Hornby secure £18 million loan

[LBRJ]

Volume of advertising doesn't necessarily equate to value of sales - or more importantly to profitable sales.

 

What it may indicate is the hobby moving toward a cottage industry model both in terms of supply and retail.  The sustainability of a PLC like Hornby in a low-volume hobby with a large overhead is very unclear and has been for a number of years.

 

I don't think its at all unclear - That's kinda why this thread exists in the first place.

 

There is certainly a market there, but to get a good chunk of it you have to know what and where that market is.... "Follow it" if you like....I suspect that Hornby think they can lead it...……..

[Legend]

Half of the considerable thickness of every month's Railway Modeller is made up of adverts for businesses of all sizes, all of whom would appear to believe that there is an income to be made from the model railway market. That might not make it buoyant, exactly, but it suggests there is still a significant amount spent on toy trains.

Actually if you compare the adverts in an RM with a copy from 10 years ago , you find quite a difference . In general there are not so many big advertisers in the front section of the magazine . These are now mainly pages dominated by Hattons , Rails and Kernow and significantly double spreads or single page adverts for auction houses . So I’d say the number of serious players has dropped. The back section which tends to be more niche advertisers or smaller shops appears much the same though. I’m not sure what this means to be honest, except that mass market seems to be consolidating around the major players and the rest seem to be becoming more cottage industry/niche .

[adb968008]

Actually if you compare the adverts in an RM with a copy from 10 years ago , you find quite a difference . In general there are not so many big advertisers in the front section of the magazine . These are now mainly pages dominated by Hattons , Rails and Kernow and significantly double spreads or single page adverts for auction houses . So I’d say the number of serious players has dropped. The back section which tends to be more niche advertisers or smaller shops appears much the same though. I’m not sure what this means to be honest, except that mass market seems to be consolidating around the major players and the rest seem to be becoming more cottage industry/niche .

And 30 years ago, Lima had a standing order for the back cover of Rail magazine, every 2 weeks listing 3 new models every two weeks for several years.

[adb968008]

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Edited November 6, 2018 by adb968008

[Legend]

Well as an accountant I’m hoping this is a steady hand at the tiller. While accountants do have a reputation for being very conservative , they do recognise the need to invest to get new models out and the cash in. So I’m hoping this guy will allocate the funding he can and allow the more creative types to get on with it. Manufacturing capacity I still think is the key though.

[The Stationmaster]

Well as an accountant I’m hoping this is a steady hand at the tiller. While accountants do have a reputation for being very conservative , they do recognise the need to invest to get new models out and the cash in. So I’m hoping this guy will allocate the funding he can and allow the more creative types to get on with it. Manufacturing capacity I still think is the key though.

 

I'm not an accountant but I definitely agree with that - to the extent he is able to influence individual spending decisions.  What I am sure he will be doing, and ought to be doing, is watching how the loans are being used overall and are being spent to get the best return to ensure the interest payments are met and capital reserves are gradually accumulated to meet the time the loans have to be repaid.  That will be the best way he can help ensure the future of the group and the things it makes and help to make sure it remains in the marketplace.

[Legend]

I'm not an accountant but I definitely agree with that - to the extent he is able to influence individual spending decisions.  What I am sure he will be doing, and ought to be doing, is watching how the loans are being used overall and are being spent to get the best return to ensure the interest payments are met and capital reserves are gradually accumulated to meet the time the loans have to be repaid.  That will be the best way he can help ensure the future of the group and the things it makes and help to make sure it remains in the marketplace.

Sure you are not an accountant Mike?

[jjb1970]

Bean counters get a bad rep and are often blamed for all sorts of stuff that is not their fault. I used to work for one of the big gas and electricity companies, when I left they were desperately flogging assets, cutting costs, cancelling new investments etc. Most people in the company blamed the bean counters who were brought in to replace the previous top team, not the outgoing CEO (btw, the CEO was always carping on about how inept the UK government was, a classic example of a pot calling a kettle black) who'd gone on a stupid spending spree and burned through a cash mountain buying over valued assets which had to be written down, or operational management for bloated costs and all sorts of other klangers. In actual fact, if they'd listened to bean counters in the first place they might not have ended up in such a mess in the first place, but people tended not to consider that as they blamed them for implementing recovery plans to try and salvage something out of the mess.

[adb968008]

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Edited November 6, 2018 by adb968008

[tomparryharry]

The job of the consultant is this:-

 

"A suitably qualified person, who is hired at the 11th hour, 59th minute, to share the blame."

 

Fred Needle-Street

[JSpencer]

As to whether any company moves forwards or not, is largely based on the internal politics within and who has the biggest mouth to get their version across compared to everyone else's and their political motivations for doing so. People with experience, correct knowledge and truly know the root cause and fix won't get far if that view is contrary to the view by some big mouth at the top.

 

Bean counters will always say there is a risk, it is their role, but nothing ventured = nothing gained. There is a thin line in the decision making process between leading excellence and mediocre slow death and outright suicide.

 

I do feel Hornby have picked a team that is more in touch with reality and lot less political and more practical to move things forwards. They have quite a big challenge though.

Edited August 24, 2018 by JSpencer

[The Stationmaster]

Sure you are not an accountant Mike?

 

Definitely not - but I used to put together my own budgets and get them signed off (usually without any demur ) by my lords & masters and then manage said budgets to deliver what I'd planned and in most cases when I'd planned to deliver it (in terms of cost savings or additional expenditure).  Thus I used to enjoy budget agreement meetings as they didn't last too long for me, alas for one of my colleagues in TLF days his meeting inevitably extended into a second day.

As to whether any company moves forwards or not, is largely based on the internal politics within and who has the biggest mouth to get their version across compared to everyone else's and their political motivations for doing so. People with experience, correct knowledge and truly know the root cause and fix won't get far if that view is contrary to the view by some big mouth at the top.

 

Bean counters will always say there is a risk, it is their role, but nothing ventured = nothing gained. There is a thin line in the decision making process between leading excellence and mediocre slow death and outright suicide.

 

I do feel Hornby have picked a team that is more in touch with reality and lot less political and more practical to move things forwards. They have quite a big challenge though.

 

Alas judging by results to date I have a nasty suspicion that Hornby has at least one member of the team who is a considerable way detached from the reality of the current UK model railway market and that his approach of going back to the past simply will not work in this day and age.   There has also been a lack of direction although that was in the early days and might (should) by now have been rectified with a everybody hopefully now singing from the same hymn sheet

[adb968008]

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Edited November 6, 2018 by adb968008

[Clearwater]

From memory, the Cadbury Code on corporate governance recommends that the Chairman and CEO roles are split. I don't read anything particular sinister into the changes here. In a sense, a qualified accountant taking the role may offer some comfort. If he thinks the numbers are prospects dire, he may have been less willing to take on something that's about to go insolvent.

[jjb1970]

Something to remember is that companies exist to make profit. You can dress it up behind all sorts of flummery and noble aims, but ultimately any commercial entity exists to make a return for its owner or shareholders. And that isn't a criticism, good companies maximise their performance by striving to satisfy their customers, providing the right product and service. Those that don't do that tend not to last long, even the the bargain basement el cheapo end of the line offers something their customers value (low prices). Which means that there is no inherent conflict between what we might call accountancy management and product quality since a good numbers person will also consider their target market and the needs of that market. For sure there are plenty of examples of companies getting it wrong and implementing silly cost cutting, but there are an awful lot of companies getting it right (does anybody believe a company like Mclaren cars doesn't bother about cost control? Clue, they do, I once did some stuff with their engine manufacturer). So in itself I don't see the presence of an accountant at the top as a bad thing given their dire financial predicament. Something to remember, if a company is in a hole like the one Hornby is in then the turnaround is highly unlikely to be universally popular and the medicine might be rather unpalatable. I'm sure quite a few of us have been there ourselves.

[Mike Storey]

Something to remember is that companies exist to make profit. You can dress it up behind all sorts of flummery and noble aims, but ultimately any commercial entity exists to make a return for its owner or shareholders. And that isn't a criticism, good companies maximise their performance by striving to satisfy their customers, providing the right product and service. Those that don't do that tend not to last long, even the the bargain basement el cheapo end of the line offers something their customers value (low prices). Which means that there is no inherent conflict between what we might call accountancy management and product quality since a good numbers person will also consider their target market and the needs of that market. For sure there are plenty of examples of companies getting it wrong and implementing silly cost cutting, but there are an awful lot of companies getting it right (does anybody believe a company like Mclaren cars doesn't bother about cost control? Clue, they do, I once did some stuff with their engine manufacturer). So in itself I don't see the presence of an accountant at the top as a bad thing given their dire financial predicament. Something to remember, if a company is in a hole like the one Hornby is in then the turnaround is highly unlikely to be universally popular and the medicine might be rather unpalatable. I'm sure quite a few of us have been there ourselves.

 

All true, but I once suffered experienced the effects of having a person whose specialist skill was accountancy, as a CEO. He believed he understood far more about business than he really did, having had a few small successes initially, and he had identified a pretty serious gap in the market. He was also (perversely) a gambler. We went bust, because the supply deals he had negotiated did not turn out the way he said they would, whilst we (as in me and a couple of other key players) had loads of potential sales lined up.

 

On the other hand, I have worked with (and subsequently became a supplier to) an accountant (a Financial Controller at first, and then Financial Director) who had tremendous business acumen and highly developed negotiation skills. Trouble was, once you experienced his techniques a number of times, you knew exactly how to counter and he had no intuitive ability to work around that.

 

You will note I am no fan of people trained and who practice in a rigid profession, who then branch out. Most good Chair people and CEO's have tended to be more generalist, good with people, good with their product and good with their market. It is about managing risk, and quantifying risk is a talent that banks and other funders require. I am not sure where the balance of need sits with Hornby. Perhaps the CEO will be a good balance with the new Chair. Let's hope so.

[The Stationmaster]

(snipped)

You will note I am no fan of people trained and who practice in a rigid profession, who then branch out. Most good Chair people and CEO's have tended to be more generalist, good with people, good with their product and good with their market. It is about managing risk, and quantifying risk is a talent that banks and other funders require. I am not sure where the balance of need sits with Hornby. Perhaps the CEO will be a good balance with the new Chair. Let's hope so.

 

We can but hope for the company's sake that they know where the balance of interest and skills sits although I do get the impression that at least one senior managerial appointment has been made on a false premise (or maybe an overrated promise?).   As ever time and the profit & loss account will tell.

[jjb1970]

Something I think is that the fundamentals of running a business don't really alter. Yes, aspects of implementation differ but many of the allegedly unique factors in running a business in a given sector are actually down to understanding your market and getting product and delivery right, not to any inherent differences in the basic principles of how to run a business. Which is why I've never bought into the idea that a model train company must be headed by a model (or rail) enthusiast, what the guy at the top needs to make sure of is that people with the necessary technical and market expertise are in the posts that need that knowledge. That's not to say that being a model nut is incompatible with being the right person to run a model train company (I'd point to Jason Shron as a good example of somebody who is bonkers about models and also extremely professional and capable at leading a model business) but I don't see it as necessary and we could point to examples of passionate enthusiasts in the hot seat being the last people who should be running a business. I'm a big believer in the principle that if you can't get the basics right then there isn't much point in trying the more difficult stuff, when I look at the model scene in particular (and I'm not just talking about Hornby) a lot of the problematic areas are things like managing e-commerce, logistics/distribution, supply chain management, QA and none of those things need the unique insights of a model enthusiast to manage.

[JSpencer]

It is bit of a balance act, you cannot be totally detached from the fine detail and you need sufficient knowledge to know what it means in order to act accordingly. On the other hand, I have seen great modelers start businesses that stagnate or die because they lack the skills to interact with the market accordingly. I can rattle off several small suppliers whose products I think are superb but - by god - they are hard to contact and buy from or even just ask them questions. I often hear things like "they only do shows..." or "they don't do internet..." or "they son't answer calls..." and then later we hear complaints of them possibly shutting down as no one is buying anything from them but they easily lost sales but being hard to access.

There are plenty of small items I want to buy from such suppliers but there is zero chance I will be taking a plane to visit a show in the UK just to get them.

 

The market was easy to predict when we had high levels of detail for a cheap price. Now we are at loggerheads over whether it is high levels of detail at a high price or low levels of detail at a low price or somewhere in between or mix of two of them or more. There is no easy answer to questions like that which means you need people who feel between this complex set of data.

Some niche players have eroded some of Hornby's market share (and Bachmann for that matter) by going directly to the high end but this may not be the majority of the market and they use a smaller more economic method to produce trains. Hornby could follow the niche model but this means cutting back from the size they are today to something smaller and inevitably means more expensive models and maybe not enough turnover to pay off the loans.

I still think a HI-LO mix is the best way forwards. LO being for everyone (toy stores and Argos included), HI being primarily targeted to model shops. They also need to split the range between bread and butter items (track, flocking, paint etc) that they should have constantly on hand ready to supply model shops (in house storage) and the fast one off sellers (new loco types), outsourced storage if it really is more economic than in house.

[Mike Storey]

All true, except that many of the smaller folk who have set up "businesses" in model railways, have done so not to become mega rich, or to evolve into larger concerns, but to supply something either they think is missing, or where they have a particular skill and want to share their "product". These are usually the folk who cannot be contacted easily, and seem to fall by the wayside from time to time. But they are often highly valued in a niche. They often garner an awful lot of loyalty and patience from customers, due to the unique gaps they usually fill. Unfortunately, one or two have turned out either to be utter rotters or simply inept at taking money but being incapable of delivery.

 

I do not think we can compare them to any medium to large company operations.

[robmcg]

We can but hope for the company's sake that they know where the balance of interest and skills sits although I do get the impression that at least one senior managerial appointment has been made on a false premise (or maybe an overrated promise?).   As ever time and the profit & loss account will tell.

 

Your propensity for criticising one member of the Hornby management team and attributing the entire fortunes of the company to him does your argument no favours, in my opinion Mike.

[JSpencer]

I have no doubt that there are other players, whom even doing this just to offer products they developed themselves. There are many here, who offer excellent service and communication despite it not being the main source of income by a wide margin.

 

That said we have all seen comments on here of various frustrations with certain suppliers. You give up dealing with them at a certain moment and stick to those easy to deal with. For example, the NRM is a medium/big organisation frustrating a lot of people as we speak now over the delivery of Stirling singles. I had to change my postal address with them a few months ago, it was done, but it take little time and chasing up to do it. With Hattons, Rails, Kernow, Model Railways Direct, it took less than 3 minutes. This is probably a resource issue at the NRM now, as they were as good a service as one could expect when I called to pay off the rest of the APT E a good few years ago.

Yes I want to buy more NRM products for sure, but a negative buying experience would put me off.

[The Stationmaster]

Your propensity for criticising one member of the Hornby management team and attributing the entire fortunes of the company to him does your argument no favours, in my opinion Mike.

 

You're of course as entitled to your opinion as I am to mine Rob (although in my case I do work on the basis of facts as some other folk are quite aware).

[Coryton]

Something I think is that the fundamentals of running a business don't really alter. Yes, aspects of implementation differ but many of the allegedly unique factors in running a business in a given sector are actually down to understanding your market and getting product and delivery right, not to any inherent differences in the basic principles of how to run a business. Which is why I've never bought into the idea that a model train company must be headed by a model (or rail) enthusiast, what the guy at the top needs to make sure of is that people with the necessary technical and market expertise are in the posts that need that knowledge. That's not to say that being a model nut is incompatible with being the right person to run a model train company (I'd point to Jason Shron as a good example of somebody who is bonkers about models and also extremely professional and capable at leading a model business) but I don't see it as necessary and we could point to examples of passionate enthusiasts in the hot seat being the last people who should be running a business. 

 

Surely the key to this is that the person at the top has people with the necessary expertise and listens to them? It's no good having a layer of people who know exactly what they're doing if the person at the top thinks they know better.

[jjb1970]

Surely the key to this is that the person at the top has people with the necessary expertise and listens to them? It's no good having a layer of people who know exactly what they're doing if the person at the top thinks they know better.

 

I think that is an essential skill in any leadership role. Note however that listening to people is not necessarily the same as agreeing with them as one of the key skills of a leader is also knowing when to disagree with their expert advisers and managers.