Hornby's financial updates to the Stock Market

[Ozexpatriate]

So the question is, where did the 13.5 Million disappear too?

 

You can't put that all down to a new ERP system and restructuring.

In £'000

 

Restructuring costs .................(993)

Implementation of new ERP system ..(1,174)

 

Segment reporting suggests that 55% (7,214) of the operating loss (13,124) happened in Spain.

Edited June 22, 2016 by Ozexpatriate

[Clearwater]

In £'000 Restructuring costs .................(993)Implementation of new ERP system ..(1,174)Segment reporting suggests that 55% (7,214) of the operating loss (13,124) happened in Spain.

Includes a write down of 4m of goodwill in Spain and 1m of tooling costs

Edited June 22, 2016 by Clearwater

[DJM Dave]

In £'000 Restructuring costs .................(993)Implementation of new ERP system ..(1,174)Segment reporting suggests that 55% (7,214) of the operating loss (13,124) happened in Spain.

Was that to pay off the Spanish national debt? Lol

 

Seriously though I did hear that Spain was a tail that wagged the dog (that from insiders in the company).

[Ozexpatriate]

Includes a write down of 4m of goodwill in Spain and 1m of tooling costs

Even with this in the credit column:

 

In addition, post the year-end, we completed the sale of office premises in Spain for of consideration of €1.3 million.

Some time back there were financial reports regarding management severance (or similar) payments in Spain. I don't remember the particulars.

 

EDIT:

This was from the 2015 interim report (covering business through September 30, 2015).

However, we have recently pressed ahead sooner than had been planned with major rationalisation to the organisation structure and systems across Europe, resulting in senior management changes in Italy, France and Spain. These changes have contributed to very significant trading disruption, though they will also result in higher levels of cost savings this year.

It's hard to square that circle.

Edited June 22, 2016 by Ozexpatriate

[PCW]

This approach to things seems reasonable. It is good to see a 'promise' to work with and support independent retailers, perhaps forging closer connections with the staff in the inde shops could help ensure the right products and the right amount of the right products are made in the future. A collection of many experienced brains on this has to work better then a smaller number in one office?

 

It worries me that there is a lot of surplus stock that is going to have to be 'sold off' in a structured way. On the one hand Hornby want to support independents, but on the other hand it sounds as if it will be inevitable they will de-value stock in the shops bought at a 'proper' trade price the moment the price slashed overstock hits the streets?

 

So Hornby recognize they need to build bridges with the indes, but there is still the fear stopping independents ordering more than 2 of anything. Hornby can promise anything they want, but independents will be very cynical and probably sit on the sidelines for a year before possibly having the appetite to roll their sleeves up and work with the brand 'properley' again. 

 

So the question is can Hornby afford a very slow turnround in relationships with independents? One of the key things in the relationship is for the manufacturer to delivers lots of new stock to the shops as soon as a new model arrives, that way they get paid in a totally predictable 30 - 60days on invoice irrespective of the time the stock might site on the shops shelves. Hornby really do need to persuade shops to buy stock again, otherwise they will have to sit on overproduced stock themselves. 

 

So come on Hornby, we want you to do well, but what EXACTLY are you going to do to build bridges with independent shops?

[The Stationmaster]

Agreed however my point was the straight cash profitability is / will be less than using amortised cost toolings and with any new item, the risks are inevitably greater. New toolings - as they focus on ebitda less capex, I think there'll be a fixed spend per year with fewer new tools per annum

 

David

 

The big problem with amortised tooling is will it produce things which will sell in todays' market?  We come here to Andy's 'crossroads' thread and Hornby are about to take one of the turnings instead of heading straight on - by recognising their core profitability areas and, hopefully, how they work. That will, I suspect mean a move away from a new item getting a run in Years 1, 2 and 3 in several different ways -

 

1. I'm sure they will take the lesson of today's market, which effectively demands (still) continuous r-t-r novelty and that means that if they do go into Year 2 with new items they ought to be recognising how different they need to be from Year 1 in order to sustain sales volume (which means they need to have a really good understanding of their markets in order to do it successfully).

2. I think Year 3 will be part of the 40% cutback - that would make sense in today's moving marketplace,

3. If they make these sort of changes they are inevitably (and realistically in my view) going to look to cover development costs and make a profit above that level in Year 1 (assuming they don't already do so.  Again this will need careful marketing and it might well produce upward pressure on prices but if Steve Cooke has looked over the fence he will have noticed that is effectively what the commissioners do and - to date - they're all still in business.  With an improved working capital position, or just by using as much as in the past (if it is still there?) He too can play that game, in a big way - provided they get the marketing right.

4. They might take the view - because we simply don't know the actual numbers - of a better spread of release rates of new models to improve cashflow against fixed costs.  Might 

 

Reintroduction of models made on older tooling will no doubt continue but will, I expect, be in much smaller quantities - certainly much smaller than Hornby's traditional approach to the market and volume but I would think there would still be a base of 'steady sellers' around - as long as they sell.

[adb968008]

230 staff, cost £ 11mn... That's an average £47k in salary, tax etc.

That 230 staff produce average £240k per head to the revenue figure of £ 55mn.

In my mind this figure is drastically too low.. Employees are not adding enough value to the sales total.

(At let's say a trade price of £60 a loco.. That's 4000 loco's per person ).

 

The £55mn revenue against production costs of £ 33mn, it's low (40%) but profitable until you look at the operating costs..

 

The one that stands out is sales & marketing costs of £12m... Must be getting expensive paying for magazine adverts ???.. £1mn a month - and they don't give out free samples any more ???

Distribution costs have gone up £3mn in a year too... (And I thought oil prices had gone down).

 

It seems that the problem isn't in manufacturing or in margin, but more related to the costs of administering the products once the goods are here.

 

£13mn in stock... @£60 a loco that's 216000 loco's in stock...(so taking into account the 000's of items in the range that must be in the millions of pieces of stock items across everything)... That's a lot of stock...

 

When other suppliers are manufacturing to order, have personnel in low numbers, and maximise their marketing at minimum costs, It feels to me Hornby are still trading in an ethos that goes back to the 80's rather than modern reality.

 

All of that is before we start to question the wisdom of what models they are actually making and in what quantity.

Edited June 22, 2016 by adb968008

[Clearwater]

@mike

 

We're back to the key issue that we don't really know what is and what is not profitable. I think your strategy for maximising profit/revenues from new tools makes sense. Equally, as someone pointed out on the 'axing lines thread, when factories mess up delivery schedules the best laid sequencing plans can go to pot. I also agree that we've come to expect innovation each year.

 

Old toolings - The Flying Scotsman plus railroad teak coaches must fall into that category. With a £125+ rrp, that must be one of their more profitable lines. Pullman coaches - I reckon they're good sellers. Ditto the A4 both railroad and full fat. The 0-4-0 train set stuff must sell as well. I think some of the retailers here have commented that some of the accessory ranges sell well. I'd expect the scaledale stuff to be at the profitable end too. The way that's marketed as add ons to train sets is smart. Outside railways, a scalectrix starter set is probably also in their top ten. Airfix spitfire ditto.

 

On the collector/hobby end of the market, Hornby are noticeably absent from the commissioner market compared to Bachmann and DJM. Whilst awards can be a bit phony, it's got to hurt them to see their competitors win. It's probably a non financial target for the chief product developer to win such awards. Targeting that commissioning market has got to be an effective way of utilising your capacity and renting out your expertise. Perhaps that's part ofwhat they mean when they are talking about developing their relationships with the independent sector,

 

David

[Kelly]

230 staff, cost £ 11mn... That's an average £47k in salary, tax etc.

That 230 staff produce average £240k per head to the revenue figure of £ 55mn.

In my mind this figure is drastically too low.. Employees are not adding enough value to the sales total.

(At let's say a trade price of £60 a loco.. That's 4000 loco's per person ).

 

The £55mn revenue against production costs of £ 33mn, it's low (40%) but profitable until you look at the operating costs..

 

The one that stands out is sales & marketing costs of £12m... Must be getting expensive paying for magazine adverts ???.. £1mn a month ???

Distribution costs have gone up £3mn in a year too... (And I thought oil prices had gone down).

 

It seems that the problem isn't in manufacturing or in margin, but more related to the costs of administering the products once the goods are here.

 

£13mn in stock... @£60 a loco that's 216000 loco's in stock...(so taking into account the 000's of items in the range that must be in the millions of pieces of stock items across everything)... That's a lot of stock...

 

When other suppliers are manufacturing to order, have personnel in low numbers, and maximise their marketing at minimum costs, It feels to me Hornby are still trading in an ethos that goes back to the 80's rather than modern reality.

 

All of that is before we start to question the wisdom of what models they are actually making.

 

 

Don't forget minimum wage and other items went up too. So your figures are a bit simplistic, as there'll be executives on £150k+ and some on a minimum of about £25k.

 

Your figures for stock don't really add up to anything meaningful when items range from pennies to £250+. There could be 1000s of cheap items sitting in stock (perhaps track etc) or 100s of more expensive items (multiple units and the like). Though as you say it is still a large amount of stock to be sitting on, especially with the move to bigger warehouse etc and likely increases in costs incurred with that.

 

Oil prices might have gone down (though that doesn't mean the final price has gone down (look at petrol/diesel prices slowly rising in recent months from around £1/l to about £1.10/l), many other factors are at play. Likely that shipping costs outside of oil prices have gone up significantly, stuff like dock handling charges, tug charges etc.

 

Streamlining the ranges would seem a good idea though. Plenty of items in the ranges many won't miss I'm sure.

 

It should also be considered that in recent years the airfix range has been expanded and a lot of newly tooled kits have been released (with quite a number of them being excellent models). The same is true for the corgi diecast ranges no doubt.

[Ozexpatriate]

£13mn in stock... @£60 a loco that's 216000 loco's in stock...(so taking into account the 000's of items in the range that must be in the millions of pieces of stock items across everything)... That's a lot of stock...

Let's be careful with that stock number. It's not the big driver of the £13.7M loss. It is only 9% over 2014/2015.  It doesn't explain a loss of £0.1m versus a loss of £13.7m.

 

There's a couple of relevant parts of the reporting:

Balance sheet

Group inventories increased during the year by 9% from £12.5 million to £13.6 million due to the overhang of stock from the overall sales shortfall against expectations during the year. Trade and other receivables increased by 26% due to some large sales orders being fulfilled just before year end, with a fall post the year end to £9.8 million at the end of April (2015: £8.2 million). Trade and other payables reduced by £1.7 million largely due to a year on year reduction of stock purchases in the first calendar quarter of 2016. The net effect of these factors was an increase in working capital requirements by £5.6 million (an increase of 41%). Investment in new tooling, new computer software and other capital expenditure was £4.6 million (2015: £5.1 million).

 

In £'000

 

Revenue .......... 55,757

Cost of sales ... (33,992)

 

Inventories:

- Cost of inventories recognised as an expense (included in cost of sales) ... 26,808

From a fundamentals standpoint, 'gross profit' is still positive making Hornby Plc's problem primarily one of expense management, rather than manufacturing and inventory. (I am presuming the inventories to be a part of 'cost of sales'.)

 

The inventories need to be reduced, but the big 'issues' seem to be somewhere else.

 

In my opinion, this is where the 'big rocks' are:

The exceptional items totalling £7.9 million (2015: £0.8 million) include restructuring costs (£1.0 million) relating to the reorganisation of the European management teams and the costs of running the Margate site, impairment of goodwill (£4.0 million) following the decision to restructure the European businesses, impairment of tooling (£1.1 million) following the decision to discontinue certain product lines as part of the new business plan, costs relating to the implementation of the new ERP system (£1.2 million), costs relating to the 2015 equity issue and bank refinancing (£0.8 million) less the profit on the sale of part of the Margate site (£0.2 million).

Most notably the £400m of "impairment of goodwill" in Spain. "Exceptional items" for the previous year totalled £811k. Edited June 22, 2016 by Ozexpatriate

[Clearwater]

Those near year end sales contributed to a pretty large swing in working capital - I think it's note 27 to the accounts that shows the reconcialation of cash to operating profit which despite some large non cash items, eg the Spain write down of goodwill, shows cash outflow in the year

 

David

[The Stationmaster]

230 staff, cost £ 11mn... That's an average £47k in salary, tax etc.

That 230 staff produce average £240k per head to the revenue figure of £ 55mn.

In my mind this figure is drastically too low.. Employees are not adding enough value to the sales total.

(At let's say a trade price of £60 a loco.. That's 4000 loco's per person ).

 

The £55mn revenue against production costs of £ 33mn, it's low (40%) but profitable until you look at the operating costs..

 

The one that stands out is sales & marketing costs of £12m... Must be getting expensive paying for magazine adverts ???.. £1mn a month - and they don't give out free samples any more ???

Distribution costs have gone up £3mn in a year too... (And I thought oil prices had gone down).

 

It seems that the problem isn't in manufacturing or in margin, but more related to the costs of administering the products once the goods are here.

 

£13mn in stock... @£60 a loco that's 216000 loco's in stock...(so taking into account the 000's of items in the range that must be in the millions of pieces of stock items across everything)... That's a lot of stock...

 

When other suppliers are manufacturing to order, have personnel in low numbers, and maximise their marketing at minimum costs, It feels to me Hornby are still trading in an ethos that goes back to the 80's rather than modern reality.

 

All of that is before we start to question the wisdom of what models they are actually making and in what quantity.

 

As I have pointed out previously they area very top heavy company in relation to the size and type of their business and I've no doubt that concentration on core products will mean cuts in the marketing dept as they get shot of all the nonsense about buying licences and coming up with off-core ranges such as most of the Olympics tat.  I have a  feeling a number of folk currently appearing on Linked In when you look at Hornby's marketing side will shortly be in the jobs market, and in one or two cases having to do a lot of self-marketing in order to keep paying the mortgage.

[dibber25]

230 staff, cost £ 11mn... That's an average £47k in salary, tax etc.

That 230 staff produce average £240k per head to the revenue figure of £ 55mn.

In my mind this figure is drastically too low.. Employees are not adding enough value to the sales total.

(At let's say a trade price of £60 a loco.. That's 4000 loco's per person ).

 

The £55mn revenue against production costs of £ 33mn, it's low (40%) but profitable until you look at the operating costs..

 

The one that stands out is sales & marketing costs of £12m... Must be getting expensive paying for magazine adverts ???.. £1mn a month - and they don't give out free samples any more ???

Distribution costs have gone up £3mn in a year too... (And I thought oil prices had gone down).

 

It seems that the problem isn't in manufacturing or in margin, but more related to the costs of administering the products once the goods are here.

 

£13mn in stock... @£60 a loco that's 216000 loco's in stock...(so taking into account the 000's of items in the range that must be in the millions of pieces of stock items across everything)... That's a lot of stock...

 

When other suppliers are manufacturing to order, have personnel in low numbers, and maximise their marketing at minimum costs, It feels to me Hornby are still trading in an ethos that goes back to the 80's rather than modern reality.

 

All of that is before we start to question the wisdom of what models they are actually making and in what quantity.

They don't advertise in the specialist mags any more. Took the view that they were better to advertise in non-specialist publications rather than 'preaching to the converted'. However, model magazine ads are cheap by comparison to most other magazines, so if you take a page in a typical lifestyle magazine, for instance, you can add a nought or two to the price you paid in any of the model mags. I was told by a well respected (former) employee of Hornby several years ago that whenever a new top quality model (for instance the Bachmann Warship) came out, it boosted demand for the cheaper, old models (ex-Lima Warship) from those who could not afford the newer models, and that's why Railroad and the old toolings were kept going. (CJL)

[rue_d_etropal]

I have mentioned it before, but cross subsidising between new products and older ones has enabled Hornby to keep some prices lower(but there is only so much it can be done). The pullman coaches were done this way. I suspect one reason for the prices going up on Railroad models is to keep other prices down.

Given the higher prices for continental HO models, produced in same factories, and therefore costing about same to produce, then cutting back on production of HO models will mean prices for British OO will have to reflect true cost, ie rise in price. Look at the way Bachmann have hiked prices up over past year, as they have less ability to cross subsidise. The European range(Liliput) is a lot smaller.

 

The Spanish part in the mix. Electrotren, although part of Hornby were set up slightly different, initially. Scalectrix probably sells better in Spain than trains, given the nation's support for F1. Some of the Spanish models are shared by other ranges, as the prototypes were not just found in Spain. Some of the Junior models are very good value, so hopefully they will continue.

[adb968008]

Agreed to above, but as I don't have the actuals I can only guess..

 

Looking over the numbers, it doesn't look like manufacturing, the product or product cost is the issue.

Where I'm going is operational efficiency is one problem. Marketing seems to be another.

 

I don't begrudge a higher paid exec, if he's adding value, but What I can't get my head round the marketing departments £12m figure and rationalising that to decisions on advertising spend, product promotion and feeding back to the company results of market research...especially when so many modellers, retailers and even industry publishers have voiced their frustrations here..it's obviously a problem...

 

Sales and Marketing are the deliverers of a companies lifeblood...Money. Bringing in sales is the measure of success..the results they are paid for.

Results are the equation of Skills + Activity.

It is clear the figures haven't delivered. The next step is to look at Activity..and given the negative feedback across the industry this too seems to be a problem, there's only 1 angle left in this triangle.. That's skill...are the sales and marketing people truly inline with the hobby or generic sales /marketing professionals or is it just outsourced consulting ?

 

It's worth pointing out, that until a few years ago, the person occupying this role was a industry respected individual with decades of experience and in every sense a passionate enthusiast. It feels to me there's a huge gap been left since his departure and trying to fill that gap with cash isn't necessarily the answer.

 

Operationally in my industry, a headcount to revenue ratio is approx 15x average salary.

Transpose that ratio to Hornby, 230 staff costing the company £11mn should support a company with revenues of £165mn.. Not £55m.

That is why I conclude Hornby is in some measure a company sized to operate based on past glories.

 

It's got some hard decisions to make across the board, as long as it has support of its shareholders they can pull through, but it's time to recognise Charles darwin's theory that the ability to survive isn't by being the largest or the strongest, but the one with the best ability to adapt to change...

 

That starting point has to be their customer and understanding their needs. It could also take a look at how their competitors are doing things and finally understand how the market has changed around them and look how they can best adapt to serve it...

It's not hard... By understanding a customer demand, recognising what competitors are doing and looking at what's popular we the customers have successfully been offered a 4TC to join our class 33/1 and class 71s... We're also on the verge of a 009 revolution by several manufacturers... Whilst we gripe about price, ultimately if just enough will buy to make it financially viable then that's sales and marketing at its best. That brings results and ultimately sustains a larger business.

Edited June 23, 2016 by adb968008

[blueeighties]

All of this sounds like too little too late to me. For Years now dealers and customers have been giving constant feedback to Hornby which just falls on deaf ears. Having to cut your product range by 40% is a good idea when you sell so much rubbish, but this should have been done Years ago.

[MarkSG]

It worries me that there is a lot of surplus stock that is going to have to be 'sold off' in a structured way. On the one hand Hornby want to support independents, but on the other hand it sounds as if it will be inevitable they will de-value stock in the shops bought at a 'proper' trade price the moment the price slashed overstock hits the streets?

 

That's based on the assumption that the surplus stock is all, or mostly, model railway products. But I suspect it probably isn't. We already know, from the reports, that their core brands - including Hornby itself - are profitable. But we also know they've made some unwise acquisitions and expansions. My guess would be that most of their surplus stock is stuff that, in retrospect, it was a wrong decision to make in the first place. The core, "hobbyist" model railway lines are unlikely to fall into that category.

[Adams442T]

That's based on the assumption that the surplus stock is all, or mostly, model railway products. But I suspect it probably isn't. We already know, from the reports, that their core brands - including Hornby itself - are profitable. But we also know they've made some unwise acquisitions and expansions. My guess would be that most of their surplus stock is stuff that, in retrospect, it was a wrong decision to make in the first place. The core, "hobbyist" model railway lines are unlikely to fall into that category.

 

One further problem in this is that many model shops sell a broad range of products,apart from model railways, slot cars, diecasts, etc. so any 'dumping' of these products will adversely affect them too.  We don't know what is in the frame to be discounted but I don't somehow think it will be a Bonanza for small shops, and even the bigger stores might be reluctant to invest in what will basically be the cr*p that Hornby PLC have been unable to shift.

[Clearwater]

Don't forget minimum wage prices might have gone down (though that doesn't mean the final price has gone down (look at petrol/diesel prices slowly rising in recent months from around £1/l to about £1.10/l), many other factors are at play. Likely that shipping costs outside of oil prices have gone up significantly, stuff like dock handling charges, tug charges etc.

 

gi.

Shipping rates are currently pretty low - the trend to ever bigger ships coupled to China growing at a slower rate has led to a glut in capacity and hence a fall in prices.

 

http://en.sse.net.cn/indices/ccfinew.jsp

 

Other charges like tugs, container handling are pretty low - particularly when you consider how many small red boxes fit into a typical container

 

David

[jjb1970]

I think there are some models which will most likely always have some demand, for example the A3, A4, Duchess, Castle and post steam types like the 37, 47 and 66. Many others will most likely need to make their supplier a return on the first run and then it may be quite while before there is sufficient fresh demand for a re-run. So the arguments about sustained use of tooling is not as simple as saying one approach is correct and the other wrong as it may be that both approaches co-exist within a single range. I think one of the mistakes Hornby has made is flogging some of the steady bankers to death by releasing too many variations of models like the A4 too quickly where I suspect a slower, more extended use of tooling would be more sensible. And I think that this is much more a locomotive issue than model railways in general, a limited batch production approach seems much less clear cut for coaches and wagons (although clearly it can still be applied), if we look at coaches both Hornby and Bachmann have kept tooling in their catalogues for years and still seem to be able to sell the models produced.

Another thing to keep in mind is that it may be a mistake to assume that the ranges Hornby will cut are those perceived by hobbyists as being of poor quality, the products culled will be the least profitable and nobody outside Hornby will really know what these products are. Some of the Railroad and older main range stock will utilise tooling paid for years ago and with very simple assembly and manufacture meaning that they may be more attractive from a financial perspective than some of the super detail models. The downside to that is that if Hornby want to concentrate on the "serious" end of the hobby then it is the newer super detail (and I'd argue the newer Railroad tooling too) that they need to concentrate on to meet the expectations of that market.

I think that Hornby are indeed facing some quite profound choices. They're facing increasing competition for the big ticket locomotive items from smaller rivals with nothing like the costs of Hornby (or Kader) and who in some cases can further reduce costs by selling direct. In business as in many things timing is critical, I think their shift to an emphasis on direct sales was premature but in the longer term I suspect it will be seen in retrospect as being essentially poor timing rather than a fundamentally bad idea given the changes in specialist retailing. Will Hornby continue to offer a traditional catalogue range or will they move to a pre-order system? I suspect many (most?) modellers want the former but from a suppliers perspective the second has undeniable attractions. Can they maintain all the overheads associated with a traditional business when their rivals are increasingly small privateers with minimal staffing and premise costs? So far so negative however they are still the only model train supplier with a recognisable brand name to anybody not already part of the hobby, they do still have a lot of loyal and enthusiastic supporters and the quality of their product is as good as any of their rivals if comparing like for like (ie. not comparing the old Limby and Railroad stuff with the latest super detail stuff from rivals). Although the ERP introduction has been painful it will offer huge opportunities for Hornby to improve efficiency and optimise their business processes as it beds in. They do seem to have a turn around plan and most importantly that plan is clearly sufficiently credible to secure the continued support of their bankers and principal shareholders. So whilst Hornby are still in a bad place I don't think it is irrecoverable and provided they manage their turnaround plan well (admittedly a big if) I think they can recover.

[jjb1970]

Shipping rates are currently pretty low - the trend to ever bigger ships coupled to China growing at a slower rate has led to a glut in capacity and hence a fall in prices.

 

http://en.sse.net.cn/indices/ccfinew.jsp

 

Other charges like tugs, container handling are pretty low - particularly when you consider how many small red boxes fit into a typical container

 

David

If Hornby shareholders want to cheer themselves up they could take a look at the maritime sector. The big Korean ship yards are in crises (some were recapitalised a few months ago by the Korean government and are already putting out feelers for another injection of cash), ship owners are still struggling and many of those who financed ships are in a catch 22 in that they either put the squeeze on ship owners and risk mass bankruptcies and flooding an already troubled the market with nearly new tonnage worth peanuts or keep supporting corpses. Not a pretty sight.

[Marcoblanco]

Getting back to the subject of Hornby profits, I personally do not believe Hornby can acheive sales volumes at the prices indicated by both Bachmann and Hornby as viable and necessary for the foreseeable future.

 

Why?

 

Because the market is awash with models of current-day quality at one third to a half that price, like these below.

 

A Bachmann Standard 5MT BR green 73014 model from 2002 sold as shown by Hattons for UKP50 last week to me, described by them as weathered but actually mostly just layout dust. Full detailing already on. Well applied too.  A type of model you can hardly give away these days, green 5MTs.. black ones fetch a fraction more especially Southern Region ones.. maybe UKP60-70

 

73014_5MT_Standard_1ab_r1200.jpg

 

A Hornby Royal Scot 7P BR green 46102 'Black Watch' bought by me new about 7 years ago for probably about UKP80  now worth about UKP50, was displayed on a shelf for the last five years, rather embarrassing house dust, detailing added by me. 

 

46102_Royal_Scot_1a_r1200.jpg

 

Both model are just the same, apart from dust, as new models at prices near cUKP150 new, the market is awash with quailty s/h models, admittedly many are damaged, but many are not, just try and sell a mint Hornby N15 or Royal Scot on Ebay you'd be lucky to make fifty pounds. 

 

For what it's worth I touched up the lamps on the 5MT and altered colour saturation and balance on both pics but they are otherwise cropped straight from the camera.

 

While we watch UKP75-99 mint new Hornby models sit on the shelves at big box-movers, B1s, S15s, K1s, A4s, A3s, what hope new production? The market is in my opinion over-supplied right now. I will still buy a B12 and two MNs at least,  but volume sales? I don't know.

 

I saw a TTS sound Duke full detail version for under UKP55 just now, with VAT off,  sound not working, but mint,     I DO like a bargain!  

Edit; but no, for around that price and a few quid more, how about a new K1 or B17?

 

Apologies if you think I'm too negative but these are my honest thoughts.

yes you are right same with diesels.. I haven't bought new for years.. I go to the Bay when I want to get something at a fair price. The market is awash.

[Coryton]

Those near year end sales contributed to a pretty large swing in working capital - I think it's note 27 to the accounts that shows the reconcialation of cash to operating profit which despite some large non cash items, eg the Spain write down of goodwill, shows cash outflow in the year

 

David

 

Goodwill is an interesting example of how profit and loss is not straightforward.

 

If I remember correctly from an accounting course a few years back, if a company considers itself to have built up goodwill it can't include it in the accounts. However, if it buys another company, it can then include whatever part of the sale price was considered to be for "goodwill" on the balance sheet.

 

So if - to take a simplistic example - company A buys company B for £10M, getting £6M worth of machinery, stock etc. and the rest is considered goodwill, the £10M outgoing is balanced by £10M in assets and shows no net change in profit and loss.

 

If later it becomes clear that the goodwill was worthless at the time of purchase (and I'm not saying this is what has happened to Hornby), you end up with a £4M loss in a later year, which by rights should have gone into the year company B was purchased. Of course whoever is in charge when this happens might not be the person who agreed to buy company B for £10M....

 

I find it fascinating that something as fundamental seeming as profit and less can depend on such intangible concepts as goodwill - which incidentally shows why there can be so much uncertainty over the correct amount of corporation tax companies should pay.

 

This is of course not the only subjective part of profit and loss. You have to decide how much stock is worth, how much risk you are carrying for goods that have been sold and are still under warranty, what rate to depreciate equipment at etc. etc. 

[Dunsignalling]

Shipping rates are currently pretty low - the trend to ever bigger ships coupled to China growing at a slower rate has led to a glut in capacity and hence a fall in prices.

 

http://en.sse.net.cn/indices/ccfinew.jsp

 

Other charges like tugs, container handling are pretty low - particularly when you consider how many small red boxes fit into a typical container

 

David

I don't really think shipping costs have much impact on model prices for exactly the reason you give at the end of your last sentence.

 

Whether they average out at 6p per loco or 2p, it's not going to make a whole lot of difference to anyone in the chain other than the ship operators.

 

Hornby simply won't be using enough containers per annum for the cost of transporting each one to significantly affect their own accounts.

 

John   

Edited June 23, 2016 by Dunsignalling

[Clearwater]

@coryton

 

I agree - that's why when I look at accounts I tend to add back/deduct non-cash items. Cash is, was and shall be King!

 

To me goodwill write off signifies that management overpaid for an acquisition and the new team is taking as much loss through as possible whilst they have the chance!