Hornby's financial updates to the Stock Market

[robmcg]

Perhaps someone internal will fill this role until a full-time replacement is hired or more significantly perhaps there really isn't anyone internal ready to step up to this post?

 

They just closed their books at the beginning of the month. They will publish final audited results in June. This is a very busy time for the finance office at Hornby PLC even without all the revised business planning and activity communicating with bankers.

 

I presume that arrangements for overdraft with Barclays are subject to ongoing performance as well as audited accounts to March 31, and that the reduction in costs and the increase in sales is all part of a survival strategy.  

[gismorail]

So have Hornby scrapped their 'Direct Selling ' plans now if so the move to a new distribution centre and logistics company would to have been a complete waste of money !!!!

[Legend]

No.They still have to ship to model shops all over the country and are still offering a direct selling alternative. While I don't like it, outsourcing seems to be the way these days, the theory being you are letting people who are experts in the trade do their job rather than be a Jack of all trades yourself. Should be more efficient but it does cost.

 

It does seem that deeply discounted direct selling has stopped and instead stock offered out to the retail trade. Hopefully it was offered widely but so far we seem to have seen Rails and Hattons take them up on this. The benefit being that Hornby get one large sale now rather than lots of small individual direct sales

[Vistisen]

The B1 is coming down to a more sensible price, £155 was a silly price to start it at, so I would assume rather than a last chance to buy, it is simply a price reduction, as I seem to recall it only appeared around December/January.

Yes it was silly of them to price it where they actually made a profit, much better they sell it at a loss and go bust

[MarkSG]

Yes it was silly of them to price it where they actually made a profit, much better they sell it at a loss and go bust

 

Actually, both the original price and the current price are sensible. A multiple price marketing strategy is a common means of maximising profit.

[woodenhead]

Accountants running railway related organisations, what can possibly go wrong?

 

On a serious note, accountants will be holding at least the CEO, Sales and Finance directors roles. Given it appears the development and production teams are doing OK at the moment in getting product out and some nice models are in the pipeline, hopefully the bean counters will let them get on with making models and focus management's attention on sorting out the ERP and other functional/back office problems that are undermining current performance. A proper stock take might be a good place to start.

Accountants shouldn't be looked on as bean counters, with their qualifications these days management accountants are very rounded individuals and I know a few who run very effective operations in a number of markets.  True their main job is to ensure financial performance but they have to know all about the market they operate in, be able to quantify risk and set prices that will win business as well as make profit.

 

If I had my time over again I wish I'd been doing CIMA over banking exams.

[Andy Hayter]

So have Hornby scrapped their 'Direct Selling ' plans now if so the move to a new distribution centre and logistics company would to have been a complete waste of money !!!!

 

Not necessarily.

 

The move to an external distribution centre mirrors what many industries have done I the past few years.  Concentrate on what you are good at (making and marketing models) and let other experts do what they are good at (handling storage and distribution).  Outside logistics experts are less likely to damage or misplace stock and they are usually more efficient and use newer and better equipped premises. 

 

I am of course not party to Hornby's contract with the warehouse, but typically you pay for goods to come in, you pay for the amount of storage space you are using and you pay for goods to go out.

 

The last charge is the interesting one, since this is typically a flat rate per item type.  This means if you have an online order for 1 Rxyza, you pay the fixed sum.  On the other hand if a retailer orders 25 Ryxza you pay the same fixed sum - so the cost of picking and dispatching per item is 4% of the cost for the online order.   Shipping costs are also likely to be less per item for the multiple order.   

[Ron Ron Ron]

..... This means if you have an online order for 1 Rxyza, you pay the fixed sum.  On the other hand if a retailer orders 25 Ryxza you pay the same fixed sum.......

 

 

Unfortunately you won't be able to order any of them.

 

Apparently the Rxyza has been added to the list of models cancelled from the 2016 range.

 

 

 

.

[Barry Ten]

Not sure what to read into this, but the last three Hornby locos I've bought, from three different retailers, all exhibited faults of one sort or another.

 

A3 Minoru - wouldn't run due to severely buckled valve gear, which I carefully bent back into shape, but also a tooling mismatch/assembly fault meaning the entire running plate is at an angle. Varuious details loose in box. Too far to drive back to shop.

 

Streamlined Coronation class - tyre came off rear pony truck during test running. Again too far to go back to shop but fixable by me.

 

LSWR M7 tank - non-runner. Limps for about half a wheel rotation, then jams. No obvious source of fault without taking body off. Feels like it might be a split gear to me.

 

It might just be a run of bad luck, but all these are since March and I've gone years without running into any serious issues with Hornby locos.

[ruggedpeak]

Accountants shouldn't be looked on as bean counters, with their qualifications these days management accountants are very rounded individuals and I know a few who run very effective operations in a number of markets.  True their main job is to ensure financial performance but they have to know all about the market they operate in, be able to quantify risk and set prices that will win business as well as make profit.

 

If I had my time over again I wish I'd been doing CIMA over banking exams.

I'm sure there are plenty of good ones. I was merely jesting given the high profile failure of 'bean counters' who tried to run Railtrack and decided to ignore the core business engineering and operating a railway.

 

As you say, knowing all about the market and the nature of the business is critical. I can think of at least one other railway related firm currently in desperate in need of some competent management.

[The Stationmaster]

I'm sure there are plenty of good ones. I was merely jesting given the high profile failure of 'bean counters' who tried to run Railtrack and decided to ignore the core business engineering and operating a railway.

 

As you say, knowing all about the market and the nature of the business is critical. I can think of at least one other railway related firm currently in desperate in need of some competent management.

 

I think those who ran Railtrack (mainly into the ground) were more in the nature of carpet baggers grabbing what they could rather than any sort of bean counter - they definitely weren't at all keen to see what they regarded as 'profits' actually being spent on maintaining their major asset let alone going so far as to modernise it.

 

Hornby is I think a very different story although the 'dash for cash' of the now ended era was regrettably associated with some pretty daft ideas.  And underselling via their direct outlet seems to have been an inescapable way of throwing away money.

[ruggedpeak]

Hornby is I think a very different story although the 'dash for cash' of the now ended era was regrettably associated with some pretty daft ideas.  And underselling via their direct outlet seems to have been an inescapable way of throwing away money.

I think the bean counters may be back

 

http://www.rmweb.co.uk/community/index.php?/topic/110872-chester-model-centre-announcement/

 

[The Stationmaster]

I think the bean counters may be back

 

http://www.rmweb.co.uk/community/index.php?/topic/110872-chester-model-centre-announcement/

 

 

Not necessarily so.  There are pluses and minuses of becoming a concession and while it can offer advantages such as reduced investment in stock and, in some cases availability of offers which the normal retail trade haven't been given (Locomotion seem to have done rather well as a concession) it also has the commercial disadvantage of loss of independent pricing control and reduced (or loss of) choice in what to stock.  I can recall, easily, a situation not very many years ago where some retailers were far from happy because of the prices being asked for certain items through concession sites when they could not get that sort of deal or, in some cases, couldn't even get those items to stock.

And to give a recent example at Ally Pally Locomotion were offering one version of the 'Castle' at £100 when no one else seemed to have that model - so very much a case of swings and roundabouts I think.

 

In the end the decision lies with each retailer whether or not they should pick up the option to become a concession or not and their reasons for doing so - or not doing so - will vary according to their business plan and particular market circumstances.  Two retailers I know quite well both rejected that course when Hornby slashed their trade margin because they wished to remain independent in choosing what to stock (if they could get it) and because they knew it would not work for them.  And one of them even considered buying via the wholesaler instead of direct if Hornby started to get awkward about contract terms (not that he had too in the end).

[Joseph_Pestell]

But all that still shows that Hornby has a muddled policy. They need to work out what one strategy will give them the best results and stick to it. Having conflicting strategies will never work.

[The Stationmaster]

But all that still shows that Hornby has a muddled policy. They need to work out what one strategy will give them the best results and stick to it. Having conflicting strategies will never work.

 

I think you're right but it's mainly a consequence of changes made in the recently departed regime rather than anything else.

 

In the past Hornby had three main outlet routes - to retailers either by direct sale or via their wholesaler, via concession sites, or through what were known as key accounts (basically i believe major store chains and mail order houses.

 

While I don't know quite what has happened to the key account sector the other two haven't changed in many respects although there seems to have been a push a year or two back to get more concessions onboard, specially after Modelzone bit the dust.  On the other hand the company deliberately introduced a 'net based direct sales operation which, I understand, was actually separately located from their main HQ (based in London I have heard). At the same time they cut, in two successive years the trade discount to the retail trade first reducing it to 20% and more recently to a mere 10%.  This might well have served two purpose - firstly to improve Hornby's slice of the cake but also to try and reduce deep discounting and alter the price perceptions it was causing in the marketplace.  But what they didn't do - presumably because they couldn't (?) - was stop their wholesaler selling to an anyone who had the money to buy stock irrespective of whether or not that had a retail premises, so there was still price distortion from discounting by those people.

 

The next stage, possibly encouraged by poor supply from China but equally possibly down to internal targets was to start underselling surplus stock through their 'net outlet at way below trade price - thus hitting retailer confidence and ultimately undermining retailer preparedness to order annually for the coming year; that turned round and bit them in January this year which might well account for a need to clear surplus stock held at the warehouse (and costing money to keep it there).  Also with a change of attitude towards retailers reportedly happening within the company as the change took place at the top they have obviously gone back to their old way of clearing surplus stock - by offering it to the retail trade at reduced cost  (i.e. a greater discount level of discount) instead of pushing it through direct 'sales very cheaply or putting it into concessions.  So in reality it's just turning the clock back and doing exactly what Bachmann also do.

 

The only difference - which is far from clear - is to what extent the surplus stock currently being cleared has been offered to the retail trade i.e. was it offered to a limited number of outlets, or was it offered subject to a minimum spend (either of which would make economic sense) or did those retailers who appear to have some of this stuff get in quick and scoop it all up before anybody else had noticed it was available?  Simple answer to that one is that we don't know and I'd be very surprised if Hornby will tell us.  But I suspect the key thing from their viewpoint was that they sold the stuff in the 2015 trading year and that might sort the dip that occurred in January - to some extent.

 

So in reality it looks like we are getting back to where things were before the 'net selling operation started although because of trade orders being withheld in January (and probably due to demand for some items being sated) there seems to be quite a large range (and quantity) involved.

Edited May 3, 2016 by The Stationmaster

[duncan]

Outsourcing often works like this (simplified),

 

new boss comes in & says he will cut costs (his bonus depends on it), so cuts outsourcing.  It works for a couple of years; boss is looking for his next job at higher pay level; problems start to occur & business does not have the staff / skills to do the work / rectify the faults / costs too much to recruit & train staff so use expensive temporary workers

 

new boss arrives (his bonus depends on short-term profits), aims to cut costs; increases outsourcing; costs fall as fewer expensive temporary workers; problems fall as expert outsourcer know better

 

cycle repeats itself (the accountant says "another cycle, seen it all before & gets on with his job)

Edited May 3, 2016 by duncan

[Silver Sidelines]

Hi Barry

 

Agree entirely. I try to avoid negative comments on my Blog but I am sorely tempted to write about one or more of my recent Hornby purchases.  

 

Not sure what to read into this, but the last three Hornby locos I've bought, from three different retailers, all exhibited faults of one sort or another.

 

A3 Minoru - wouldn't run due to severely buckled valve gear, which I carefully bent back into shape, but also a tooling mismatch/assembly fault meaning the entire running plate is at an angle. Varuious details loose in box. Too far to drive back to shop.

 

Streamlined Coronation class - tyre came off rear pony truck during test running. Again too far to go back to shop but fixable by me.

 

LSWR M7 tank - non-runner. Limps for about half a wheel rotation, then jams. No obvious source of fault without taking body off. Feels like it might be a split gear to me.

 

It might just be a run of bad luck, but all these are since March and I've gone years without running into any serious issues with Hornby locos.

 

I would say the 'rot' set in just before Christmas.  Like you my purchases have come from different sources.  I too thought about buying Minoru but given my recent purchase experiences (not to mention problems with Coranach) I have instead indulged in some preused Bachmann models.  Buying from a trusted retailer it is possible to acquire quality tested models cheaper than even the latest Hornby Sale items.

 

Regards

 

Ray

[Pete47401]

The only difference - which is far from clear - is to what extent the surplus stock currently being cleared has been offered to the retail trade i.e. was it offered to a limited number of outlets, or was it offered subject to a minimum spend (either of which would make economic sense) or did those retailers who appear to have some of this stuff get in quick and scoop it all up before anybody else had noticed it was available?  

 

We are a very small seller, but with an account direct with Hornby, not with a wholesaler. Unless an email went astray, or I failed to read some small print somewhere, we did NOT receive this offer. I checked the recent Trade News bulletins they send and it's all about stuff that I couldn't possibly want in a million years, not about stuff that I might actually want.

 

For the sake of circulating an email to additional recipients at no further cost, they could have kept a few more people happy.

 

When they set up the new discount scheme we were told that the "big boys" did not get the extra 10% quarterly rebate over (I think) £40k. This was to give small shops an advantage. Perhaps this is how they level the playing field.

 

We only have "new tooling" releases on order with them now (Class 71, MN, B12, Peckett, Q6, coke hoppers), absolutely no way that we ever buy any reissue/relivery/renumber release (unless a direct customer request for minimum order of 2).

[adb968008]

I read the hattons interview in another part of this site..

 

A manufacturer selling off redundant stock at a discount from a previous year is neither unique to the hobby or unique to the wider manufacturing industry.

Everyone reads it and says its financial doom and mismanagement, but as Ken Dodd says... Will we ever live to see the end of the DFS sale.

 

I'm not too worried about it, nor will it affect my purchase pattern, as a popular model at the right price will always sell well.

It doesn't stop me waiting for a sale on a less desirable item if and when it comes along at a discount nor will I lose sleep if it doesn't.

 

However the manufacturer clears its ranks is up to them, we don't know for sure, but can speculate they did so in bulk by selling to the big two, if that's true then it makes sense.. Box shifters shift boxes that's what they do ... And the hattons article tells us that's what they've always done. The manufacturer gets cash, the boxes get shifted quick and the modeller gets a bargain.

 

If the bulk buy is true , I understand the regular dealer network being miffed at missing out on a cheap deal, but clearly the objective is to make the bulk leftovers disappear from the shelves quickly...Not all dealers would sell so cheaply or be able to sell volume, the manufacturer has to deal with higher shipping and billing cost associated with it, it just takes longer. Additionally If it lingers on a retailers shelf it's not much better then lingering on a manufacturers shelf..as it ties up cash that stops the manufacture and sales of new models.

 

I now have 3 B17s, Sandringham an ebay bargain at £20 sold mislabelled as a B12, Grimsby Town, new at £82 and now Barnsley new in a sale at £77... How much it really is a bargain is relative, especially in context of previous purchases..one would argue it was a good selling strategy as I wasn't considering b17 number 3, had it not been "on sale".

 

 

The usual objective behind a clear out is to get cash and make them disappear.

So if you want it, get them whilst you can as once gone there gone.

That's the point.

Edited May 6, 2016 by adb968008

[Joseph_Pestell]

I read the hattons interview in another part of this site..

 

A manufacturer selling off redundant stock at a discount from a previous year is neither unique to the hobby or unique to the wider manufacturing industry.

Everyone reads it and says its financial doom and mismanagement, but as Ken Dodd says... Will we ever live to see the end of the DFS sale.

 

I'm not too worried about it, nor will it affect my purchase pattern, as a popular model at the right price will always sell well.

It doesn't stop me waiting for a sale on a less desirable item if and when it comes along at a discount nor will I lose sleep if it doesn't.

 

However the manufacturer clears its ranks is up to them, we don't know for sure, but can speculate they did so in bulk by selling to the big two, if that's true then it makes sense.. Box shifters shift boxes that's what they do ... And the hattons article tells us that's what they've always done. The manufacturer gets cash, the boxes get shifted quick and the modeller gets a bargain.

 

If the bulk buy is true , I understand the regular dealer network being miffed at missing out on a cheap deal, but clearly the objective is to make the bulk leftovers disappear from the shelves quickly...Not all dealers would sell so cheaply or be able to sell volume, the manufacturer has to deal with higher shipping and billing cost associated with it, it just takes longer. Additionally If it lingers on a retailers shelf it's not much better then lingering on a manufacturers shelf..as it ties up cash that stops the manufacture and sales of new models.

 

I now have 3 B17s, Sandringham an ebay bargain at £20 sold mislabelled as a B12, Grimsby Town, new at £82 and now Barnsley new in a sale at £77... How much it really is a bargain is relative, especially in context of previous purchases..one would argue it was a good selling strategy as I wasn't considering b17 number 3, had it not been "on sale".

 

 

The usual objective behind a clear out is to get cash and make them disappear.

So if you want it, get them whilst you can as once gone there gone.

That's the point.

 

That's fine for you as an experienced modeller who knows what he wants. But in the longer term.....

 

New entrants into the hobby are discouraged by the lack of local shops where they can see the goods, get advice, etc. Therefore overall market declines and Hornby sell less, and, if they survive, bring out fewer new models at much higher prices as development costs have to be spread over smaller numbers of models produced.

 

How does that help you?

[adb968008]

That's fine for you as an experienced modeller who knows what he wants. But in the longer term.....

 

New entrants into the hobby are discouraged by the lack of local shops where they can see the goods, get advice, etc. Therefore overall market declines and Hornby sell less, and, if they survive, bring out fewer new models at much higher prices as development costs have to be spread over smaller numbers of models produced.

 

How does that help you?

The high street is changing, and it's not just model shops... The whole ethos of "going to town shopping on a Saturday" has changed.

 

I know it's sad that model shops (and the specialist skill they offer) is declining... When I grew up I had 7 model shops in 5 miles.

Where I live now I have 2 model shops within 10 miles.

Indeed knowing there's several local clubs, with an area of moderate income and a lot of families I actually thought this maybe an opportunity for a business.. Indeed there used to be several.

 

But as I haven't yet had time to visit either shop, since I started back modelling a few years ago, and their online presence suggests I don't need to either. - if I as an avid collector doesn't go, why would anyone else ?

 

I still model, I buy from the Internet, research using this forum, others and YouTube and get inspiration attending exhibitions. Indeed I have been able to achieve far more using these mediums than the old days using the shop and a magazine.

It's worth remembering new comers to the hobby will be younger, and increasingly internet savvy.

It's not all bad, it's changing.

 

In the old days, models shops had to compete with the likes of Railmail.. They still prospered just the same.

The decline of the model shop is not just down to two box shifters and a manufacturer having a clear out.

Remember a newcomer won't go to a box shifter..they probably don't know they exist.

 

 

Model shops need to change, my impression is a model shop would be an art gallery rather than a business. What's needed by an internet savvy modeller, is the skills, tools and talent the Internet cannot provide.. Find a way to bottle it and add a price tag that shop would thrive.

Edited May 6, 2016 by adb968008

[caradoc]

The worrying thing is that some of the sale items are not slow sellers from previous years but very recent releases, such as the TTS 40164 which only came out at the end of February.

[phil-b259]

I read the hattons interview in another part of this site..

 

A manufacturer selling off redundant stock at a discount from a previous year is neither unique to the hobby or unique to the wider manufacturing industry.

Everyone reads it and says its financial doom and mismanagement, but as Ken Dodd says... Will we ever live to see the end of the DFS sale.

 

 

There is a big difference between the likes of DFS and Hornby.

 

DFS effectively make their stuff with every intention of selling it at the 'Sale' price 11 months of the year (They jack the prices UP for one month, usually from mid November to Christmas when they cannot supply "in time for Christmas" and people generally are not that interested in buying furniture). Thus even when their furniture is 'on sale' DFS are still making a nice profit on everything sold - hence the 'never ending sale' which is simply a marketing trick too many people in the UK fall for.

 

Hornby by contrast are having a sale simply get as much cash as possible so as to keep Barclays from pulling the plug - many of the items they are selling will actually be selling at a loss, but desperate times call for desperate measures with say £80 quid now being much better for the banks than a possible £140 in a months time.

[Clearwater]

I think the advice point is, in part, also met by the Internet. I caveat with the line that not all people use the web but for me, and a lot of other people, my first thought if I have a modelling query is to post a question here and often get best in class advice from the users here.

 

Certainly the immediacy and interaction on Tony Wright's thread, coachmann's (although he seems to have stopped posting?), Allan downes etc offers tutorials to people in a way not even the best shop could hope to match. Others blogs and threads on building, dcc, track etc which are usually more detailed than magazines can provide and, like a club, people are generally happy to explain how they've done things.

Personally I read stuff, then google the item and buy it like that often.

 

David

 

[edit: I should have also remembered to mention the often erudite and informative discourses on prototype practice]

Edited May 6, 2016 by Clearwater

[Wicor Models]

We are a very small seller, but with an account direct with Hornby, not with a wholesaler. Unless an email went astray, or I failed to read some small print somewhere, we did NOT receive this offer. I checked the recent Trade News bulletins they send and it's all about stuff that I couldn't possibly want in a million years, not about stuff that I might actually want.

 

For the sake of circulating an email to additional recipients at no further cost, they could have kept a few more people happy.

 

When they set up the new discount scheme we were told that the "big boys" did not get the extra 10% quarterly rebate over (I think) £40k. This was to give small shops an advantage. Perhaps this is how they level the playing field.

 

We only have "new tooling" releases on order with them now (Class 71, MN, B12, Peckett, Q6, coke hoppers), absolutely no way that we ever buy any reissue/relivery/renumber release (unless a direct customer request for minimum order of 2).

I don't know where your shop is so I don't know your rep but we certainly had an email from our rep with a list of discounted items recently.  We took the decision not to order anything from it mainl because we have existing stocks of the items on the list, apart from those items we would never sell in a month of Sundays (or any other day come to that).  We've also recently received another offer to coincide with the Toymaster show, but again this came directly from our rep not Hornby Sales.  As I have said before on this forum I can only speak for us as Wicor Models but having dealt with Hornby for the best part of 20 years we have never had any real problems or quibbles and if there has been an issue it has been dealt with promptly (except on one recent occasion but that is not for public consumption yet - too soon!).  We have been assured by our rep and his managers that the retail trade is an important part of Hornby's ongoing business plan and nothing that I have seen makes me think otherwise.  Despite some of the doomsayers above shops are a vital component in he UK economy and the percentage of internet sales is very small compared to shop sales nationally.