Hornby sales figures surge under lockdown

[melmerby]

Hi all

Seems Hornby has benefit from lockdown modelling:

https://www.bbc.co.uk/news/business-54729801

[Legend]

Excellent news .  over the last 2 years Hornby certainly seem to have been reinvigorated . Well done all involved . It must be nice to see turnround happening . 

[Oldddudders]

Positive stuff, and hopefully mirrored in other model suppliers and manufacturers who were able to keep trading. Covid has perversely offered our hobby a new momentum. Any further lockdown - and they are increasingly being applied - will presumably add further value, especially at a a time of year when being outside is less appealing anyway.

 

France locks down for at least a month from tonight. La Poste will remain my friend!

[The Stationmaster]

The big surprise would have been if sales hadn't grown by at least 20% if retailers I have spoken to have been any indication of what the market was doing during lockdown and subsequently.  The big question mark now is around what happens next as disposable incomes could well take a hit over the longer term after a period when there was plenty of otherwise unspent money around due to things like cancelled holidays and folk not being able to eat out or go on various leisure trips etc.

 

Generally model railways and constructional hobbies have for many years tended to do comparatively well in periods of economic recession due to changes in spending patterns and giving people something to do when they're not going out spending their disposable income on the more usual things.  I suspect an upcoming test for Hornby might well be the release of steam punk but Humbrol and Airfix sales will remain resilient.

[ovbulleid]

I’d be interested to know where this growth came from- how much was Hornby/ Airfix/ Scalextric? Have their new releases done well this year or is it more classic items? Which do better- high end releases or railroad re-releases? One they won’t have data for but I find interesting is how has the second hand market fared- are people completing their collections as they buy new from Hornby or is it being ignored as people focus on display cabinet items? I shall have to ask Simon at the next show, c. 2023 I expect.

[The Stationmaster]

1 minute ago, ovbulleid said:

I’d be interested to know where this growth came from- how much was Hornby/ Airfix/ Scalextric? Have their new releases done well this year or is it more classic items? Which do better- high end releases or railroad re-releases? One they won’t have data for but I find interesting is how has the second hand market fared- are people completing their collections as they buy new from Hornby or is it being ignored as people focus on display cabinet items? I shall have to ask Simon at the next show, c. 2023 I expect.

That's something Hornby never seem too keen to reveal - they usually just talk in general terms about something 'doing well' without quoting any numbers.  I do know that a lot of folk were buying plastic kits around the time when lockdown was announced but of course in sales value many of them are well behind model railway prices.

[melmerby]

4 minutes ago, The Stationmaster said:

That's something Hornby never seem too keen to reveal - they usually just talk in general terms about something 'doing well' without quoting any numbers.  I do know that a lot of folk were buying plastic kits around the time when lockdown was announced but of course in sales value many of them are well behind model railway prices.

Airfix kits seem to be much more spread around the retail sector than Hornby branded items.

I would guess the actual quantity sold is many times that of a 'Hornby' item.

In Birmingham city centre I could find an Airfix kit in a few places but the only Hornby is the very limited range in Argos.

 

[bigherb]

10 minutes ago, The Stationmaster said:

 I do know that a lot of folk were buying plastic kits around the time when lockdown was announced but of course in sales value many of them are well behind model railway prices.

Yes my local newsagent stocks a selection of Airfix kits, always been steady sellers but after lockdown she hasn't been able to keep up with demand.

[tractionman]

1 hour ago, melmerby said:

Hi all

Seems Hornby has benefit from lockdown modelling:

https://www.bbc.co.uk/news/business-54729801

 

 

a similar report in The Guardian/Observer a few days ago, some discussion here:

 

 

 

Edited October 29, 2020 by tractionman
typo

[MyRule1]

Rather than rely on a media report the full Hornby half year results are at:

 

https://www.londonstockexchange.com/news-article/HRN/half-year-report/14736006

 

Includes:

 

Interim Results Highlights

 

·      Group revenue of £21.1 million (2019: £15.9 million) an increase of 33% on prior year

·      Operating Group profit before tax* of £0.2 million (2019: loss of £2.5 million)

·      Statutory profit before taxation for the period of £17,000 (2019: loss of £2.5 million)

·      Net cash £4.0 million (2019: Net debt £8.4 million)

 

 

[truffy]

Quote

sales climbed to £21.1m in the period from £15.9m last year. That's given Hornby a net profit of £200,000, turning around a £2.5m loss in 2019.

Hmmm, I'm no economist, and profitability is a good thing, but that profit is less than 10% of 2019's loss. So it's a pretty delicate recovery, to say the least.

[atom3624]

The next 12-24 months is going to be interesting.

 

Obviously it'll be a compromise between time available with funds available, but the future looks good again, for the hobby.

 

Al.

[JohnR]

10 minutes ago, truffy said:

Hmmm, I'm no economist, and profitability is a good thing, but that profit is less than 10% of 2019's loss. So it's a pretty delicate recovery, to say the least.

 

Considering that 60% of their sales normally are in the second half, that result may strengthen, if they can maintain the increased margin.

[Oldddudders]

11 minutes ago, truffy said:

Hmmm, I'm no economist, and profitability is a good thing, but that profit is less than 10% of 2019's loss. So it's a pretty delicate recovery, to say the least.

But, supermarkets apart, how many other companies have good news to tell over this same period? Hornby have struggled to be profitable in recent years, and now are in clean air for the first time in quite a while. Suits me. 

[it's-er]

Those figures quoted by MyRule1 are really interesting.

 

It is good that Hornby moved during the period to a profit (note, before tax), but as already pointed out, it is small. The significant change is the move from net debt of £8.4 million in 2019 to net cash of £4.0 million - that is a HUGE improvement, and a great encouragement for any of us who wondered at one time if Hornby was going to continue.

 

I can't see that the £12.4 million turnaround has been achieved solely through cost reductions and better sales, however: wasn't there a capital reconstruction at some point (within the last year, as that is where the comparison is being made)?

 

John S

[MarkSG]

That headline is straight out of the Sub-Editors' Little Book of Railway Cliches. Anything to do with trains, full size or model, depending on whether it's a positive or negative story, either steams ahead, is on track, goes off the rails or hits the buffers. Or, sometimes, just by way of change, suffers a signal failure.

[GWRtrainman]

Share price seems to be going in the right direction too.

[maico]

The key point is they are not being drowned in debt any more like Roco-Fleischmann.

 

Marklin-Trix profits are small too as a percentage of revenue, seems a common theme

 

 

Edited October 29, 2020 by maico

[dpgibbons]

The jump in the share price is a pretty clear indication that these were much better than expected results with sales, gross margins and the balance sheet all showing big improvements - the latter due primarily to the GBP15m share issue. That issue plus the additional lending facilities has restored them to good financial heath. But they need a follow through in the seasonally stronger 2H to underpin the return to profitability and to demonstrate that their strong sales growth is not simply a temporary COVID bounce. 

 

[The Stationmaster]

51 minutes ago, truffy said:

Hmmm, I'm no economist, and profitability is a good thing, but that profit is less than 10% of 2019's loss. So it's a pretty delicate recovery, to say the least.

Yes - it's an interesting situation and one that is really difficult to forecast either way.  As I mentioned above judging by what I have heard from the retail trade it would have been amazing, and worrying, if their sales had not grown by at least 20%.  But in both that and their results we are looking at a very unusual (and in some respects hopefully not to be repeated) situation which has impacted the hobbies market in a positive manner for many in the trade if they have been able to respond to the increase in demand.

 

The big unknown is the extent to which that growth in demand can be sustained and the extent to which folk will firstly have the necessary disposable income and secondly whether they will still wish to spend it on hobbies or get back to expensive evenings out and holidays.  For example - although it cannot go on model railways - cancellation this year of both our weeks at sea plus cancelling the travel insurance has saved a substantial amount of money (just as well in our case because the household insurance won't cover all the consequential costs of a burst underfloor pipe).  So we - like no doubt many others - had money that would have been spent on holiday and travel this year become available for something else - that might not be the case next year.

 

Similarly the effects of reduced earnings due to redundancy or cuts in working hours have probably only just begun to feed through and remain a big unknown when it comes to disposable income spending.  Thus the future situation remains rather cloudy.  I would expect their second half year to do pretty well with some attractive products heading for the marketplace and people no doubt looking for a spot of cheerfulness via spending for the Christmas period.  But beyond that things remain unclear and they still need to get their model railway marketing into proper shape as they have been making some of the same old, same old mistakes by flogging hard things which initially sell well and chucking more of the same into the marketplace in quick succession - just ask anybody on the retail trade about the situation with K Hornby Pecketts where it would seem the market was well and truly sated a while back.

[Legend]

Well they've done very well in a volatile trading situation . As Stationmaster says a lot will depend on whether demand is sustained . Maybe a lot of people bought that train set or Airfix kit and have now decided that was enough . You would hope there's some increase in overall demand though with hopefully some people continuing in the hobby. 

 

I've always though one of Hornbys challenges was actually delivering the goods , that demand was always there its just they couldn't get goods manufactured fast enough.  I know there have been delays but they seem to have managed manufacturing during Covid pretty well . They obviously need to keep their eye on the ball though. 

[adb968008]

Dont be buying Dom Perignon just yet... it took a once in a 100 year event to get a 1%, £200k profit off the back of a 30% up lift.

 

They need to keep that trajectory, and improve that margin.

Theres a lot of new good stuff, thats cost a lot of investment, coming down the pipe, that will be the real test.

 

but, Hornby has finally got a win.

Lets Celebrate that.

 

 

[Roy Langridge]

19 minutes ago, adb968008 said:

Dont be buying Dom Perignon just yet... it took a once in a 100 year event to get a 1%, £200k profit off the back of a 30% up lift.

 

They need to keep that trajectory, and improve that margin.

Theres a lot of new good stuff, thats cost a lot of investment, coming down the pipe, that will be the real test.

 

but, Hornby has finally got a win.

Lets Celebrate that.

 

 

Don't quite a few of those 100 year models are not released yet, costs will have been incurred but no income on them.

Roy

[pirouets]

One of the interesting things was the size of growth in the US. That was 50% growth from just under £1.6m to nearly £2.3m. Is that just lockdown or improvements in awareness and product in the US?

 

[Michael Crofts]

Does Hornby's fixed investment spend go on tooling only, or are they building up their own in-house manufacturing capability in their own premises?