Hornby's financial updates to the Stock Market

[Pacific231G]

This is something Henry Ford realised over a century ago; he realised that he would have to pay reasonable wages in order to have a mass market for his products. I believe George Soros reiterated the point fairly recently.

I think the figures for the USA are that, despite a considerable increase in per capita GDP, the great majority of the population have had no increase in their real personal prosperity for something like forty years; every penny of the increased national wealth has gone to the top few percent. I don't think the figures for Britain have been very different. At the same time social mobility, which was never that good, has almost disappeared so even the hope that your children might do better than you has largely disappeared.

 

Advances in technology have masked this to a large extent so we have far better phones, cars, televisions, computers and toy trains than we had forty years ago but the fundamental things like the size of our houses and gardens, how much personal attention we get from people like GPs, nurses or other public services and above all how much leisure time we have to enjoy our lives have deteriorated rather than getting better.

 

Most people who've thought about it don't really believe that this situation is sustainable but, however much you support say social mobility in general, if you can afford to send your own kids to a top public school that almost guarantees their entry into the upper echelons of society that's what you're going to do;  if you're the chief executive of a health trust or a PLC of course you're going to think that you're worth more than you're being paid, and if you can buy a shirt for a few quid because the people in Bangladesh or wherever who made it are being paid a pittance you're probably going to do that too. 

Edited March 10, 2016 by Pacific231G

[Fenman]

This is something Henry Ford realised over a century ago; he realised that he would have to pay reasonable wages in order to have a mass market for his products. I believe George Soros reiterated the point fairly recently.

 

I recall a trade union leader making a related point a while back, in negotiations (with the managers of a factory mass producing cars) about replacing workers with robots.

 

Pointing to the number of the manufacturer's products sitting in the factory workers' car park, he asked how many cars the robots were going to buy.

 

Paul

[Talltim]

Rapido have recently said that some paint schemes of their RDC, for which preorders closed for this week, will probably not get made as there hasn't been enough interest*. However overall the uptake has been well above the number required to make production viable. An example of preorders de-risking the process, but at least it keeps the manufacturer financially viable.

*Mainly the ones I'd be interested in

[robmcg]

I vaguely recall that this thread began several millennia ago as a discussion of Hornby's financial position.

 

Maybe everyone has given up hope of that company, or are they just getting bored waiting for further news later this month as to whether they have negotiated some sort of bail-out with Barclays, or whether the bank will finally have had enough, and will decide to pull the plug?

 

Discussion of other topics may well be fascinating to the particpants, but is totally irrelevant to the question in hand.

 

Will they?  Won't they.  Maybe we have only a few more weeks to wait for the answer.

 

I confess I too have asked this very question when ordering products from Hornby via their website in the last month.

 

I presume that if Barclays don't see a viable business plan and don't like the current debt, Hornby will then be 'under management'?

[Pacific231G]

Interesting to see Hornby's latest move us to start promoting their international range over here.

I never really understood why they didn't do that as soon as they acquired those brands.

 

A couple of years ago I bought a very nice ABJ autorail in SNCF livery for a very attractive price at Warley. It was sold under the Spanish Electrotren brand (it was a type of railcar also used by RENFE) by a trader who specialised in European models but, unless you knew, you'd have had no idea that it was now a Hornby brand from the company whose own stand was practically next door. However, at the same show I bought from the Bachman stand an SNCF 140C from their Liliput brand for an even more attractive price but this was being sold alongside British OO and I think American HO rolling stock 

 

Right now I'm looking at a Rivarossi catalogue from 1979 that has on successive pages of train sets of "great name trains" The DB "Loreley Express, the FS Ligure TEE, the FS Vesuvio express, the SNCF Fleche d'Or, the LMS "Royal Scott" (in H0), the NYC 20th Century Limited (in three versions) and the Santa Fe "Super Chief" amongst several others .

These were all nominally H0 scale though in those days Rivarossi still regarded H0 as about 1:80 scale for European trains and 1:87 for US prototypes.

 

Quite apart from the fairly large number of people who model European railways in H0 an awful lot of people who buy model trains just want to run those they like around some kind of circuit and would quite happily have a Big Boy and a train of American freight cars running alongside the Orient Express or the Flying Scotsman. Though those of us who prefer to model the whole railway might look askance at this, there's actually nothing wrong with it if it's the trains themselves that are the interest. It is after all what our model engineering colleagues have always done and nobody thinks twice about an American Shay sharing the local Model Engineering Club's track with a GWR King.

Edited March 10, 2016 by Pacific231G

[Ravenser]

I think the figures for the USA are that, despite a considerable increase in per capita GDP, the great majority of the population have had no increase in their real personal prosperity for something like forty years; every penny of the increased national wealth has gone to the top few percent. I don't think the figures for Britain have been very different. At the same time social mobility, which was never that good, has almost disappeared so even the hope that your children might do better than you has largely disappeared.

 

Advances in technology have masked this to a large extent so we have far better phones, cars, televisions, computers and toy trains than we had forty years ago but the fundamental things like the size of our houses and gardens, how much personal attention we get from people like GPs, nurses or other public services and above all how much leisure time we have to enjoy our lives have deteriorated rather than getting better.

 

 

 

Real incomes in Britain kept growing almost until the crash, so the British figures are quite different. The big recent factor in Britain is a rapidly growing population (largely through immigration) coupled with low unemployment. The growth in the economy goes to supporting a larger population with more in work (Which is what some folk argued would be a "better way" during the 80s when real wages rose sharply and productivity rose sharply to pay for them - with greatly increased unemployment - be careful what you wish for, you just might get it)

 

There is a real benefit from advancing technology , which is a hidden boost to living standards, but housing standards are largely determined by the rising population and our lamentable failure to build houses. If the population fell - which is partly independent of GDP - then housing would cease to be an issue (I'm not saying that there wouldn't be problems if it did - no-one wants a re-run of the Black Death, even though bubonic plague significantly raised living standards for most people - until they caught it)

 

Meanwhile I'm very much considering buying a J50 next weekend - in case that's the only batch ever made . Maybe we'll see the Q6 and maybe we won't, the same goes for the King, and the chances that the B12 will happen are probably under 50%

Edited March 10, 2016 by Ravenser

[Joseph_Pestell]

I never really understood why they didn't do that as soon as they acquired those brands.

 

 

 

 

Still only a very lacklustre effort with very few items listed on the website.

 

What little there is shows what a complete muddle they have got into with their brand management.

[Fenman]

...the chances that the B12 will happen are probably under 50%

How can you *possibly* have quantified this with sufficient confidence to publish it (unless you are secretly a member of Hornby's senior management team)?

 

Paul

[Ravenser]

How can you *possibly* have quantified this with sufficient confidence to publish it (unless you are secretly a member of Hornby's senior management team)?

 

Paul

 

We are currently wondering if the bank will pull the plug by the end of this month. The chances that Hornby will avoid breaching their banking covenants until mid 2017? - which is what will be needed to see the B12 on containers and on a ship?

 

Anybody feel that's better than a 50:50 bet at the moment? 

[Andy Y]

 

Anybody feel that's better than a 50:50 bet at the moment? 

 

I do.

 

However I could foresee restrictions on product development/investment which hasn't yet had its most significant up-front expenditure which could mean your 50:50 may be right for different reasons.

[APOLLO]

Certainly the outcome will mean change within the company which will have big implications - just what the implications / changes will be is the $64million question.

 

Brit15

[Jenny Emily]

It's a shame, because Hornby seem to have really started to pull through the bad patch in terms of supply of models, and value for money.

 

I find myself buying far more Hornby in the last 12 months than I ever did, and for the first time far more items than I buy from Bachmann which used to be my staple. I bought the J50 because it offered superb value for money, along with a couple of Sentinals for the same reason. I'm considering buying all three of the forthcoming Pecketts when (if) they arrive for the same reason. At the same time, the prices of Bachmann's stuff has risen to the point where I fear there is very little that I might buy.

 

Along with the Collectors' club Terriers at a staggering superb value for money at £35 each, I was really feeling that Hornby were making a really good attempt to get people buying their stuff.

[Pacific231G]

Still only a very lacklustre effort with very few items listed on the website.

 

What little there is shows what a complete muddle they have got into with their brand management.

It seems almost a random selection, maybe of items that didn't sell well in their "home" markets. It appears very incoherent though.

[davknigh]

I do.

 

However I could foresee restrictions on product development/investment which hasn't yet had its most significant up-front expenditure which could mean your 50:50 may be right for different reasons.

So that's a good thing for the Peckett?

 

Cheers,

 

David

[Ozexpatriate]

It's a shame, because Hornby seem to have really started to pull through the bad patch in terms of supply of models, and value for money.

Presuming Hornby PLC continues, I wouldn't be surprised by some form of restructuring, re-prioritization of product lines and increased prices.

The first thing they need to do is stop undercutting retailers.

Edited March 11, 2016 by Ozexpatriate

[robmcg]

Presuming Hornby PLC continues, I wouldn't be surprised by some form of restructuring, re-prioritization of product lines and increased prices.

The first thing they need to do is stop undercutting retailers.

 

Hornby not only offer better prices than most retailers can, with member's club discount especially, they also direct-sell to web buyers long before retailers receive stock.

 

They also offer free delivery to overseas addresses like mine in NZ for orders over UKP125.

 

The mix of direct selling and hurting retailers suggests that they do not see much value in supporting conventional bricks-and-mortar... or maybe the state of the books is such that the accountants say they have no choice, and that they think web-sales are the future. What will eventuate after the expiration of current banking arrangements will show us what if any plan Hornby has for selling-style. I suspect they will continue to undermine conventional retailers.

 

The spectre of soon-to-be-increased prices, or lure, depending on your point-of-view, must surely be a factor in Hornby's and Barclay's views of future trading. Already we have retail prices over UKP150 for some UK outline steam models and I wouldn't want to bet on the demand for volume sales at that level, thus perhaps a greater distinction between top-end and cheaper more-robust models will be part of a re-organisation,    but I'm just flying kites here.

 

typo edit

Edited March 11, 2016 by robmcg

[Joseph_Pestell]

There is probably some merit for Hornby in a strategy of direct selling, particularly of high-end, low volume products.

 

There is equally a lot of merit in having a retailer network.

 

What will most certainly not work is a muddled strategy of trying to have both, at least not under the same brand.

[JSpencer]

There is probably some merit for Hornby in a strategy of direct selling, particularly of high-end, low volume products.

 

There is equally a lot of merit in having a retailer network.

 

What will most certainly not work is a muddled strategy of trying to have both, at least not under the same brand.

 

Actually Hornby have 3 strategies:

Classic retailers

Direct Selling

Concessions

 

I personally would merge the concession & retailer into one concept as it is outright confusing, doing their business harm and particularly annoying even for me as an end customer.

Take their new Duchess of Hamilton as an example. Can one buy one from a classic model shop where I can see it before hand and support the small local business? Nope!

 

It is not like as if Hornby products are found in every super market up and down the country. They have a very limited and small number of outlets selling their stock. All they do is create an additional logistic and administrative nightmare in their systems and processes and cause confusion/upset with both their B2B and end customers alike.

 

I can see it now. Hornby announces the loco on Facebook, Joe Blogs who is not informed/could not care less about Hornby's selling concepts, sees this and thinks that is nice. Does a 20 mile round trip to his favorite model shop to order/buy/see one and then finds out that model shops are not allowed to sell them! Meanwhile their website can sell both concessions and non concession items alike, and while it might state that this is a concession exclusive, it means nothing to me as an end buyer since I would consider any model shop selling new Hornby items to be a form of concession of some sort.

My only real life example to Concession are car retailers selling brand new cars. Non concessions are generally just secondhand items. (I accept that this may not be correct technically, but that is my general perception of the word vis-a-vis cars and I am sure I am not alone in this).

[ruggedpeak]

There is probably some merit for Hornby in a strategy of direct selling, particularly of high-end, low volume products.

Yes, as long as it follows the well proven path of many other manufacturers of products as diverse as Apple to Dartington Crystal.

 

That is sell direct at full price, do not undercut, undermine or cannibalise your existing sales channels, and maintain your focus on marketing to drive sales and your brand across ALL channels.

[Legend]

Yes, as long as it follows the well proven path of many other manufacturers of products as diverse as Apple to Dartington Crystal.

 

That is sell direct at full price, do not undercut, undermine or cannibalise your existing sales channels, and maintain your focus on marketing to drive sales and your brand across ALL channels.

Agreed and if they have any slow moving stock to sell they should first offer it to dealer network and only if not taken up have a bargain sale on internet. Having benefitted from some cheap direct selling I accept I will have to pay more here , but I think it's the only way to restore the faith of their retailer network. Dare I say it but restoring some of the retailers margin might also help. Again this will mean slightly increased prices but they will probably pale into insignificance compared with Bachmann, and frankly we need an independent Hornby to survive. The thought of Kader having a near monopoly given the increases over the last three years is not palatable

[Coryton]

Bachmann, and frankly we need an independent Hornby to survive. The thought of Kader having a near monopoly given the increases over the last three years is not palatable

 

There are already smaller companies taking advantage of the fact that anyone can have models have made in a Chinese factory. Even if Hornby were to disappear overnight and the tooling vanish, I don't think Bachmann would find themselves with no meaningful competition.

[Legend]

There are already smaller companies taking advantage of the fact that anyone can have models have made in a Chinese factory. Even if Hornby were to disappear overnight and the tooling vanish, I don't think Bachmann would find themselves with no meaningful competition.

But it would still be a large hole and give Kader market dominance. More likely someone would buy the Hornby name , but that could be Kader! Neither of which is good. That's why we need an independent Hornby to survive.

[Oldddudders]

A couple of years ago I bought a very nice ABJ autorail in SNCF livery for a very attractive price at Warley. It was sold under the Spanish Electrotren brand (it was a type of railcar also used by RENFE) by a trader who specialised in European models but, unless you knew, you'd have had no idea that it was now a Hornby brand from the company whose own stand was practically next door.

The Electrotren ABJs are/were stonking models, and I have half a dozen. Several different body-styles, several different liveries, some dating from the 1930s, before SNCF was created. RTR UK diesel railcars from before the war are non-existent! They seem more robust, and also more reliable, than the more exotic Picasso railcars from Mistral and LS Models, of which I also have - er - several examples. But prices had fallen by the time I took an interest, so they were a great bargain, too, suggesting Hornby did not make the killing the models deserved. I think the last ones I saw advertised new were from the box-shifter in Andorra.

Edited March 11, 2016 by Oldddudders

[Coryton]

But it would still be a large hole and give Kader market dominance. More likely someone would buy the Hornby name , but that could be Kader! Neither of which is good. That's why we need an independent Hornby to survive.

 

I won't argue with that.

 

But the move to outsourcing manufacture must have hugely lowered the barrier to new entrants to the market.

 

I suppose the move away from building representative models using lots of common parts has also helped. Whether you are a small company making your first model or Hornby, you're still tooling up almost everything in a new model from scratch.

 

Of course if ultimately we move away from plastic mould tools to 3-D printing (quite a long way off if it happens at all) that will be a much bigger change than the move to manufacture in China was.

[Fenman]

Agreed and if they have any slow moving stock to sell they should first offer it to dealer network and only if not taken up have a bargain sale on internet. ...

 

That's a very certain position you've taken. I would be more comfortable with it if everyone had access to a "local" model shop. But we don't. I don't know what proportion of the UK population does not but, given as an example that central and most of suburban London has no model shop, I'd expect this proportion to be high - and, given the rate of closures, getting higher.

 

So, what you are arguing is that those of you who have a "local" model shop should have access to discounted stock (rewards to you for your loyalty by your friendly local dealer), while the rest of us should have to pay full price, always, through Hornby direct. Or, I guess, provide added revenue to your local model shop by buying mail order.

 

That doesn't strike me as entirely reasonable.

 

Paul