Hornby's financial updates to the Stock Market

[Ron Ron Ron]

.....it seems at odds with the huge and expensive improvement in games graphics which are lost on a smaller screen. ....

It's easy to Airplay a game onto an HD TV screen.

[Chris M]

The correlation of model making to an interesting prototype to model also needs to be made. The railways used to appear interesting and reached most places where people lived. Judging by what happens locally when a special train appears locomotives (steam and diesel) remain a draw, multiple units aren't to the same extent. 

 

The recent Great Central Rly show may just perhaps be the first one that might reverse the trend; get people to a model making show where there is a related prototype alongside that has wide appeal.

 

 

Warley club has always felt this way which is why there is always at least one real loco at the NEC show, admittedly only on static display.  Exhibiting at the SVR Engine House was a very good experience this year with layouts in amongst the real thing. This is a smaller event than the GCR but a nice one.

Edited June 29, 2017 by Chris M

[Roy Langridge]

Warley club has always felt this way which is why there is always at least one real loco at the NEC show, admittedly only on static display. Exhibiting at the SVR Engine House was a very good experience this year with layouts in amongst the real thing. This is a smaller event than the GCR but a nice one.

I loved seeing the two Vale of Rheidol locos at Warley last year. Made my day.

 

Roy

[Crantock]

Have either of them got the odd 25 million quid to spare?

But lets be honest, thats the problem.  These are all very small businesses.  Bachmann Europe turnover £15.4m (UK £12m)Operating profit £260k.  Hornby turnover £56m (UK£43m) Operating profit - would be nice. 

 

The LSE has about isted companies.  They publish data and you can sort by market cap.  Hornby may be big to us but its around 1400 on the list.   Neither of these companies really have the resources to reinvigorate themselves or change a market.

[DonnyRailMan]

Have either of them got the odd 25 million quid to spare?

 

I understand / been told there is people in management from Athearn over at the minute.

[Crantock]

I understand / been told there is people in management from Athearn over at the minute.

Thanks but lets all bear in mind this is a Plc subject to a takeover offer so we need to be wary on posting inside gossip and tactful as there are employees whose jobs might be impacted.

[Ozexpatriate]

There needs to be a cost effective way of getting people into the hobby so they can enjoy building a reasonable layout in decent time and decent cost.If not, people will just get dejected and never give it a go. An oval of track with a loco and two coaches doesn't do it for most folks these days compared to maybe a simulator on your PC or iPad that gives you more for less. That's where the battleground should be , encouraging more people to give the hobby a go.

More than anyone, Hornby has invested here.

• They have the RailRoad range for lower cost of entry
• They have multiple (relatively) cheap and cheerful trainsets (there are 6 under £100, including two Thomas and the Santa set)
• They have layout operating software to engage the 'connected generation'
• They introduced low-cost sound to add play-value
• They re-launched the Collectors' Club aiming it at youngsters (not what RMwebbers call "Collectors")
• They built their on-line forum to encourage brand-specific discussion amongst people, many of whom do not appear to be relatively new to model railways (being the point of the forum)

Where did it get them?

 

Recently here on this thread multiple posters have commented that Hornby needs to focus on the 'future of the hobby'. I believe that they have tried really hard to do just that.

 

My observation is that it wasn't working. It feels like the selection of train sets is declining - perhaps that's observational bias on my part. On the website right now, excluding the Junior and and the Arnold N set, there are 14 train sets and of these two are Thomas and one is the Santa set. In the remaining 11, three are only available from retailer stock. The only train set that you can pre-order is the perennial Flying Scotsman set - which suggests to me that this is the one that actually sells in any volume.

 

Based on the financial statements it is clear that their core UK railway business remains their largest share of revenue and (I believe) this is mostly from selling to adult enthusiasts. (It's actually very hard to tell from the financial statements.)

 

What is clear is that Scalextric is underperforming. No amount of selling trainsets to children will fix Scalextric.

[Ozexpatriate]

Not all older modelers are rich so there is a market for it. For every highly detailed layout here there are 1000's more out there where anything goes and its bought on a budget regardless of if they are 7 or 70 years old.

Certainly, and for such customers, there is the Railroad range.

 

Similarly the US manufactures have multiple tiers (from high-end through mid-spec to low-end)

 

Athearn has Genesis, Ready-to-roll and Roundhouse.

Atlas has H0 Master, H0 Classic and H0 Trainman

Walthers has Proto, Mainline and Trainline

 

Regrettably, Hornby made a dog's breakfast of delineating their high-end versus low-end lines, so introducing a mid-spec line would be very tricky for them, but there is no question that the Railroad range is intended for budget-conscious enthusiasts and youngsters alike.

[Ozexpatriate]

Have either of them got the odd 25 million quid to spare?

But lets be honest, thats the problem. 

I think you'll find the original comment was rhetorical.

[Chris M]

Hornby put the wrong people in charge a few years back; they had no understanding of the business they were in. I believe they now have people who understand the hobby in charge again. There are signs that Hornby are moving forwards with fresh thinking. They now have a link up with Hornby magazine which will probably be good for both organisations and they have a battery powered radio control toy train set under development. We don't know how this will work out but it shows they are working hard on improving with new ideas. I hope this BPRC set does really well as it brings the toy train set up to date. Reduced cost, plastic track and no wires are all good for starters.

 

As an N gauge and G gauge modeller I have no direct interest in Hornby products but I wish them all the best for the future.

[Legend]

Hornby put the wrong people in charge a few years back; they had no understanding of the business they were in. I believe they now have people who understand the hobby in charge again. There are signs that Hornby are moving forwards with fresh thinking. They now have a link up with Hornby magazine which will probably be good for both organisations and they have a battery powered radio control toy train set under development. We don't know how this will work out but it shows they are working hard on improving with new ideas. I hope this BPRC set does really well as it brings the toy train set up to date. Reduced cost, plastic track and no wires are all good for starters.

As an N gauge and G gauge modeller I have no direct interest in Hornby products but I wish them all the best for the future.

The last management gets a lot of blame. I think the main error was going for direct sales and alienating their existing dealer network. No catalogue was also an issue. However don't let's forget it was the previous management (Frank Martins time)did a lot of damage:-

 

The complete failure to secure their manufacturing supply chain , leading to starvation of models for 2 years

The Olympic fiasco

Mix up between Railroad and main ranges, 5 pole/3 pole, moulded smoke darts & handrails or not - you never really knew!

Announcing design clever . I still think the concept was sound. How it was rolled out was not.

Edited June 30, 2017 by Legend

[RJS1977]

Not all older modelers are rich so there is a market for it. For every highly detailed layout here there are 1000's more out there where anything goes and its bought on a budget regardless of if they are 7 or 70 years old.

 

£30 for one wagon could be a huge wad out their state pension.

 

.

 

Yes, and in the case of wagons, you don't normally need one (unless it's something specialised like a flask wagon), you need 5-10 of them!

[No Decorum]

Quite right. I have long since accepted that a train costs more than the locomotive which pulls it.

[RJS1977]

More than anyone, Hornby has invested here.

• They have the RailRoad range for lower cost of entry
• They have multiple (relatively) cheap and cheerful trainsets (there are 6 under £100, including two Thomas and the Santa set)
• They have layout operating software to engage the 'connected generation'
• They introduced low-cost sound to add play-value
• They re-launched the Collectors' Club aiming it at youngsters (not what RMwebbers call "Collectors")
• They built their on-line forum to encourage brand-specific discussion amongst people, many of whom do not appear to be relatively new to model railways (being the point of the forum)

Where did it get them?

 

Recently here on this thread multiple posters have commented that Hornby needs to focus on the 'future of the hobby'. I believe that they have tried really hard to do just that.

 

My observation is that it wasn't working. It feels like the selection of train sets is declining - perhaps that's observational bias on my part. On the website right now, excluding the Junior and and the Arnold N set, there are 14 train sets and of these two are Thomas and one is the Santa set. In the remaining 11, three are only available from retailer stock. The only train set that you can pre-order is the perennial Flying Scotsman set - which suggests to me that this is the one that actually sells in any volume.

 

Based on the financial statements it is clear that their core UK railway business remains their largest share of revenue and (I believe) this is mostly from selling to adult enthusiasts. (It's actually very hard to tell from the financial statements.)

 

What is clear is that Scalextric is underperforming. No amount of selling trainsets to children will fix Scalextric.

 

Unfortunately the Railroad range isn't large enough and a lot of what is in it isn't really relevant to younger modellers:

 

1) Beyond Smokey Joe/101/08 there isn't much in the way of tank engines (Jinty and 57XX make occasional appearances but not regularly enough to act as a 'stepping stone'). Most of the locos are 'big engines' retailing at close to the £100 mark. There should be for at least each of the Big 4 at least one tank engine, one 'small tender loco' (Dean Goods etc) and one big engine.

 

2) There aren't really any contemporary items in the range - most of the diesels are 1970s Rail Blue for example. Apart from preserved lines, young people today aren't going to have any experience of them. There needs to be at least a Railroad HST and IEP, and a 66 as well.

 

Net result is if a parent buys a train set, there's not a lot to expand the collection with, so the child loses interest and the set gets binned rather than becoming a hobby. There's an increasing realisation that young people are spending too much time on screens and a need for things that different generations can do together.

 

Ultimately Hornby has a choice. It can either:

 

a) Continue to concentrate its efforts on selling 'high end' products to a market which is dwindling as people die off/get priced out, which will eventually lead to the company's demise

 

or

 

b) Make genuine efforts to reach younger/less pecuinious modellers (and parents) with a relevant, broad, range of budget items and advertising/marketing to suit. Yes, it's a high-risk strategy but it offers the prospect of a longer-term future if it can be made to work.

[Legend]

I think it can do both though. Trouble is it's been mixing them up and it's not at all clear which range is which.

 

I do think companies need to be much more cost conscious . Over the last 5 years for whatever reason , some valid, some debatable, costs have risen considerably. There can be no doubt that this has affected the market .

[Coryton]

More than anyone, Hornby has invested here.

• They have the RailRoad range for lower cost of entry
• They have multiple (relatively) cheap and cheerful trainsets (there are 6 under £100, including two Thomas and the Santa set)

 

But at the bottom end of the range, they generally haven't invested in tooling - they are using old tools so there isn't much that is contemporary. (And of course they may be right to do so - the return on investment of doing otherwise might not justify it).

[Coryton]

Hornby put the wrong people in charge a few years back; they had no understanding of the business they were in. I believe they now have people who understand the hobby in charge again. There are signs that Hornby are moving forwards with fresh thinking. They now have a link up with Hornby magazine which will probably be good for both organisations and they have a battery powered radio control toy train set under development. We don't know how this will work out but it shows they are working hard on improving with new ideas. I hope this BPRC set does really well as it brings the toy train set up to date. Reduced cost, plastic track and no wires are all good for starters.

 

 

If you mean the "Hornby Junior" set then this seems to be not BPRC but BPPB (battery-powered-push-button) - push button on roof it goes forwards (one speed), push button and it stops.

 

And as for "under development", it seems to be a re-badging of an existing Italian prototype set.

 

All rather a disappointment.

[Legend]

But lets be honest, thats the problem. These are all very small businesses. Bachmann Europe turnover £15.4m (UK £12m)Operating profit £260k. Hornby turnover £56m (UK£43m) Operating profit - would be nice.

 

The LSE has about isted companies. They publish data and you can sort by market cap. Hornby may be big to us but its around 1400 on the list. Neither of these companies really have the resources to reinvigorate themselves or change a market.

It's not Bachmann Europe that would take them over , though, but Kader who own Bachmann . Because of pricing and competition, hopefully never. Edited June 30, 2017 by Legend

[The Johnster]

The Railroad range confuses me a little.  As I understand it, the intention is to provide cheaper alternatives to customers who jib at between £100-200 for a loco, and to use older stock that will not cut the mustard with more discerning punters who don't jib at such prices in order to entice younger enthusiasts into the hobby.  It is not a bad idea, especially as an enthusiastic youngster starting out, someone like me when I was about 12 years old and tying to motorise Airfix construction kit 61xx with Triang Black Princess chassis chopped to length with a hacksaw, who can obtain a tolerable but detail poor model cheaply and gain experience by detailing it up into something better.  The current incarnation of the Jinty is such a beast at £45.  But where does that leave a Crosti 9F at £154.  There is a sort of lack of consistency with this approach; the Crosti needs to be either a proper 'full fat' model at that price or firmly 'Railroaded' for half of it; if H cannot sell it at a profit without doing either or both of those things, it needs to be withdrawn from the range as not viable.  This is just one example.

 

I am definitely in the category of 'poor pensioner' mentioned earlier, and have attempted to model in a way that is within my means, with some success, by choosing to build a small and basic BLT which is all my rented flat has room for anyway, and which requires no more than 6 locos, 20 goods, and 5 passenger vehicles tops.  I say only 'some success', because i have more than I need and am still buying, and have spent far too much this year so far especially on locos, but that's my problem and for me to sort out; Hornby are helping by having already provided all the stock i will need from them.  if I am typical of my demographic, (and I should be or it's not a demographic) I am a very bad customer indeed for any rtr business.  They clearly need to focus on marketing to people with more disposable income and space to build railways in, by definition homeowners, by selling big express locos that need to pull long trains of coaches at £40 a pop on big layouts; to be fair H have done their best at this and, while some of their management over the last few years got it a bit wrong, they are really victims of an economic situation they have no control over, i.e. recession in the West and rising costs in China.

 

If the rumour of Athearn's interest is true, I wonder how a big US firm will adapt to the size of a typical British home and the size of the disposable income that goes with it; if they are expecting the sort of volume sales they may be used to in the UK, they will not stay long...

 

I think if I were Oxford I'd be going into vulture mode in case there is a carcass to pick over for bargains a few years down the line, or earlier if the receivers are called in.  Or the Chinese, who have the tooling, might decide to hava a go themselves!  Expect mass withdrawals and concentration on Flying Scotsman and the big sellers, 'Collector's editions' and such, and buy now folks!  Lord and Butler have 42xx brand new in box for less than £100!

[DonnyRailMan]

The sad thing is the US steam locos that Athearn produce are uglly looking naff things not a patch on class of Gresleys, Peppercorns , Staniers 4 6 2s.

[grahame]

It's a takeover battle apparently -

 

http://www.telegraph.co.uk/business/2017/06/21/battle-control-toy-train-company-Hornby-triggers-full-takeover/

 

G.

[NickC]

It's a takeover battle apparently -

 

http://www.telegraph.co.uk/business/2017/06/21/battle-control-toy-train-company-Hornby-triggers-full-takeover/

 

G.

No it's not. The intricacies were discussed and explained in detail in earlier posts.

Simply put Phoenix bought New Pistoia's shares taking it to over 50% ownership of Hornby thus under the stock market rules it must make an offer for all remaining shares, but the remaining shareholders are not mandated to sell. As Roger Canham is also chairman of Phoenix, then by the rules, he has to resign as chairman of Hornby whist the process takes place.

[Ozexpatriate]

But at the bottom end of the range, they generally haven't invested in tooling - they are using old tools so there isn't much that is contemporary. (And of course they may be right to do so - the return on investment of doing otherwise might not justify it).

Why would they spend a lot of money on tooling for cheap locomotives, when tooling for high-spec locomotives will return more profit?

 

All the discussion around expanding the low-margin budget-conscious range presumes that the PLC first can return to profitability. In the meantime if they make more profit on the same investment selling high-spec models to adult enthusiasts for the same (or perhaps slightly marginally more) tooling investment what should they do? 

Edited June 30, 2017 by Ozexpatriate

[Ozexpatriate]

The sad thing is the US steam locos that Athearn produce are uglly looking naff things not a patch on class of Gresleys, Peppercorns , Staniers 4 6 2s.

I'm not sure how the appearance of US locomotives is in anyway relevant.

 

Perhaps you were being glib and I missed the point?

[Legend]

It's a takeover battle apparently -

 

http://www.telegraph.co.uk/business/2017/06/21/battle-control-toy-train-company-Hornby-triggers-full-takeover/

 

G.

No it's not. All that's happening is Phoenix are buying out the second shareholder and have to make a bid for remaining shares. Essentially it's business as normal and the existing plan.

 

That report is dated 21/6 we've already covered it