Jump to content
 

Hornby Make a Profit


88D
 Share

Recommended Posts

  • RMweb Gold
1 hour ago, ruggedpeak said:

Except we now have 3 separate manufacturers of MGR wagons and derivatives. And a long list of things still not produced by anyone, whilst Hornby still struggle financially :rolleyes:

 

The big question for Hornby is what happens if/when we come out the pandemic and start going on holdiay etc again?

On the MGR wagon front, the big question for Hornby is whether they see a red mist and spend a load of effort attempting to nix the opposition. "Winning" would be whatever market share they could achieve in excess of 33% of overall MGR sales; probably insufficient to see a profit from it.

 

Better they should reflect that their old one has long ago paid for itself, bung it in the Railroad range and turn their attention to making something that isn't already known to be coming from elsewhere.  

 

John

  • Like 2
  • Agree 1
Link to post
Share on other sites

  • Moderators
7 minutes ago, Dunsignalling said:

Better they should reflect that their old one has long ago paid for itself, bung it in the Railroad range and turn their attention to making something that isn't already known to be coming from elsewhere.  

 

A conundrum which came a few years ago was the new, and improved, chassis for the private owner open wagons with NEM pockets etc but they didn't want to make much of it publicly so it wouldn't leave old stock with old chassis sitting around rather than promoting improvements and developments.

  • Like 5
  • Agree 1
  • Informative/Useful 3
  • Interesting/Thought-provoking 1
Link to post
Share on other sites

17 minutes ago, Dunsignalling said:

On the MGR wagon front, the big question for Hornby is whether they see a red mist and spend a load of effort attempting to nix the opposition. "Winning" would be whatever market share they could achieve in excess of 33% of overall MGR sales; probably insufficient to see a profit from it.

 

Better they should reflect that their old one has long ago paid for itself, bung it in the Railroad range and turn their attention to making something that isn't already known to be coming from elsewhere.  

 

John

 

They have already done that. The Railroad range has had their older MGR tooling but I don't think it is a current product.

 

Hornby already have a batch of MGRs scheduled for release later this year, so they are well into the production process for these. If they sell well, then make some more. No need to re-tool. If they don't sell well, then leave the MGR market for Accurascale & Cavalex then move on to something else. They have produced some fast-selling models lately: The Ivatt Duchess, Coronation Scot set, Rocket. APT seems quite popular too. If I seem a bit blinkered towards the Midland region, it is simply what I model so I am more familiar with it.

 

What about the other common hopper, the HBA/HEA variant? Both Hornby & Bachmann currently produce this, but both are older toolings. It is a versatile model too: they can run in rakes of 12+ or sit in 1's, 2's etc in sidings. Maybe a manufacturer already has this in progress?

  • Like 1
Link to post
Share on other sites

1 minute ago, Pete the Elaner said:

What about the other common hopper, the HBA/HEA variant? Both Hornby & Bachmann currently produce this, but both are older toolings. It is a versatile model too: they can run in rakes of 12+ or sit in 1's, 2's etc in sidings. Maybe a manufacturer already has this in progress?

I think we can put a pretty educated guess who will be doing these, but will it be before, after or at the same time as the humble 16t mineral.

  • Like 1
  • Agree 1
Link to post
Share on other sites

  • RMweb Gold

In the past, when Hornby were planning upgraded models (the loco-drive Britannias and Kings were examples IIRC), the old model would disappear from the catalogue a year or two before anticipated release. Maybe that would nowadays be too much of a giveaway to Hornby-watchers on here, though. 

 

The problem for existing players (not just Hornby) when newcomers announce current-spec models where older ones are still available is that, generally, the structure of a long-established business is not as "lean" as one that is newly formed. If it comes to a head-to-head competition, with sales divided, the opposition can probably break even on a lower share that Hornby (etc) need in order to do so. 

 

When such models are announced, and Hornby do have the same thing under development, the "line of no return" marking where cancellation costs begin to exceed those of seeing the project through, will not be the same for both parties.

 

John

 

  

  • Like 1
Link to post
Share on other sites

On 10/06/2021 at 19:09, adb968008 said:

Forgive me being underwhelmed at those numbers.


 

 

 

 

 

Why? For a company to turn itself around, especially in these difficult times, it is an impressive set of figures compared to last year and can only bode well for the future.

  • Like 5
  • Agree 2
Link to post
Share on other sites

  • RMweb Gold
8 minutes ago, Pete the Elaner said:

 

They have already done that. The Railroad range has had their older MGR tooling but I don't think it is a current product.

 

Hornby already have a batch of MGRs scheduled for release later this year, so they are well into the production process for these. If they sell well, then make some more. No need to re-tool. If they don't sell well, then leave the MGR market for Accurascale & Cavalex then move on to something else.

 

Sorry. Being a steam-era modeller, they all looked the same to me.:unsure:

  • Like 1
  • Funny 3
Link to post
Share on other sites

13 minutes ago, Dunsignalling said:

Sorry. Being a steam-era modeller, they all looked the same to me.:unsure:

Apparently "Merry Go Round on the Rails", by David Monk-Steel has a pic of an 8F hauling a (loaded) block trains of HAAs during 1965. I would imagine as a non fitted train with a brake van, but I’ve not seen the pic

  • Informative/Useful 1
Link to post
Share on other sites

  • RMweb Gold
41 minutes ago, Talltim said:

Apparently "Merry Go Round on the Rails", by David Monk-Steel has a pic of an 8F hauling a (loaded) block trains of HAAs during 1965. I would imagine as a non fitted train with a brake van, but I’ve not seen the pic

Page 146 of said excellent tome has 3 pictures of steam locos hauling HAA's. The 8F pic isn't very clear and only shows part of the train.

 

The other 2 photos are of shunters, one being a Hunslet at Bickershaw in 1983 in a variation on this photo (Copyright Tony Wright)

 

s 1896

 

The other is S100 at Peckfield in 1968. Similar to this

 

pt7988-NCB-Railway-Engine-at-Peckfield-C

Digging around there seems to be a common for steam to be shunting HAA's.

 

Edited by ruggedpeak
  • Like 4
Link to post
Share on other sites

  • RMweb Gold
1 hour ago, Denbridge said:

Why? For a company to turn itself around, especially in these difficult times, it is an impressive set of figures compared to last year and can only bode well for the future.

Maybe.  But the important things, as ADB identified very clearly, is that 'the turnaround. - which was actually a move from making a loss on the year into making a profit - occurred in very specialised and hopefully unusual circumstances.  It occurred in a year when there was a major shift in the pattern of disposable income spending where some of it (c.£9 million in Hornby Group's case) was spent on hobby/pastime things probably instead of on holidays and meals out etc).

 

The key thing for Hornby, and anyone else in the model railway business, is what will happen to that extra hobby spending when the alternatives of meals out and holidays become increasingly available thus year?   As I read the numbers a significant part of Hornby's move into profit was a consequence of increased sales although the financials are also worth a look because of the much reduced amount Hornby Group has spent on interest on various loans etc compared with the previous year.  But at the same time some costs have risen and they have been linked to increased sales.

 

Thus an awful lot seems to hang round sales and it doesn't matter if you've got the best models in the world or you've got the most attractive (to consumers) models in the world if those consumers are spending their money elsewhere.  That in my view is the challenge Hornby may well be facing this year if Britain manages to get out of lockdown territory and the things which have hit spending on meals out etc.   For example - although the money comes out of different pots - we have 'lost' 4 holidays this year and last year, have missed out on two theatre trips and probably several meals out.  All that will replac e the holidays is a few days away later in the year.   So while the money isn't in my toy trains account our overall household finances are considerably better off than they would be in 'normal' years - and i doubt we are alone in that respect.  

 

If others are ina similar state to us there is still probably money about for hobbies at the moment but how long will it last?

  • Like 3
  • Agree 3
Link to post
Share on other sites

1 minute ago, The Stationmaster said:

Maybe.  But the important things, as ADB identified very clearly, is that 'the turnaround. - which was actually a move from making a loss on the year into making a profit - occurred in very specialised and hopefully unusual circumstances.  It occurred in a year when there was a major shift in the pattern of disposable income spending where some of it (c.£9 million in Hornby Group's case) was spent on hobby/pastime things probably instead of on holidays and meals out etc).

 

The key thing for Hornby, and anyone else in the model railway business, is what will happen to that extra hobby spending when the alternatives of meals out and holidays become increasingly available thus year?   As I read the numbers a significant part of Hornby's move into profit was a consequence of increased sales although the financials are also worth a look because of the much reduced amount Hornby Group has spent on interest on various loans etc compared with the previous year.  But at the same time some costs have risen and they have been linked to increased sales.

 

Thus an awful lot seems to hang round sales and it doesn't matter if you've got the best models in the world or you've got the most attractive (to consumers) models in the world if those consumers are spending their money elsewhere.  That in my view is the challenge Hornby may well be facing this year if Britain manages to get out of lockdown territory and the things which have hit spending on meals out etc.   For example - although the money comes out of different pots - we have 'lost' 4 holidays this year and last year, have missed out on two theatre trips and probably several meals out.  All that will replac e the holidays is a few days away later in the year.   So while the money isn't in my toy trains account our overall household finances are considerably better off than they would be in 'normal' years - and i doubt we are alone in that respect.  

 

If others are ina similar state to us there is still probably money about for hobbies at the moment but how long will it last?

Let us also remember, that for much of 2020 Hornby didn't recieve any goods from China owing to Covid and their distribution ground to a halt or was very much reduced during the same period, for the same reason. add into the mix the small fact that many shops were closed for much of the year and were not ordering any stock, makes this turnaround something to applaud, not to pick fault with. (I'm not accusing you of this, but it seems to be a theme running through multiple threads around social media).

  • Like 2
Link to post
Share on other sites

  • RMweb Gold
3 hours ago, Denbridge said:

Let us also remember, that for much of 2020 Hornby didn't recieve any goods from China owing to Covid and their distribution ground to a halt or was very much reduced during the same period, for the same reason. add into the mix the small fact that many shops were closed for much of the year and were not ordering any stock, makes this turnaround something to applaud, not to pick fault with. (I'm not accusing you of this, but it seems to be a theme running through multiple threads around social media).

But look at what Hornby themselves have said in their Annual Results commentary -

'Our supply partners are mainly located in the Far East. Whilst manufacturing was greatly affected by Covid-19 and the, much publicized, delays caused by shipping container shortages, they have managed to satisfy the majority of our requirements.'

 

Similarly they were in a good position in respect of stocks - at the end of their 2020 year the inventory of stock on hand stood at 38% of the value of the sales in that year.   Now it is quite possible that some of that stock would not have sold in the year to 2021  But equally there would probably have been items there more than suitable to meet surges in demand.   That fgure had been growing since 2018 and the end of fire sales but it is now down to 31% albeit as a percentage of a much higher sales figure although it obviously includes, in both cases newly arrived items on hand pending distribution/sale.

 

And Hornby also said this in the Report -

Fortunately, a proportion of our product sales were already via e-commerce and we have been able to strengthen the channel as our logistic facility has remained operational under strict distancing protocols and we continue to dispatch goods. Similarly, our retail customers have implemented e-commerce systems and were better prepared to trade in later lockdowns.

 

And obviously Hornby Group must have had something to sell otherwise they would not have increased their total sales by £10.7 million and their UK sales by  £8.8 million.  And all the retailers I know of continued selling either online or by mail order and all of them have said they experienced considerable year-on-year sales growth so they too must have had something to sell, albeit of course not all from Hornby Group.

 

I'm certainly not picking fault with the Group's move from loss making to profitability but with a small increase in their overall gross margin (44.1% improved to 44.9%)  the gross profit has to a large extent moved in line with increased sales - sales up by £10.7 million, gross profit up by £5.1 million.   Those of course are very much base figures and what happens between gross profit and pre-tax profit will have an impact on the way the additional gross profit is turned into pre-tax profit.  But there is still a strong element in there of profitability coming from improved sales and that would have to be maintained in a coming year where there are a number of unknowns about how we will be spending our money between the return of 'other attractions' and hobbies.   And that was the point I was making - it needs more than one exceptional year, albeit one which has strengthened the Group's overall financial position, to complete a turn round. 

  • Like 5
  • Agree 1
Link to post
Share on other sites

  • RMweb Gold

What Mike said.

 

My prediction, which should be taken with the pinch of salt appropriate to one of my business acumen and experience, is that Hornby are not out of the woods, and that this return to profitability will not be sustained for the next few years, but that the days of the large money pit losses are over and the situation is under control.  The company has the potential to be a good investment but the long game must be played, not something venture capitalists are noted for being keen on.  What will keep the company from sinking under will be the vast reservoir of goodwill that has rescued it so far, and my concern is that their poor behaviour will reflect badly on them and drain some of this reservoir.  Normally a business would rebrand to dissassociate itself from such an image, but the brand name is the biggest friend they have, and while they 'got away' with it in rebranding from Tri-ang it would be a bit much to expect to pull the trick off twice, no matter how well it was marketed!

 

One hopes, as an insurance policy to retain the models should they go under, that there are vultures hovering ready to pick up the better pieces so that they are not lost, as happened with Airfix and Mainline, and to some extent Lima and Dapol.  This would mean that some toolings had been through several owners, the A30 auto trailer for example.

Edited by The Johnster
  • Like 1
Link to post
Share on other sites

2 hours ago, The Stationmaster said:

But look at what Hornby themselves have said in their Annual Results commentary -

'Our supply partners are mainly located in the Far East. Whilst manufacturing was greatly affected by Covid-19 and the, much publicized, delays caused by shipping container shortages, they have managed to satisfy the majority of our requirements.'

 

Right, and I think this is where some nuance has been lost. The vibe that I picked up on here (and I might be wrong) is that Hornby should have been able to make much greater net income due to increased demand.

 

That sentence makes it clear they had supply chain challenges, but they worked through *most* of them. That suggests to me there were covid related effects that had opportunity cost. It's not like their business ground to a halt, but not all their requirements were met (and remember "requirements" is a pretty strong term - as it's possible they also missed out on "wants" or "nice to haves" as a result of these challenges).

 

It is impressive that they managed to maintain/grow their gross profit margin. My wild guess is that while their shipping/logistics costs would have increased, they were not needing to discount stock as much to get it to move due to the increased demand. How much of that was luck and how much was judgement, who knows!

 

I'm an avid follower of Bargain Hunters 2 on here - it is my impression, not supported by any facts or data, that there are less "bargains" to be had in recent months, especially the December - March period. There have still been unpopular products needing discounts to be moved, but newer product lines, more common liveries etc all seem to have held their pricing better (20% off rrp rather than 40-50%).

  • Like 1
Link to post
Share on other sites

1 hour ago, The Johnster said:

What Mike said.

 

My prediction, which should be taken with the pinch of salt appropriate to one of my business acumen and experience, is that Hornby are not out of the woods, and that this return to profitability will not be sustained for the next few years, but that the days of the large money pit losses are over and the situation is under control.  The company has the potential to be a good investment but the long game must be played, not something venture capitalists are noted for being keen on.  What will keep the company from sinking under will be the vast reservoir of goodwill that has rescued it so far, and my concern is that their poor behaviour will reflect badly on them and drain some of this reservoir.  Normally a business would rebrand to dissassociate itself from such an image, but the brand name is the biggest friend they have, and while they 'got away' with it in rebranding from Tri-ang it would be a bit much to expect to pull the trick off twice, no matter how well it was marketed!

 

One hopes, as an insurance policy to retain the models should they go under, that there are vultures hovering ready to pick up the better pieces so that they are not lost, as happened with Airfix and Mainline, and to some extent Lima and Dapol.  This would mean that some toolings had been through several owners, the A30 auto trailer for example.

Many private equity firms operate to a five-year invest and sell timescale but Phoenix has said it's a far longer-term owner of Hornby.

 

Longer term, a merger with  an expanding company like the Simba Dickie Group (which includes Marjorette, Tamiya Germany, plus Marklin, Trix and LGB) might make sense.

Edited by 1andrew1
  • Agree 1
  • Interesting/Thought-provoking 2
Link to post
Share on other sites

  • RMweb Gold

The bigger concern is that despite increasing the gross margin that the net profit is still low for the level of sales. That suggests that the cost of business is too high (or the margins are still not high enough) for the income. As others have said if the income has been increased during lockdown then there is no guarantee that the sales will continue which makes things worrying. 

  • Like 1
  • Agree 3
Link to post
Share on other sites

On 11/06/2021 at 23:28, Nova Scotian said:

4. They gave up production slots to run the NHS 66 - I think in the long run this will work out well for them commercially, and morally I know it gave me warm fuzzy feelings about them. My view of Hornby as a brand improved as a result of that 3500 product run, but you can bet they had an "opportunity cost" of giving up production slots on higher margin products to meet that demand.

 

I think that this was a brilliant move on the part of Hornby, because they got a lot of good press and made a donation to NHS charities in the process. The fact that they kept the cost of those special edition models the same as their standard models made them accessable to most, too.

 

But here's a thought (and I know I will get shouted down from some quarters) - that loco will become synonymous with the events of 2020, and as such will become the "memorabilia" of the next generation of railway modellers. But where will they source them from? I suspect, looking at eBay, that they will find themselves paying well over the odds to get hold of them (take a look at the eBay Madness thread for some examples)

 

I think that Hornby should announce that a Thank You NHs/Captain Sir Tom Moore class 66 loco to be an ongoing part of their range. I would also put a small premium (say £20 extra) on the RRP that continues to be donated to NHS charities. My reasoning is this:

 

1) It provides an 'entry level' (it is a Railroad tooling after all) modern image loco that will have emotional resonations with a whole generation of future modellers

2) It will continue to generate good publicity for Hornby through raising money for NHS Charities, or perhaps the charity set up in Sir Tom's memory

3) It might be possible that the family of Sir Tom endorse the loco (again, great public relations/image)

4) As the original model was not sold at a hiked "limited run" price, I think anyone who bought the original models should not feel in any way 'cheated' and instead be happy to share the "warm fuzzy feelings" about Hornby as mentioned by @Nova Scotian in his post

5) Continuous availability would torpedo the price gougers on eBay looking to cash in on the original release of the model!

 

For example, I know of one keen young 17 year old model train enthusiast who would love to add a Thank You NHS loco to his fleet, but would not - could not - spend the £250+ being asked by eBay sellers for one. I missed the original run and would have bought one simply to have donated to the NHS Charities - today, I would buy one with a slightly higher than standard price if it was still doing the same. However, I simply will not put hundreds of pounds of profit into the pockets of eBay sellers trying to cash in upon either the rarity of the model or those warm fuzzy feelings I also feel for the NHS.

 

This idea won't turn Hornby's fortunes around, but as their name is synonymous with model trains to the wider public, such an ongoing gesture could ensure that "warm fuzzy feelings" towards them continues into the future, because "warm fuzzy feelings" about their past are often at the heart of why people chose to make a model railway in the first place.

 

Steve S

Edited by SteveyDee68
  • Like 7
Link to post
Share on other sites

11 hours ago, red death said:

The bigger concern is that despite increasing the gross margin that the net profit is still low for the level of sales. That suggests that the cost of business is too high (or the margins are still not high enough) for the income. As others have said if the income has been increased during lockdown then there is no guarantee that the sales will continue which makes things worrying. 

I think this is where getting the supply chain resolved is key.

 

Hornby's trading statement  said

Quote

Whilst manufacturing was greatly affected by Covid-19 and the, much publicized, delays caused by shipping container shortages, they have managed to satisfy the majority of our requirements.

 

Not the vast majority, just the majority. So, up to 49% of Hornby's requirements may have been un met. 

 

With a strong product range and the ability to meet demand then demand should hold up or even increase. Some of those lockdown newcomers to the hobby will be looking to expand their layouts and stock and this will benefit other manufacturers too, not just Hornby.

 

 

Edited by 1andrew1
  • Like 1
  • Agree 1
Link to post
Share on other sites

  • RMweb Gold
19 minutes ago, 1andrew1 said:

I think this is where getting the supply chain resolved is key.

 

Hornby's trading statement  said

 

Not the vast majority, just the majority. So, up to 49% of Hornby's requirements may have been un met. 

 

With a strong product range and the ability to meet demand then demand should hold up or even increase. Some of those lockdown newcomers to the hobby will be looking to expand their layouts and stock and this will benefit other manufacturers too, not just Hornby.

 

 

Surely 'getting the supply chain resolved' isn't really the answer to getting the net profit to a higher ratio in relation to sales?  Hornby themselves, in the results, have said there is still a need to get certain overheads reduced although the present management have vigorously tackled some areas of overheads already.  Getting in more product will obviously help increase the gross profit but it it still remains at present little changed from the latest nmargins there will be no change to net profit except that it would grow in line with sales growth.

 

Now obviously increased sales would reduce overhead cost per item sold in some areas provided there is not another increase in marketing costs and number of marketing people employed - and the report states that the Chairman considers that could be done.  So part of overhead would reduce per item with a greater level of sales.  But once again that inescapably comes back to sales volume and gross income and it's all well good having everything you order delivered on time but not so good if you can't sell it and you finish up once again adding to the debt represented by unsold inventory.  And however good or attractive your product - and most of what is promised for 2021 is attractive to somebody or other - they will only buy it if they have the money available to buy it.

  • Agree 2
Link to post
Share on other sites

5 hours ago, The Stationmaster said:

Surely 'getting the supply chain resolved' isn't really the answer to getting the net profit to a higher ratio in relation to sales?  Hornby themselves, in the results, have said there is still a need to get certain overheads reduced although the present management have vigorously tackled some areas of overheads already.  Getting in more product will obviously help increase the gross profit but it it still remains at present little changed from the latest nmargins there will be no change to net profit except that it would grow in line with sales growth.

 

Now obviously increased sales would reduce overhead cost per item sold in some areas provided there is not another increase in marketing costs and number of marketing people employed - and the report states that the Chairman considers that could be done.  So part of overhead would reduce per item with a greater level of sales.  But once again that inescapably comes back to sales volume and gross income and it's all well good having everything you order delivered on time but not so good if you can't sell it and you finish up once again adding to the debt represented by unsold inventory.  And however good or attractive your product - and most of what is promised for 2021 is attractive to somebody or other - they will only buy it if they have the money available to buy it.

Getiting the supply chain resolved enables them to increase sales with no extra cost to marketing. That's key to raising profitability and is the reason that many European manques (eg Roco-Fleischmann, Marklin-LGB-Trix, Piko)  still have manufacturing arms, despite this being capital intensive.

Link to post
Share on other sites

  • RMweb Gold
13 hours ago, 1andrew1 said:

Getiting the supply chain resolved enables them to increase sales with no extra cost to marketing. That's key to raising profitability and is the reason that many European manques (eg Roco-Fleischmann, Marklin-LGB-Trix, Piko)  still have manufacturing arms, despite this being capital intensive.

You again miss the point - they will only be able to sell stuff, whatever their supply chain does, if people have the disposable income available to buy it.

 

And in order to improve profit - however much they sell - they need to retain a higher percentage of gross profit through to the bottom line on the accounts.   At present group + Company are spending the equivalent of over £10,000 per week on interest charges on loans although that total  also includes interest on leases.  That figure comes down to a bit over £7,000 per week after adding the money they make on financing including interest on a loan but even then it means they need sales.  That means they have to sell c.£16,000 worth of goods per week just to cover that cost.  They will probably never remove a need for working capital due to the nature of their business some of which is  cyclical unless they can seriously improve on their new positive cash in hand position.  It's not just income it's always going to be about costs as well - for example their cost per employee, albeit including executive directors (but not board members) and incentive scheme costs, is noticeably higher than Bachmann Europe's although geography probably plays a part in that as well as the south east is expensive.

 

Don't gte me wrong - they have had a good year and have moved from loss to profit but that isn't everything.  And interestingly - although it could be due to profit taking - their share price dropped by 5p on Friday although it did rally a little earlier today. 

  • Like 2
Link to post
Share on other sites

14 hours ago, 1andrew1 said:

Getiting the supply chain resolved enables them to increase sales with no extra cost to marketing. That's key to raising profitability and is the reason that many European manques (eg Roco-Fleischmann, Marklin-LGB-Trix, Piko)  still have manufacturing arms, despite this being capital intensive.

 

Hornby is in an interesting place strategically.  Some, newer, competitors may operate on a  much smaller corporate overhead allowing them to be more profitable at an equivalent pricing point.  Nonetheless, I wonder the extent to which Hornby price their products effectively.  There's a floor price they need to cover costs etc but I suspect strongly that on some lines they are not profit maximising.  If I was Phoenix/a Non-Exec, I'd be pushing hard to look at the revenue side of the equation as well as the cost side.  How fast do some lines sell out? Is there unsatisfied demand or could the sales team have pushed the price higher? What is the mechanic for setting price (bottom-up vs top down)? How are sales' teams incentivised? What's the margin on small vs large shops etc?  How does profitability vary through the product lifecycle (new tooling, old tooling, legacy toolings)? Balance of margin vs complexity of tooling/assembley? Which brands are profitable? And in which market places?

 

There's also the question of the relationship with retail.  Hornby must be making a better margin on direct sales than those via shops.  I get that selling via mom and pop model shops has brand value (it's a form of advertising) but I can also see why ceasing to sell via volume discounters, particularly those who compete in the 'manufacturing' space may also make sense.  

 

Great that they are now at least breaking even.  Next step is to get to an operating profit that supports the current valuation.  Step after that is the number that supports Phoenix's exit plan.  A  lot of strategy to develop to support those ambitions.

 

David

  • Like 2
  • Interesting/Thought-provoking 1
Link to post
Share on other sites

  • RMweb Gold

As I’ve said before, I think they could get away with raising prices without much affecting sales.  Comparing them with Bachmann is probably not really comparing exactly like for like, but I would suggest that, in terms of their ‘hi fi’ products, H are producing stuff comparable in quality and detail to B, and knocking it out at about 20% cheaper.  
 

The very basic level of market research and public perception I encounter talking to non-railway chums up the pub is that they regard RTR model railways as very expensive, an outraged ‘how much?!!’ being the usual reaction.  A Smokey Joe train set for the anklebiters at xmas (H’s core market) is usually an acceptable purchase, though; my sense is that H have got this right.  They should, of course they’ve been performing this stunt since the Rovex Black Princess set came out.  So the pub reaction to a Hornby coach at £35 is as above; when you point out that the same coach from Bachmann comes in at £54, it changes to ‘who (the …..) are Bachmann?’  £200+ for a loco is simply not believed, though of course there’s a battered HD 3-rail Montrose set in the attic and everyone knows those are worth thousands, aren’t they?
 

Model railways seem unique in the UK in this respect; the general public by and large only aware of Hornby and few are aware even that it’s geneticall really Tri-ang.  Talk about plastic kits and they all know Airfix of course, but most will know Tamiya and probably Revell as well.  The Squeeze is Polish and her family had a Piko train set in her childhood, but she was aware of Marklin, Fleichmann, and LGB even on her side of the Iron Curtain, and she was a girl!!!

 

The point I’m somewhat laboriously trying to make is that price rises for ‘hi fi’ items would have little or no effect on the ‘man in the pub’ perception of Hornby, and collectors and us will pay up if we ‘need’ the model (this is very much a first world definition of ‘need’!).  The extra income to H would come at no increase in overheads or production costs, and could be a big factor in them turning the corner properly.  
 

You can of course all blame me when H announce 20% across the board price increases later today, and no doubt you will, but if H have their current pricing right then B are overcharging and profiteering, but nobody mentions that!

  • Like 1
  • Agree 5
Link to post
Share on other sites

  • RMweb Gold

The thing with Hornby's pricing policy is that it doesn't always seem logical, those for new, and not-so-new tooling Pacifics wander about all over the place. 

 

The Thompsons (new tooling) and a/s Merchant Navies (fairly new tooling) are significantly cheaper and have higher spec mechanisms than the Battle of Britain Winston Churchill  (basically 2002 tooling, unless the rumours of a new set being produced to make the second run of Exeter are true).  Moreover, it's a number/name they have done twice before (albeit most recently in a train pack) even if you don't include the ex-Tri-ang ones!

 

At under £50 a go, I reckon Hornby's newer coaches are excellent value, but asking much the same for the ex-Dapol LMS Restaurant car is taking the proverbial! By contrast, under £40 for the superb new SR baggage van is way less than most of us expected to pay. Surely an interior moulding doesn't cost ten to fifteen quid.... 

 

Go figure.

 

John

  • Like 2
  • Agree 3
Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...