Hornby plc 2021 Interim Results

[JohnR]

Surprised not to see this discussed elsewhere.

 

First half this year shows a loss, but I think I'm right in saying that this is partly due to the cost of acquiring the rest of Oxford Group. 

 

https://wp-Hornby-2020.s3.eu-west-2.amazonaws.com/media/2021/11/Interim-2021-FINAL.pdf

[curlypaws]

It looks like the loss is before exceptional items - and the acquisition of the rest of Oxford Group seems to be one of the exceptional items. It appears that lack of stock due to problems in supply and production in China are the causes of Hornby slipping back into the red. Not entirely surprising when you see how many items are not in stock (something impacting many retailers across a wide variety of products).

[The Stationmaster]

The most important factors are the increase in the cost of sales (although revenue has in any event risen), increases in selling & marketing costs and in administrative expenses.  It gets interesting when one looks at the segment information in Note 4 because while the biggest loss will, I think,  inevitably be in the UK segment for all sorts of reasons the operating loss in the US segment is very large compared to the segment revenue and compares very badly with all other segments.

 

Another interesting area - which will have a minor impact on profitability - is the way in which direct sales have changed - possibly reflecting the impact of Covid in 2020?  Thus direct Hornby sales have dropped back from the substantial increase seen in 2020 (although still better than 2019); Scalextric has grown slightly; Airfix has held at last year's level (which was a big increase on 2019); Corgi has grown (but appears to yo-yo anyway - probably influenced by product?);  Humbrol has dropped substantially; 'other' has increased (but again appears to yo-yo).

[Black 5 Bear]

23 minutes ago, cbrooks122000 said:

I did wonder the other day how Hornby is making its money on trains at the moment. They have released a few models this year but not an excessive amount. 

They also have Airfix, Scalextric and Corgi sales.

[JohnR]

54 minutes ago, Black 5 Bear said:

They also have Airfix, Scalextric and Corgi sales.

 

Although they are now saying what proprtion of sales for each brand comes from UK and international sales, they dont yet break down their sales by brand. 

[Legend]

Interesting . I had expected them to peak last year , when they just made a profit then sink back as demand dropped post pandemic . The good news is that they seem to be maintaining sales . The downside is something that’s dogged them since Frank Martin , who had all the eggs in the Sanda Kan basket , lack of manufacturing capacity . I had expected them to make loss simply because they are not delivering enough new stuff . Look at the 2021 range items some of which are now deferred until 2023. . Add to this increase in shipping costs and raw materials , which is hitting everyone . 
 

Proportion of direct sales seems to have dropped back slightly . Could that be because they dropped their outlet at Swindon?  I might have expected the tier system which is basically a fall out with Hattons to have triggered an increase in direct sales at the expense of Hattons, where you can no longer preorder new Hornby items with certainty. That hasn’t happened, maybe people have simply moved to other retailers .  Interestingly Airfix seem to have been more successful driving direct sales up but without the fuss. 
 

Not sure what to make of the 2022 range launch. I expect it will be comparable to last year but they really need to underpin it with more manufacturing capacity , otherwise it’s just wishful thinking . 

Edited December 2, 2021 by Legend

[jonnyuk]

slightly off topic but is the lack of  manufacturing capacity forcing Hornby to move to second rate factories or trying to get more out of a  manufacturing slot by compromise on QA time?

i noticed in the TV show that the Airfix quick builds are made in the UK (at the end of the day there is no skillful assembly required), are regular Airfix products now produced in the UK?

i do wonder if a manufacturer at some point in the near future will bite the bullet and move back to the UK.

[Legend]

9 minutes ago, jonnyuk said:

slightly off topic but is the lack of  manufacturing capacity forcing Hornby to move to second rate factories or trying to get more out of a  manufacturing slot by compromise on QA time?

i noticed in the TV show that the Airfix quick builds are made in the UK (at the end of the day there is no skillful assembly required), are regular Airfix products now produced in the UK?

i do wonder if a manufacturer at some point in the near future will bite the bullet and move back to the UK.

Labour costs are such that I think bringing stuff back to UK is a long way off . However things that require less manual work and are highly automated (like Airfix pressings) might be possible . There’s a lot to be said for having a short supply chain that’s more flexible . 

[JohnR]

12 minutes ago, jonnyuk said:

slightly off topic but is the lack of  manufacturing capacity forcing Hornby to move to second rate factories or trying to get more out of a  manufacturing slot by compromise on QA time?

i noticed in the TV show that the Airfix quick builds are made in the UK (at the end of the day there is no skillful assembly required), are regular Airfix products now produced in the UK?

i do wonder if a manufacturer at some point in the near future will bite the bullet and move back to the UK.

 

The move back to the UK idea is never going to work for the detailed railway models that we are now used to. Maybe for wagons, as I believe Dapol do?

[blueeighties]

Maybe the constant changing of goalposts,and cheesing off of the dealer network, abysmal qc, and odd release choices, certainly diesel and electric, is finally starting to bite? 

Lots of other newer manufacturers have taken up the slack.

Edited December 2, 2021 by blueeighties
Typo

[adb968008]

2 hours ago, Legend said:

 

Proportion of direct sales seems to have dropped back slightly . Could that be because they dropped their outlet at Swindon?  I might have expected the tier system which is basically a fall out with Hattons to have triggered an increase in direct sales at the expense of Hattons, where you can no longer preorder new Hornby items with certainty. That hasn’t happened, maybe people have simply moved to other retailers .  Interestingly Airfix seem to have been more successful driving direct sales up but without the fuss. 
 

Not sure what to make of the 2022 range launch. I expect it will be comparable to last year but they really need to underpin it with more manufacturing capacity , otherwise it’s just wishful thinking . 

It could be that orders that moved from Hattons etc to their website havent actually been delivered yet, so are not showing.

 

However the emergence of the chart in the report is going to set expectation that if margin rises as a result of sales moving to direct, that it continues to move towards direct. They have afterall increased marketing and spent a lot on the website.

Edited December 2, 2021 by adb968008

[Les1952]

2 hours ago, JohnR said:

 

The move back to the UK idea is never going to work for the detailed railway models that we are now used to. Maybe for wagons, as I believe Dapol do?

 

I think a lot of the Dapol stuff now made in the UK never went to China in the first place....

 

Les

[Steamport Southport]

14 minutes ago, cbrooks122000 said:

A lot of people go on about the UK is too expensive to make anything, if you say it enough to yourself then you will believe it. Yes the manual operations will be more expensive, but it is not that they are making millions of the things. Communicating with a remote manufacturing operation can easily eat lots of money. The bodies are probably make by a machine as will be the chassis, probably that machine would be the same if it was in China or the UK. In my last job we bought a load of PCBs from China because they were cheap, then I went to an exhibition in this country and found that as they all use the same machinery a UK company could match them for price. A big issue with Hornby is that with their locomotives there is no standard, go look at the number of wheel sets you can get for say a Duchess, generally they are the same set of wheels just with a different part number, so that duplication will cost money. Just look at the number of motors they use, if they standardised on set types they could save money and probably get them cheaper. I think you will find a set of A4 conrods will fit a Duchess and vice versa but they have different part numbers.  I noticed on the Tornado locos they even use different size conrod screws, you could say that the smaller diameter screws will save them money, but again I doubt they make enough of them to save any money, if they do it is probably lost in the added complication of specifying different parts. Trouble is, on the model railway side it is becoming a specialised market where they seem to think increasing the price, the market will always pay. Eventually, they will reach a price where people won't pay it anymore, then they will really be in trouble.

 

Okay.

 

I would really want to work in a factory making Hornby models. I've worked on production lines before so I'm skilled.

 

I want £15 an hour for a forty hour week*. Deal? That's the going rate I'm afraid. £30,000 before taxes is not a huge amount for a family man to earn in a year. Some get that much in benefits.

 

You only need about another 500 people to join me and you can make Hornby models in the UK again.

 

That's £300,000 a week in wages. 50 weeks a year. £15 million a year on wages alone.

 

Production is not coming back to the UK. It's gone for good. The days of being able to pay hundreds of middle aged women a pittance to make Hornby models are gone thankfully. That's what killed off the original Hornby, spiralling wage costs due to the fact you couldn't pay women less anymore bankrupted the company.

 

Some photos of the old Hornby here. Most of those factories are long gone and so are the jobs. They aren't coming back.

 

https://www.liverpoolecho.co.uk/news/nostalgia/gallery/pictures-liverpool-factories-through-years-8175975

 

 

*National Living Wage is getting on for £11 an hour for an unskilled worker. 

 

 

 

Jason

[mdvle]

16 hours ago, The Stationmaster said:

 It gets interesting when one looks at the segment information in Note 4 because while the biggest loss will, I think,  inevitably be in the UK segment for all sorts of reasons the operating loss in the US segment is very large compared to the segment revenue and compares very badly with all other segments.

 

An interesting figure - Hornby essentially sells no model trains in the US, I doubt they offer paint, which means they are losing money on Corgi/Airfix/Scalextric and whatever else in in "other"

 

 

[mdvle]

4 hours ago, cbrooks122000 said:

A lot of people go on about the UK is too expensive to make anything, if you say it enough to yourself then you will believe it.

 

Not specific to the UK - the western world where high labour costs exist simply can't compete on the making of things that can't be automated or are special enough that those costs can be absorbed into the selling price.

 

4 hours ago, cbrooks122000 said:

Yes the manual operations will be more expensive, but it is not that they are making millions of the things.

 

Ironically, this is part of the problem - make millions and then investing in automation changes the equation...

 

4 hours ago, cbrooks122000 said:

Communicating with a remote manufacturing operation can easily eat lots of money.

 

Not really.

 

4 hours ago, cbrooks122000 said:

The bodies are probably make by a machine as will be the chassis, probably that machine would be the same if it was in China or the UK.

 

The injection molding yes, but the parts prep / painting / pad printing / assembly are primarily done manually and this is what makes shifting to a high wage location like the US or Western Europe non-feasible.

 

And lets be clear - we aren't talking about "returning" the making of model trains because the modern high detail model train with all its detail parts was never made anywhere but China where the labour costs were affordable.

 

4 hours ago, cbrooks122000 said:

A big issue with Hornby is that with their locomotives there is no standard, go look at the number of wheel sets you can get for say a Duchess, generally they are the same set of wheels just with a different part number, so that duplication will cost money. Just look at the number of motors they use, if they standardised on set types they could save money and probably get them cheaper. I think you will find a set of A4 conrods will fit a Duchess and vice versa but they have different part numbers. 

 

I will defer to experts on here, but my guess is that your assumption of standardized parts on the real locos is false - and today we expect our models to be accurate and not some generic thing made up of compromised parts.

[adb968008]

2 hours ago, mdvle said:

And lets be clear - we aren't talking about "returning" the making of model trains because the modern high detail model train with all its detail parts was never made anywhere but China where the labour costs were affordable.

OOworks have made a successful business out of rtr high detail (indeed detail that surpasses China) using Brass etc.

Their price is not off the planet either, c£300… the Dublo Duchess was £300 and i’d say OOWorks product is the better detailed quality model.

 

https://ooworks.co.uk
 

Unless I wasnt paying attention fully, the recent Hornby episode showed them making Airfix kits in the UK, though it seemed as if they were giving the manufacturer a tough ride, i’m sure that’d fly in China.

Dapol is expanding in the UK, its not all doom and gloom.

 

I think the future will see more activities like Rails, and Silverfox… 3D rtr, it can deal with bespoke smaller runs of niche items, with China increasingly a raw materials supplier and modellers taking a bigger role in self assembly, supported by a flat line range of toolings made post 2000 by major manufacturers who will largely run out of suitable prototypes to tool up and sell in sufficient volume to make a return.

 

 

 

 

Edited December 3, 2021 by adb968008

[Hal Nail]

8 hours ago, cbrooks122000 said:

A lot of people go on about the UK is too expensive to make anything, if you say it enough to yourself then you will believe it. 

Could equally point out that there is a widespread undercurrent that the UK is just better than everywhere else.

 

The trick is finding the right balance between supporting ourselves/economy while not flogging a dead horse.

[JohnR]

4 hours ago, mdvle said:

 

An interesting figure - Hornby essentially sells no model trains in the US, I doubt they offer paint, which means they are losing money on Corgi/Airfix/Scalextric and whatever else in in "other"

 

 

 

Dont they sell the Rivarossi stuff in the US? Didnt the Big Boy come out recently?

[Georgeconna]

Wonder how much Brexit affected the drop, Personally my UK ordering for Hobby Related materials has dropped to almost nothing now and with shipping high from Europe nothing from there either.

[SamThomas]

13 hours ago, Legend said:

 There’s a lot to be said for having a short supply chain that’s more flexible . 

Here's an idea - use up some empty space behind some offices & produce models there.

 

Oh, sorry, already tried that.

[SamThomas]

9 hours ago, Steamport Southport said:

 

Okay.

 

I would really want to work in a factory making Hornby models. I've worked on production lines before so I'm skilled.

 

I want £15 an hour for a forty hour week*. Deal? That's the going rate I'm afraid. £30,000 before taxes is not a huge amount for a family man to earn in a year. Some get that much in benefits.

 

You only need about another 500 people to join me and you can make Hornby models in the UK again.

 

That's £300,000 a week in wages. 50 weeks a year. £15 million a year on wages alone.

 

Production is not coming back to the UK. It's gone for good. The days of being able to pay hundreds of middle aged women a pittance to make Hornby models are gone thankfully. That's what killed off the original Hornby, spiralling wage costs due to the fact you couldn't pay women less anymore bankrupted the company.

 

Some photos of the old Hornby here. Most of those factories are long gone and so are the jobs. They aren't coming back.

 

https://www.liverpoolecho.co.uk/news/nostalgia/gallery/pictures-liverpool-factories-through-years-8175975

 

 

*National Living Wage is getting on for £11 an hour for an unskilled worker. 

 

 

 

Jason

Bit sexist arn't we ? Please don't talk about my late mother like that (as it happens she actually worked at Triang Westwood).

 

There is an ample potential labour force in the Thanet area willing to work for far less than your quoted £15/hour.

 

I don't see the point you are trying to make quoting Hornby Liverpool - we are talking Hornby Margate here - the Hornby that has an empty factory behinf the offices.

[SamThomas]

1 hour ago, JohnR said:

 

Dont they sell the Rivarossi stuff in the US? Didnt the Big Boy come out recently?

It's often overlooked** that Hornby own & produce Rivarossi. Jouef, Lima & Electrotren HO Models. The older build of these were pretty poor & most of the locomotives were "weedy", including the Big Boy of that era.

Quality wise now - up there with Roco & similar brands.

 

*/*/ Not really surprising here as RMWeb is predominatly UK.

[SamThomas]

9 minutes ago, cbrooks122000 said:

When did they try that?

My comment was tongue in cheek.

[JohnR]

12 minutes ago, SamThomas said:

I don't see the point you are trying to make quoting Hornby Liverpool - we are talking Hornby Margate here - the Hornby that has an empty factory behinf the offices.

 

Hornby dont have an empty factory behind their offices. Their old factory was sold, and their current offices are rented from the owners. 

 

I also dont think £15 an hour is unreasonable wage for a skilled factory worker. 

[SamThomas]

5 minutes ago, cbrooks122000 said:

I used to live in Kent, Thanet was always a low cost area, although recently when I went down there there did seem to be a lot more industry.

There certainly is a lot more industry, mostly concentrated near Manston Airport (currently closed).

 

Thanet is changing, property prices are rising, partly because more people are working from home thesedays & the fact that Margate is 80 minutes or so from St Pancras & the new Thanet Parkway Station being built will cut another 15 minutes off that. Line/signal improvements to Ashord could shave a bit more off to get Thanet within that magic 60minute communte to London.

 

The "transient" workforce will remain as they tend to live in a concentrated area.

 

Hornby could certainly bring production back to Margate - just think how quickly alterations could be made if production was back in house & part of the same house. It just needs some serious investment - the money they paid for Oxford would have been a good start.

 

Someone mentioned that "wagons are easier to produce than locomotives" - well that could be something to look at - limited production of rolling stock - if it fails then not too much of a loss, if it suceeds then as experience is gained then produce locomotives, after all, the design is done in Margate.