Hornby sales figures surge under lockdown

[JohnR]

39 minutes ago, Michael Crofts said:

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?

I think its safe to say they're not building up their own manufacturing capability. That would require massive investment that they simply dont have.

[Legend]

2 hours ago, pirouets said:

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?

 

When did they produce the Rivarossi "Big Boy"?  Could that be reason?

[adb968008]

8 hours ago, pirouets said:

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?

 

My local bakery does £700k turnover in a month, at £2 odd a loaf.

 

If a model is £100 trade, this is 7000 models.. in a country 6x populace and a country who’s disposable income is much higher than ours.

 

Still growth is growth.

Covid sounds like its emptied the warehouse of dusty stuff.

What hopefully comes from this is confidence to invest, and to plan for growth, rather than a return to the same... it seems like they have gotten themselves grounds for a new beginning, in that the management should be pleased.

 

Edited October 29, 2020 by adb968008
Edit typo.

[Clearwater]

5 hours ago, GWRtrainman said:

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

 

It's thinly traded, illiquid and has a large single holding so the stock tends to show relatively big movements on news announcements.

 

I agree with others comments about the relative balance of sales to the second half of their financial year.  Equally the ability to continue to deliver product with non supply chain interruptions is crucial.  I'd also wonder whether this year has any  one of benefit from the centenary range and whether they can sustain that to 2021/22.  However, after however many consecutive periods of loss, this is positive/

[adb968008]

1 minute ago, Clearwater said:

 

It's thinly traded, illiquid and has a large single holding so the stock tends to show relatively big movements on news announcements.

 

I agree with others comments about the relative balance of sales to the second half of their financial year.  Equally the ability to continue to deliver product with non supply chain interruptions is crucial.  I'd also wonder whether this year has any  one of benefit from the centenary range and whether they can sustain that to 2021/22.  However, after however many consecutive periods of loss, this is positive/

I’d imagine the 100 year range has passed through weve had:

Tinplate, Rocket, Merton, Smokey Joe, 9f, Duchess, 4498 set, 46201 set..

 

it leaves: Clan line, Peckett to come.

 

if the sale is recognised at the point of invoicing, then i’d imagine the cream is covered.

 

That said the real big ticket / higher revenue items have yet to come: w1,Coronation, apt, 91

 

Dont underestimate the revenues of the 66’s, kfa’s & mk2e’s.. they might be cheap but they seem to have dissapeared as quick as they came out... faster than the Terriers and 61xx’s.

 

 

[ovbulleid]

1 hour ago, adb968008 said:

... the revenues of the 66’s, kfa’s & mk2e’s.. they might be cheap but they seem to have dissapeared as quick as they came out... faster than the Terriers and 61xx’s.

 

 

It would be interesting to see if anyone who bought a special ‘Captain Tom’ 66 bought themselves their first train set at the same time to begin their collection

[adb968008]

18 minutes ago, ovbulleid said:

It would be interesting to see if anyone who bought a special ‘Captain Tom’ 66 bought themselves their first train set at the same time to begin their collection

Whilst it goes counter to the “must have the best” mantra of the forum, My Captain Tom, stood up well against my Bachmann and Hattons ones, so I decided to add a Pink 66 from Hornby to the collection, to entertain my little one... so 66731 did manage a +1 sales of another 66 in our house.

[autocoach]

4 hours ago, pirouets said:

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?

 

What are they selling in the US? I have not seen any recent mention of Hornby products in any of trade or US railroad forums. Nothing in railroad hobby stores. Could it be non-railroad such as Scalextric and Airfix?

[Roy Langridge]

1 hour ago, adb968008 said:

My local bakery does £700k turnover in a month, at £2 odd a loaf.

 

If a model is £100 trade, this is 700 models.. in a country 6x populace and a country who’s disposable income is much higher than ours.

 

I think you maths is out there, £100 trade would be 7000 models to get to £700k.

 

Roy

[Clearwater]

2 hours ago, adb968008 said:

I’d imagine the 100 year range has passed through weve had:

Tinplate, Rocket, Merton, Smokey Joe, 9f, Duchess, 4498 set, 46201 set..

 

it leaves: Clan line, Peckett to come.

 

if the sale is recognised at the point of invoicing, then i’d imagine the cream is covered.

 

That said the real big ticket / higher revenue items have yet to come: w1,Coronation, apt, 91

 

Dont underestimate the revenues of the 66’s, kfa’s & mk2e’s.. they might be cheap but they seem to have dissapeared as quick as they came out... faster than the Terriers and 61xx’s.

 

 

 

Hornby is an FMCG business.  B2C.  Has to have lots of sales on quite thin margins.  Fickle purchasers that follow fashions.  Need to call the trends right etc etc.  Get it wrong and you're long stock and facing a write off / discounting to shift stock.  Albeit the sector itself as Mike (@thestationmaster) argues has some anti-cyclical features.

 

I'd agree that items like the W1.A2s, APT etc should be higher profit (both in £ terms and margin terms).   Rocket should become an alternate year range regular and drive decent ongoing profits.   I think the Coronation set is a smart idea to drive both sales of 7 coach sets and, to some, accompanying locos.  If it's profitable, I'd do a Silver Jubilee set and rerelease Silver A4s but now I'm running the risk of wish listing.   I'd also run the argument on the 66s, kfas and Mk2es etc that if they've already amortised tool costs, then those short earn a higher margin if you maintain pricing.

 

As we've discussed before, and is commented on this thread, what we don't know is the split between airfix, scaletrix, die cast etc.  I'd love to read their management accounts and product accounts to understand where they really make their money!  

[adb968008]

B2C ? only on the website.

Most of their sales are to trade i’d have thought ? B2B.

Last time I was running a shop it wasnt “sale or return” and I doubt that has changed...

it was goods invoiced and 30 day payment, with 2% extra deducted for 7 day payment, the invoice turning up a after Month end, so if you were lucky, and order went out on the 1st, you got 59 days to pay, upto 65 days before your cheque was actually cashed if you sent it in the mail right at the time limit... those loop holes are surely closed.
 

Once the goods have left Hornby and the invoice is in the post.. thats it, deal done ?
 

I cant verify, but I heard it suggested now a days, the invoice is viewable online before the stock arrives, Does anyone use cheques any more ?

 

 

 

 

Edited October 29, 2020 by adb968008

[Mike Harvey]

3 hours ago, adb968008 said:

My local bakery does £700k turnover in a month, at £2 odd a loaf.

 

12000 loaves a day. Must have a decent catchment area, and distribution set up.

[maico]

Do the sales figures include Rivarossi, Jouef and Arnold? I'm assuming it does as those model ranges are all shown on the Hornby website.

[roythebus]

10 hours 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 remember the amount to take the loss back to zero has to be added to the profit.

[adb968008]

1 hour ago, Mike Harvey said:

12000 loaves a day. Must have a decent catchment area, and distribution set up.

They sell more than loaves.

i never leave without donuts.

;-)

 

but seriously they are a £8mn a year turnover, there is real brass in bread.

 

Anyways, the point I was trying to make.. was £1.6m, in my mind, isnt a big sum, for an organisation with the logistics, overheads and staffing costs of Hornby, to have a viable operation in a market the size of the US. I maybe wrong, and could well be, but to me it looks way too small.

if its profitable so be it, but I think theres more ambition and potential that could be explored.
 

I’d wager Hattons exports more than that to the US.

 

 

Edited October 29, 2020 by adb968008

[Amand]

Definitely good news, helped by several limited edition models appealing to collectors and railway operators.

 

Benefit of limited editions is Hornby possibly sold more models than usual direct to the public at full price. Those that were sold to the trade (as trade discount with further discount for prompt payment) sold out instantly too, so no stock depreciating in a warehouse. My nearest model shop sold out of all the limited edition locos within days, with only the two centenary trainsets not selling out straight away. So a run of "must have" locos that were sales hits have helped, along with a lot of people having to stay at home and turn to hobbies to occupy themselves.

 

Still plenty more to come from Hornby, there must be a big wave of optimism over Margate in these uncertain times.

[1andrew1]

10 hours ago, Michael Crofts said:

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?

All manufacturing is outsourced and is mostly overseas, the exception being some of the Humbrol range which is made by English manufacturers for Hornby.. The Airfix QuickBuild kits used to be made in the UK but like the rest of the Airfix range, are made in India.

[1andrew1]

5 hours ago, Clearwater said:

 

Hornby is an FMCG business.  B2C.  Has to have lots of sales on quite thin margins.  Fickle purchasers that follow fashions.  Need to call the trends right etc etc.  Get it wrong and you're long stock and facing a write off / discounting to shift stock.  Albeit the sector itself as Mike (@thestationmaster) argues has some anti-cyclical features.

 

I'd agree that items like the W1.A2s, APT etc should be higher profit (both in £ terms and margin terms).   Rocket should become an alternate year range regular and drive decent ongoing profits.   I think the Coronation set is a smart idea to drive both sales of 7 coach sets and, to some, accompanying locos.  If it's profitable, I'd do a Silver Jubilee set and rerelease Silver A4s but now I'm running the risk of wish listing.   I'd also run the argument on the 66s, kfas and Mk2es etc that if they've already amortised tool costs, then those short earn a higher margin if you maintain pricing.

 

As we've discussed before, and is commented on this thread, what we don't know is the split between airfix, scaletrix, die cast etc.  I'd love to read their management accounts and product accounts to understand where they really make their money!  

I think Airfix is meant to be the most profitable as it can be sold in the largest number of countries and is able to maintain a good price. Scalextric has suffered the most from computer gaming competition but that too is sold worldwide.  The railway ranges are higher value but profitability is lower as they don't get the economies of scale of the other ranges, as models tend to appeal to fewer countries. 

[JohnR]

11 hours ago, maico said:

Do the sales figures include Rivarossi, Jouef and Arnold? I'm assuming it does as those model ranges are all shown on the Hornby website.

I'm assuming the big jump in US sales was due to the Rivarossi Big Boy?

[Legend]

14 hours ago, maico said:

Do the sales figures include Rivarossi, Jouef and Arnold? I'm assuming it does as those model ranges are all shown on the Hornby website.

 

Yes , also Corgi , Airfix , Scalextrix . 

[The Stationmaster]

I understand that the 'prompt payment' additional discount for retailers was discontinued earlier this year.  That is possibly part of the reason why Hornby's margin has improved because it was effectively a price increase for those who were taking advantage of that additional discount.  And anybody with half an eye on their cash flow was taking advantage of that discount and of course it fed through to retail prices eventually if stock was still available beyond the discount limit period.

 

But look too at Hornby's detail where they showed a big increase in direct sales - hence a further contribution to an improvement in margin.  The lockdown no doubt had considerable influence in that respect because of the Hornby name and the natural inclination to go there first if you wanted 'a toy train' for something to do while stuck at home.   That is probably more directly linked to the pandemic than any other marketing driver and the open question has to be if it will be sustainable in the longer term - that is an area where marketing has to be very positive to retain new customers.

 

The inventory area is an interesting one.  it is c.£2 million up on last year's figure for the same date last year so the comment about building stocks for the peak sale period is effectively common to both although supply chain improvement might be the reason for it being larger this year.  The worrying feature last year was that the year end inventory - after the sales peak had passed - had only dropped by a bit over £500,000 out of a September total of not much short of £15 million.  This year we're looking at a similar snapshot figure of almost £17 million of inventory with a lot of commercially attractive peak sales period items still to arrive.  An obvious continuing question I think still has to be has to be to what extent the amount of longer term unsold stock is affecting the balance sheet?

 

As far as indebtedness is concerned the answer is easy - it's not difficult to wipe out outstanding loans a bit in excess of £9 million if you issue over £13 million of additional equity (and this had in any case been taken to account by the end of the 2019/2020 financial year).  Basically all it does is say nothing about financial performance and a lot about the impact of obtaining additional capital.  What does still matter is the impact on finance costs and they have reduced - but still amount to £160,000 on the half year (compared with £253,000 a year ago).  And those costs play a substantial part in reducing pre-tax profits to  £17,000 - still a profit but not a big one.

 

So yes - things are looking up for Hornby but it has been an exceptional half year in more ways than one which has resulted in extremely favourable market conditions for them.   The peak sales period will no doubt also do well because of both external economic conditions and what they are bringing forward to point of sale.  But I think that sustaining all this in the longer term remains a rather different question notwithstanding what they are promising to be 'exciting new releases in 2021 - will the lion of Margate still be roaring a year from now? 

[bill badger]

Share price looking very handy of late - up to 65p now; glad I took a modest plunge when they were down at 30p. How long this sustains remains to be seen. Our local toyshop owner mentioned in conversatoin that Scalextix and Airfix were flying off the shelves (well at least they were until lockdown). The Airfix Quickbuild are particularly popular apparently; our 7 year can't get enough of them.

[The Stationmaster]

14 hours ago, bill badger said:

Share price looking very handy of late - up to 65p now; glad I took a modest plunge when they were down at 30p. How long this sustains remains to be seen. Our local toyshop owner mentioned in conversatoin that Scalextix and Airfix were flying off the shelves (well at least they were until lockdown). The Airfix Quickbuild are particularly popular apparently; our 7 year can't get enough of them.

I suspect that Lockdown 2 will do their overall sales more good than harm provided customers can get product through the various forms of remote purchase from eith Horn by or retailers or via click & collect from retailers.

 

Whether or not that will clear there increasingly large pile of unsold items which are consuming expensive warehouse space is another question because that depends entirely on the saleability of the stuff in that stockpile.  No doubt their excellent new 'complete packs' aimed at the Christmas market will help reduce the number of J15s sitting in the warehouse but that won't remove millions of £s worth of product which has gradually built up over recent years.   Quite how they will deal with that remains an open question.

[Legend]

The Inventory is interesting . If its not moving there should be a provision against that (a charge in the P&L) and the Balance Sheet value reduced . The fact that it isn't means that they think they can sell it at more than cost . Would be fascinating to find out what it is . Of course it could be Corgi, Airfix not just Hornby . 

[Phil Parker]

On 30/10/2020 at 11:27, The Stationmaster said:

But look too at Hornby's detail where they showed a big increase in direct sales - hence a further contribution to an improvement in margin.  The lockdown no doubt had considerable influence in that respect because of the Hornby name and the natural inclination to go there first if you wanted 'a toy train' for something to do while stuck at home.   That is probably more directly linked to the pandemic than any other marketing driver and the open question has to be if it will be sustainable in the longer term - that is an area where marketing has to be very positive to retain new customers.

 

I'd suggest that recent efforts to get product into new outlets has paid off. Some might look down on shops like Wilko (suppliers of my favourite scenic paint) and others, but they were open during lockdown so placing Airfix kits in there will have boosted sales and increased visibility of the brand. I know that broadening the retail base has been a big part of Hornby's work over the last few years. Unlike previous management, Lyndon and Tim especially seem under the impression that putting products on shelves where people can buy it is a good thing...