Hornby's financial updates to the Stock Market

[Fenman]

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.

 

I think you are underestimating the sheer bulk of Hornby in the marketplace: the capital costs of replacing even a significant percentage of Hornby's product range would be horrendous.

 

For those who think it would make no difference if Hornby were to disappear, can you tell me which manufacturer is producing ranges of pre-BR coaching stock covering the majority of the country?

 

Paul

[Jub45565]

can you tell me which manufacturer is producing ranges of pre-BR coaching stock covering the majority of the country?

 

Paul

 

Wizard Models? (ie, amongst other things, the Comet range...) ;-)

[Fenman]

Wizard Models? (ie, amongst other things, the Comet range...) ;-)

 

Exactly...

[Legend]

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

I see your point , Paul. I was thinking that surplus stock should be offered to the dealer network which almost certainly would include the likes of Hattons , Rails , Kernow etc. if you haven't got a local dealer ( I really haven't up in Glasgow) , would you not use them?

 

I don't think we can have it all ways .You can't have a strong and loyal dealer network and undercut them by selling direct at lower cost . Much as I liked the deals I got , it's just not compatible.

[Hroth]

Of course, retailers in "the dealer network", which include the likes of Hattons , Rails , Kernow etc are ALSO someones (relatively) local model shop.

[JSpencer]

IF Hornby did go, there is an awful lot of tooling laying around. The bank (or whoever) would not simply scrap it. The brand names carry immense value. They would be sold off.

 

Maybe Kader will buy the lot. Bachmann was interested in buying the Hornby name (just the name) in the early 1990s. Maybe not.

 

Maybe some other unknown party or partys would buy the parts.

 

When Lima went down, Hornby brought them. IF Hornby went down, someone will step in. The bank has to weigh this against any proposed restructuring that will probably happen first.

 

I expect, in both cases, we will see price increases, the end of fire sales and some rationalization of items they intend to sell - "what? not many orders for gold plated Thomases? drop it".

Likewise nothing might happen. The bank could say, we previewed a margin in case of that so you have 6 months to sort yourselves out!

 

We'll see.

 

However Bachmann has competition on the wings. Heljan has a big range of diesels and are doing more and more steam engines. Hattons/DJM/Kernow etc have a large commissioned program. Dapol are showing signs of getting their programs coming along.... But the one which will have a big influence in the next 5 years is going to be Oxfordrail. They got off to a "good start but could do better" and are learning from it and have a price advantage.

[Jub45565]

Exactly...

 

My point, while being flippant, isnt exactly invalid to the point being made. The hobby has enough other trade available to get new entrants in, and we all have a choice between using what is available RTR/RTP, and if we want something more prototypically correct for our desires then there are kits, or bashing, or scratch building.

 

While a reduction in 1 member of the trade undoubtedly reduces the amount of RTR available, it is hardly (in my mind) the end of the world as we know it.

[Retro_man]

 

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

 

If you do not have a local hobby shop it is just as easy to buy on-line from any number of hobby retailers where discounts are regularly given as it is to buy direct from Hornby.

In my opinion (as a hobby retailer), Hornby should always sell direct at full RRP or not sell direct at all.

 

Steve

[Clearwater]

If you do not have a local hobby shop it is just as easy to buy on-line from any number of hobby retailers where discounts are regularly given as it is to buy direct from Hornby.

In my opinion (as a hobby retailer), Hornby should always sell direct at full RRP or not sell direct at all.

 

Steve

An alternative would be to follow the Bachmann club template and sell 'special run' items to club members only.

[Coryton]

 

While a reduction in 1 member of the trade undoubtedly reduces the amount of RTR available, it is hardly (in my mind) the end of the world as we know it.

 

End of the world as we know it? Of course not.

 

But if Hornby (AND all its tooling - unlikely) were to vanish, I think most of us would see a significant change in one way or another.

 

In particular, with the exception of the very small Bachmann Junior range (if it still exists) other companies aren't going for the low end models. Putting aside issues of what effect train sets and the Railroad range have on bringing people into the hobby (and whether we care or not), I would certainly miss the availability of cheap rolling stock to play around with.

 

There are often comments here suggesting that people should do real modelling rather than just plonking RTR stock on the track. And maybe one day I will have the courage to paint/weather/modify a £100+ locomotive. But if it ever happens it will only be by practising on cheaper models first. Second hand goes some way to satisfy that need, but - for example - I've just bought a couple of brand new Hornby 0-4-0s split from set for ~£12 each. At that price I can give them to the kids to have a go at repainting. I would miss the availability of such things.

[The Stationmaster]

 

 

However Bachmann has competition on the wings. Heljan has a big range of diesels and are doing more and more steam engines. Hattons/DJM/Kernow etc have a large commissioned program. Dapol are showing signs of getting their programs coming along.... But the one which will have a big influence in the next 5 years is going to be Oxfordrail. They got off to a "good start but could do better" and are learning from it and have a price advantage.

 

Ah, but the essential difference is that none of them, Bachmann apart, offer a range.  Even the bigger players such as Dapol and Heljan don't offer the range of rolling stock, especially coaching stock, that Hornby and Bachmann offer and they would have to invest massive amounts of money in order to do so.  The various commissioners are only filling niche market areas when you look beyond locos although one modeller's niche is sometimes another's mass market.

 

Oxford is a newcomer and is currently clearly pricing to help gain market share - the real question is how long will they be able to sustain comparatively limited returns if they want to develop a larger and more diverse range, especially when it comes to coaching stock?

 

It's very easy to ignore the fact that Hornby has been investing comparatively large sums in bringing to market their high standard passenger rolling stock at the same time as continuing to develop several locos a year to modern standards.  You need a fair bit of finance to enable that to happen as well as the necessary labour force and while the latter will be small in numbers they still cost money to employ and provide with working space and facilities.  And alas that of course is possibly where the risk lies in what is likely to interest most of us because any financial review of the company is inevitably going to look at where the money has gone and what return it has produced.

[Jub45565]

 

There are often comments here suggesting that people should do real modelling rather than just plonking RTR stock on the track. And maybe one day I will have the courage to paint/weather/modify a £100+ locomotive. But if it ever happens it will only be by practising on cheaper models first. Second hand goes some way to satisfy that need, but - for example - I've just bought a couple of brand new Hornby 0-4-0s split from set for ~£12 each. At that price I can give them to the kids to have a go at repainting. I would miss the availability of such things.

 

Dapol do some unpainted wagons which are a good start for this, but yes - I quite agree that the hobby as a whole does require a cheap way to experiment, cut your teeth, etc, across the loco, coach, wagon range.

[JSpencer]

Ah, but the essential difference is that none of them, Bachmann apart, offer a range.  Even the bigger players such as Dapol and Heljan don't offer the range of rolling stock, especially coaching stock, that Hornby and Bachmann offer and they would have to invest massive amounts of money in order to do so.  The various commissioners are only filling niche market areas when you look beyond locos although one modeller's niche is sometimes another's mass market.

 

Oxford is a newcomer and is currently clearly pricing to help gain market share - the real question is how long will they be able to sustain comparatively limited returns if they want to develop a larger and more diverse range, especially when it comes to coaching stock?

 

It's very easy to ignore the fact that Hornby has been investing comparatively large sums in bringing to market their high standard passenger rolling stock at the same time as continuing to develop several locos a year to modern standards.  You need a fair bit of finance to enable that to happen as well as the necessary labour force and while the latter will be small in numbers they still cost money to employ and provide with working space and facilities.  And alas that of course is possibly where the risk lies in what is likely to interest most of us because any financial review of the company is inevitably going to look at where the money has gone and what return it has produced.

The Vacuum would take a while to fill. Someone just buying out Hornby would spend a little figuring out who does what and continue having models produced with them in the short run. Doubtless the operation will be scaled down for sure. Kader buying them out would probably see new production stopped while they moved things around to what ever suited them. They would probably want things done in their factory than someone elses.

 

There is going to be a few years where little would appear after the buy out as they get organized (other than items which were already scheduled). Other makes will see opportunities in that. Any Hornby buyer is going to end up putting products out that are much more expensive than they are now in what will doubtless be a scaled back operation, this means opportunities for those on the wings and Oxford seems to very efficiently set up.

 

When Lima went, Bachmann and Heljan seized the chance to replace a big part of that range (though they were probably heading there anyway, doubtless this accelerated things). Hornby tried to turn the Lima 20 into something modern, it came out more expensive than Bachmann's one. For sure Hornby have a lot of modern tooling but equally some popular subjects are ripe for replacement.

[JSpencer]

One error I see Hornby often is when it comes to new releases.

 

If we take this years southern cattle wagons, they do two types, Maunsall and Bullied - two of each. However one will be in southern colours only, the other in BR only.

 

They should have done both covering both periods. I would gladly buy 4 at least in BR colours.

[bigherb]

One error I see Hornby often is when it comes to new releases.

 

If we take this years southern cattle wagons, they do two types, Maunsall and Bullied - two of each. However one will be in southern colours only, the other in BR only.

 

They should have done both covering both periods. I would gladly buy 4 at least in BR colours.

That is not exactly an error unique to Hornby though.

[Coryton]

Dapol do some unpainted wagons which are a good start for this, but yes - I quite agree that the hobby as a whole does require a cheap way to experiment, cut your teeth, etc, across the loco, coach, wagon range.

 

Yes and of course they are the exception to my comment that only Hornby caters for low-end models.

 

As well as the Dapol unpainted wagons there are also their incredibly cheap coaches, also available for even less as kits to save you the bother of taking them apart to repaint or do more serious things to them.

[Bernard Lamb]

IF Hornby did go, there is an awful lot of tooling laying around. The bank (or whoever) would not simply scrap it.

May I refer you back to the saga of the B17.

First lot of tooling could not be used by the second supplier. Tooling remade with subsequent delay and loss.

Modern tools and machines seem to be dedicated these days in order to achieve efficient production,

As tools they are probably of little value to any body who does not have access to the machines that are currently being used.

The material will not have much value as scrap either given the way prices are at present.

Bernard

[dibber25]

May I refer you back to the saga of the B17.

First lot of tooling could not be used by the second supplier. Tooling remade with subsequent delay and loss.

Modern tools and machines seem to be dedicated these days in order to achieve efficient production,

As tools they are probably of little value to any body who does not have access to the machines that are currently being used.

The material will not have much value as scrap either given the way prices are at present.

Bernard

...and with 'possession being 9 points of the law' actually obtaining those tools may also be a problem. Ownership of tooling in China appears to be very different from the way we might understand 'ownership'. I've heard from one or two manufacturers just how fraught it is when you try to get your hands on something you think that you own. Bachmann, of course, avoids this issue by only having tools in its own factory. (CJL)

[RJS1977]

...and with 'possession being 9 points of the law' actually obtaining those tools may also be a problem. Ownership of tooling in China appears to be very different from the way we might understand 'ownership'. I've heard from one or two manufacturers just how fraught it is when you try to get your hands on something you think that you own. Bachmann, of course, avoids this issue by only having tools in its own factory. (CJL)

 

And of course Bachmann came into the UK market by acquiring a Chinese factory which owned many of the old Mainline tools.

[Legend]

And of course Bachmann came into the UK market by acquiring a Chinese factory which owned many of the old Mainline tools.

Actually Kader , set up Bachmann UK to market the old Mainline tooling they had .

[40F]

Actually Kader , set up Bachmann UK to market the old Mainline tooling they had .

 

Actually Kader own Bachmann full stop

[Talltim]

Yes, since 1981. However the Bachmann UK arm, was set up post Kader purchase and was, as said, initially to market the ex Mainline models under the Branchline brand

Edited March 11, 2016 by Talltim

[robmcg]

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.

 

At the moment Hornby are the most adept of all the players in the UK market in bringing things through the various stages of design, CAD, 3D samples, tooling, testing and production, are they not?  I am thinking of the original Merchant Navy as an example. 

 

If these reach the market this year for under UKP150 I will be VERY impressed!

[jjb1970]

I'm not sure that any listed company could absorb a share price loss of the scale of that seen by Hornby over the last month in combination with a profit warning and avoid an impact on funds available to support investment in the business. Which means that Hornby must be looking at what investments they can cancel or re-schedule.

Edited March 11, 2016 by jjb1970

[Clearwater]

I'd be optimistic about seeing this year's announced models arrive. To the extent they've incurred the majority of costs and have contractual commitments, eg to factories, that would incur cost to break, it would make sense to complete those models. However, I don't doubt that they are going through every line of expenditure extremely carefully. 2017 looks a long way away

 

David