Hornby's financial updates to the Stock Market

[dibber25]

Thank you Chris I think that post is extremely intelligent and pretty much says it all.

 

We do indeed live in interesting times!  I still want to see such as the original Merchant Navy available with Hornby's recent high standard of RTR modelling for sale this year. Also would like to see the Bachmann LBSC H2 Atlantic, ...   but have to be patient.  I fully agree that buyers like myself at 65yrs old are becoming marginally thinner on the ground, as well as the over-supplied s/h market and general levels of spending affecting new model viability. If I were to attempt to produce models now I would have to have a very good sense of production costs in Asia, probably via a 3rd-party like Heljan or Bachmann, I have no idea about Hornby's current relationship with its various Asian factories, and I think that might be part of calculations about the value of the brand.

 

I am also rather surprised that Hornby as I understand it pays for its manufacturing in US dollars, but that is all beyond the purview of we onlookers.

I understand that ALL trading with China is done in US dollars - certainly in the model railway trade. The whole operation is beset with problems - the older demographic of modellers which means manufacturers looking to a shrinking market, the Chinese price increases, the fact that there's smaller demand for the types of models now being made - you don't need as many J50s as you do A4s, but the tooling is newer so it cost more than the A4 tooling, so the unit cost of the J50 creeps nearer to the unit cost of the A4......and so on. I know of manufacturers who have thought long and hard about whether to do a particular model because of doubts about whether the market will stand the price - and even at that high price, the margin is wafer thin. Small wonder that some smaller firms are working on a pre-order arrangement where they know that every model they produce has a customer waiting. Hornby - and equally importantly Hornby's retailers - don't have that luxury. They have to stand the cost of stock that may sit unsold for many months. (CJL)

[Ian J.]

Bearing in mind the smaller market that the UK is, and the added fuel of the non-standard (by worldwide measures) scale/gauge combinations (be it O, OO, or N) which that market uses, I'm surprised that major manufacturers have been able to keep things going as long as they have. Maybe Hornby's troubles are a sign of a future where pre-ordering and short runs becomes the norm. Also, we can't forget that 3D printing will continue to develop, and if it goes far enough and high enough in quality, the idea of making many of a given prototype on a mass manufacturing system could simply become completely cost prohibitive, regardless of prototype.

[DJM Dave]

Must be some logic to my post as one of the 'likes' comes from DJM ! the same DJM doing a class 71 ?

This is the same one indeed. However my model is already bought and paid for by crowd sourcing, not a model that is relying on shops to buy and sell on at a higher RRP.

Mine is also cheaper and I hope will be judged the better of the 2.

 

So yes, I ticked agree because I don't think the market is big enough for 2 models of the same small class from 2 manufacturers, especially when 1 manufacturer has already sold and been paid for in full for his models.

 

hope this clarifies.

Cheers

Dave

[Melly]

I sense a increase the general frustration against and a malaise amongst the modellers about the manufacturers.  The fine detail models are great but at what cost for ££££££ and longevity.  Can't get my Hornby 56 / 60's to run well on Lenz system and decoders and the rubber O-rings on the sprung buffers have all perished and the buffers are now glued.  Bachy sprung buffers may be crude but have longevity.  That said having ordered some spare wheelsets from Barwell for Locos that, despite countless attempts to reset the back-to-back wobble like crazy, they sent 47 instead of 37 wheels and then when the alleged correct ones arrived they were a significantly smaller diameter (14.2 not 15mm !!)  Well at least I could use them for centre-axles and ameliorate the pivoting effect of said centre axle being too low.  But at least I got the spares; there are so many parts on models these days that when things get broken often the only option is to buy another loco to used as a source of spares - now that's just bananas.  Now not for one minute am I saying we go back to the basics of Lima but for value for money something better detailed but without so many bits that can and do fall off (and that doesn't include when in transit via mail order) would suit me just fine.  Then I don't mind the few quid I spend on laser glaze etc.

 

Personally, I've been let down by too many Red box products so no longer buy and wistfully hope that other manufacturers eventually pick up some of the classes I want.  Or maybe I've just had 10 lemons :-(

[Ozexpatriate]

 

My fear is we'll see our market follow the US model which is based on manufacturing to pre-order. Rapido are already doing it here, that de-risks their production significantly but I really do not like that model.

Fear?  It's not that bad - but it does presume you can 'trust' a manufacturer to produce a quality product, something Hornby exploded with the 'design clever' ethos and has now worked very hard to reinstate (not quite fully for me personally by the way).

 

For me pre-ordering (if it is an item I want) is a necessity - either for US items, because that is the way they are offered, or for UK items, because I cannot walk into a model shop to make a first-hand evaluation. 

 

At the end of the day, if faced with the choice of pre-ordering, or not purchasing RtR, what decision would you come to?

 

Small wonder that some smaller firms are working on a pre-order arrangement where they know that every model they produce has a customer waiting. Hornby - and equally importantly Hornby's retailers - don't have that luxury. They have to stand the cost of stock that may sit unsold for many months. 

Both the retailers and Hornby can indeed function where a material part of their business is based on pre-ordering. The hobby shop industry in the US is not dying.

 

Yes, the retailers need to have other items in their shops - track, scenery, controllers, train sets, consignment items, paint, glue, brass rodding, balsa, etc but empirically a retail business that is heavily reliant on pre-ordering functions quite well. The predictability is healthy for everyone. Consumers can save up and retailers and suppliers can count on future revenue. It's not all bad.

 

It does hinge on being able to trust the reputation of the supplier.

[jjb1970]

I can see the attractions of the pre-order system and it certainly helps the manufacturers. However I really don't like committing to something I haven't seen and which not be delivered for many months or even years. If you trust the manufacturer then I can see that buying unseen is less of an issue but I still don't like the idea of committing to stuff and having lots of purchase commitments hanging over my head with no idea when the metaphorical cheques will be cashed. And if you have to pay a deposit up front (and in so doing de-risk some of the suppliers cash flow issues as well as de-risking production numbers and sales) then it all gets a bit much for me. I did buy a APT-E because it is a train I never expected to see in model form and possibly my all time favourite train but it'll take something very special to make me do it again. If the UK does go down the US road it will not make me stop buying models but I think I'd buy less. If that model was extended to paying deposits up front a year ahead of delivery as being the norm then I suspect I'd make a decision to be happy with what models I have now.

[bike2steam]

.Sad it might be, if Hornby is lost, or disappears in its current form to re-emerge in a new incarnation at some point,

That's the best option, but also include;- a purely model railway business run by serious enthusiasts that can concentrate on the hobby with no other distractions, diversification may be good in certain circumstances, but there's always the risk of taking your eye off the game.

[Willie Whizz]

The fact Trains 4u is a retailer might have something to do with it.

 

Anecdotal evidence from one trader may well be usefully 'indicative', but it can hardly be 'conclusive' - there are too many potential variables for that, including the trader's own purchasing policies; after all, if the trader doesn't have it in stock in the first place then no-one could buy it from them even if they wanted to.

 

I reiterate: the only people who can know the reality of the profitability of individual Hornby Group brands is Hornby themselves.  The definitive information will (or should!) be in their internal Management Accounts, typically prepared monthly, which are (for a business of this size and nature) not generally circulated outside a comparatively small number of people within the Company who "need to know"  - plus, perhaps, their Bankers if the latter had become sufficiently uncertain of their lending being repaid that they stipulated regular exhibition of the Management Accounts as a condition of ongoing support.  Trust me, I used to do that for a living ...

 

That said, mind you, I'm well-impressed that Trains 4U can produce their detailed statistics - far too many small and small-to-medium business rely on gut feeling and a 'wing and a prayer' when it comes to this kind of thing ....and then wonder where their business went while they weren't looking.  Oh, the tales I could have told back then!

[Ozexpatriate]

If that model was extended to paying deposits up front a year ahead of delivery as being the norm then I suspect I'd make a decision to be happy with what models I have now.

Museum shops like Locomotion are the only place where I can recall paying a deposit. I am anticipating the Stirling Single. I wasn't comfortable paying up the whole amount in advance.

 

Payment on shipment is much more preferable.

 

And disappointments can and do happen: (GWR Star) 

[Clearwater]

 

I reiterate: the only people who can know the reality of the profitability of individual Hornby Group brands is Hornby themselves.  The definitive information will (or should!) be in their internal Management Accounts, typically prepared monthly, which are (for a business of this size and nature) not generally circulated outside a comparatively small number of people within the Company who "need to know"  - plus, perhaps, their Bankers if the latter had become sufficiently uncertain of their lending being repaid that they stipulated regular exhibition of the Management Accounts as a condition of ongoing support.  Trust me, I used to do that for a living ...

 !

Given Hornby's chequered financial history, I would be surprised if their lending bankers haven't been asking for very detailed information for a while (like you I've done that and that's what I'd have asked for when I've had borrowers with poor records of meeting covenants) Equally, if I were their broker, I would also have be asking for the same info as I'd be looking for a way to plug the cash flow gap and get the loan repaid. Lastly, if I were private equity, do also want the same info to work out if the sum of the parts of the business is worth more than the current market price. The CFO had better hope he's got his house in order to be able to provide that data...

 

David

[Willie Whizz]

Running out of cash.

 

A profitable company can still go out of business, if it runs out of working capital or cash. 

 

The final straw is commonly the inability of the Company to pay the weekly or monthly wages bill, because the Bank will not extend the overdraft facility any further.  If your staff are not being paid, they will not work; it's not like being self-employed, or doing it 'for love'.

 

Therefore the final collapse of a business is usually blamed on the Bank - not least by the Directors of the failed company.  But what is often forgotten - or never admitted by the Directors - is that by that point the overdraft is already typically 20-30% or more beyond the point it is supposed to be (i.e. way beyond the level of security, or beyond the formula agreed in banking covenants), so the Bank sees itself as having reached a point they'd just be throwing good money after bad.  Banks don't enjoy seeing their Customers go bust, and have nothing to gain from it and often much to lose; but they have shareholders to satisfy too, and there comes a point where assurances of good intent and future glories if the Bank will only be patient and allow (yet) a little more money simply no longer ring true ...

[The Nth Degree]

Fascinating reading through this thread, and a little nerve-wracking considering I've just started my own RTR company (gulp...).

 

The only thing stopping me going greyer than I already am is that it seems Hornby PLC is the company in trouble, not necessarily the businesses within it. The PLC has spent a lot of money implementing its new data analysis software, reorganising its supply chain and distribution network - the infrastructure and logistics of the group as a whole. The individual businesses within the group seem to be trading OKish (baring the ERP mess), except maybe one.

 

I think I had found a legitimate reference to a large loss in one of the businesses, but between cooking dinner and putting the little fella to bed I've lost it. I was reading about how Hornby PLC was hoping to revitalise traditional toys by sticking iPads onto them and giving them blogs and apps for the yoof market. They srarted the process with Scalextric, and had made a significant investment, but the financial results were awful, being well below expectations, especially in the US where they hoped to make significant sales. That was as far as I got up to, but there was quite a bit more to read. It was by a US tech/toy analyst written in early January. I'll carry on looking, but if anyone finds it can they post a link here perhaps?

[rob D2]

Please send the class 60 moulds to bar well , if your going £&@@ up....

['CHARD]

If the price falls below 32p I'm definitely buying 

 

I'm only going to buy when available at 18.83.....

[Ozexpatriate]

I was reading about how Hornby PLC was hoping to revitalise traditional toys by sticking iPads onto them and giving them blogs and apps for the yoof market. They srarted the process with Scalextric, and had made a significant investment, but the financial results were awful, being well below expectations, especially in the US where they hoped to make significant sales.

This product for the ARC ONE system might be the one.  Also described here.  It is apparently available.

 

There are other sets too.

 

The newest release are Bluetooth wireless controllers for this system called ARC AIR.

Edited February 12, 2016 by Ozexpatriate

[jetmorgan]

I'm only going to buy when available at 18.83.....

Buying at 83 minutes past 6pm??? what an odd time of the day to buy them!!!

[Legend]

Really good piece in MREmag this morning. I think that about sums it up for me.

[Guest]

This product for the ARC ONE system might be the one.  Also described here.  It is apparently available.

They did much the same a decade ago with Scalextric Sportworld except it connected to a PC rather than your phone. It was very very impressive but the marketing was a disaster. I defy anyone to look at the original marketing material and figure out what it actually did.

[papagolfjuliet]

I sense a increase the general frustration against and a malaise amongst the modellers about the manufacturers.  The fine detail models are great but at what cost for ££££££ and longevity. 

 

It's not just cost but inconsistency of cost. For example, a finely detailed main range blue spot fish van to modern standards costs significantly less than a basic, freelance Railroad four wheel coach from a forty year old tooling. You can pick up two good quality Skaledale resin straight platforms for around the same price as two of the 1960s vintage plastic straight platforms with the dirty great moulding nipple in the middle. When products for kids cost around the same as products for modellers something is very wrong somewhere.

[JSpencer]

It's not just cost but inconsistency of cost. For example, a finely detailed main range blue spot fish van to modern standards costs significantly less than a basic, freelance Railroad four wheel coach from a forty year old tooling. You can pick up two good quality Skaledale resin straight platforms for around the same price as two of the 1960s vintage plastic straight platforms with the dirty great moulding nipple in the middle. When products for kids cost around the same as products for modellers something is very wrong somewhere.

 

I strongly agree with this. How can they expect to sell the very old 4-wheel coach with no more than 7 parts to assemble for £15 is beyond me.

Also many of the railroad items in concession shop street cost more than their better Bachmann equivalents in Model shop street.

 

I am hardly going to buy the very old Lima tooling class 42 at £80 in WHSmiths when I can get the far better Bachmann/Mainline version for the same or the vastly superior class 43 for a small % more.

 

Edit - I would also add that I never saw the point of concessions except as confusing and badly managed PR exercise with your traditional B2B customers.

Edited February 12, 2016 by JSpencer

[DonnyRailMan]

What Hornby need is someone going and shaking up the management big style at

Hornby ,someone like Alan Sugar , Mary Portas.

[DJM Dave]

Having watched the development of non slot car, car racing from about 7 years ago, I predicted then, and even more so now that slot car racing, with a slotted track is dead!

 

I did suggest this to Hornby directly about 4/5 years ago when I was demo'd a racing 'game' that worked without a slot in the track and used on board power (rechargeable batteries).

The system used controllers which in fact were apps downloaded from the manufacturers web site, allowing the angle of the phone, to control the cars, overtake, turn, speed up and slow down.

 

You could control the car from another room if you wanted by using the screen display.

 

What made this really special was that you could, on certain modes sustain 'damage' to your car which would alter its driving characteristics somewhat, but could be 'fixed' using a quick pit stop.

 

Also, for those that found that tedious, you could have wars between the cars and electronically include guns, power up features randomly found on the 'electronic track' on your display.

You could also play against anyone in the world via the Internet for world leagues etc.

 

All very technical, but the way forward, especially with the tech savvy kids of today.

 

I never got any feedback from Hornby though. Lol

Cheers

Dave

[Quarryscapes]

Having watched the development of non slot car, car racing from about 7 years ago, I predicted then, and even more so now that slot car racing, with a slotted track is dead!

 

I did suggest this to Hornby directly about 4/5 years ago when I was demo'd a racing 'game' that worked without a slot in the track and used on board power (rechargeable batteries).

The system used controllers which in fact were apps downloaded from the manufacturers web site, allowing the angle of the phone, to control the cars, overtake, turn, speed up and slow down.

 

You could control the car from another room if you wanted by using the screen display.

 

What made this really special was that you could, on certain modes sustain 'damage' to your car which would alter its driving characteristics somewhat, but could be 'fixed' using a quick pit stop.

 

Also, for those that found that tedious, you could have wars between the cars and electronically include guns, power up features randomly found on the 'electronic track' on your display.

You could also play against anyone in the world via the Internet for world leagues etc.

 

All very technical, but the way forward, especially with the tech savvy kids of today.

 

I never got any feedback from Hornby though. Lol

Cheers

Dave

 

This meme has never been more apt - 

 

[polybear]

 But at least I got the spares; there are so many parts on models these days that when things get broken often the only option is to buy another loco to used as a source of spares - now that's just bananas. 

Absolutely spot-on.  If I'd spent £150 on a loco that became useless but for a small replacement part I'd be less than happy

 

Museum shops like Locomotion are the only place where I can recall paying a deposit. I am anticipating the Stirling Single. I wasn't comfortable paying up the whole amount in advance.

 

Payment on shipment is much more preferable.

 

And disappointments can and do happen: (GWR Star) 

Simply pay using a credit card, then you're protected in the event of non-delivery since you can claim the money back again.

 

I'm only going to buy when available at 18.83.....

Surely 16.2 would make more sense?

Ok, serious incoming = I'm off.....

 

p.s. currently 23.50p at present, having gained 1/2p today.  A long way down from the 109p 52-week high.

[alfsboy]

Frankly I would say to all the self informed gloaters .Be careful what you wish for .If Hornby dropped its train line than the hobby dies unless some takes over the lot .It  is the mainframe of British model trains and all the others ride on its back cherry picking  choice must haves for old farts like me .My grandsons train set is Hornby ,not Bachmann ,DJM ,Dapol or shop commissions. Pull that rug away and the hobby dies .Its a choke point .On a smaller level Markits and Gibson wheels ,Mashima motors and High level have no easy replacement  .i think we need Hornby in toy shops more than Hornby group need us.