achieved by Hornby in recent years is compromised by Oxford's "style" then its back to kits folks and in spades.

 

Thank God Parkside will continue through Peco.

[Clive Mark]

Where are my Oxford GWR brake vans, that were supposed to be out by the end of September? I thought that Hornby had got quite good at bringing out new products on time, but their new CEO doesn't have a good track record with that.

 

There's a horrible rumour that the metal sheeting on Oxford's toad is only on the sides and not the ends.

[Gerald Henriksen]

I think Bachmann has ceased to be a competitor at the Oxford end of the market . They are obviously going for high margin, high specification, lower volume . A mk2 with all DCC gubbins @£70 v a mk3 @ £30. From my postings you will gather I prefer the basic low cost end of the market so to me the loss of Oxford is not good news. I do wonder if Oxford has lost its appetite for Model Railways anyway. There have been no new announcements for a while and they can't even say if their Mk3s will have lights or not, despite models being on display for 8 months. Doesn't exactly suggest they are fully engaged. Perhaps the unfortunate duplication of the Adams and the poor reception of the `Dean Goods has had an effect.

 

There is nothing wrong with preferring a value end of the market, just as there is nothing wrong with a manufacturer serving that end of the market whether it be using a particular product line (aka railroad) or the entire focus.

 

I just don't believe that Oxford was that company, given the multitude of errors that plague their models, often for no reason other than the fact that they just don't seem to care.  In many cases, if the errors had been caught in the CAD stage, it would have cost nothing to fix and resulted in a model that would have been acceptable to a far greater number of people.

 

The unfortunate part is, regardless of whether Oxford continues in trains or withdraws, the damage is done.  Their Mk3 means it is unlikely anyone will produce a 3rd model, thus leaving those of us who do care about accuracy without a modern, accurate model.