Hornby's financial updates to the Stock Market

[jjb1970]

Some of the Rivarossi Italian models have been very heavily discounted over the last couple of years, I've picked up some superb models such as the E444R, E326 and ETR401 at discounts of around 50%. I also got a couple of the outstanding Lima Expert E636's at very nice discounts.

One of the mysteries of Italian models is the relationship between Lima Expert and LE Models. I believe both companies have denied a link but I have models of the E636 and E646 from both companies and they're identical, the packaging is also identical. Whether Lima Expert designers went to LE to go on their own, whether the tooling is shared or whether the factory ripped one of them off I have no idea but the similarities are too marked for it to be happenchance IMO.

[The Stationmaster]

If it is true that Hornby make little profit from models like the Peckett and Sir William Stanier pacific, then they really don't deserve to survive. Making a model that demand for easily exceeds supply and yet generates little profit is a completely illogical and unsustainable business model. The parallel case that springs to mind is the British Motor Corporation and the original Mini. It's nice to see that British management "expertise" is alive and well. Makes you wonder about certain current political developments, though...

 

The simple fact is that we don't know what profit Hornby make on a Peckett, or on anything else, and they sure aren't going to tell us.  the only way we will find out if certain models are profitable will be to see if they survive in the future in their catalogue - and I don't mean Year 2 and Year 3 re-releases with minimal changes.   I sincerely hope they have got themselves out of that dead end approach for many of their models where they have badly misjudged markets (so I hope it won't return with their 'consultant' because it seemed to happen during his era of past employment with the company).

 

Judging by prices from other manufacturers and commissioners I suspect the models mentioned are profitable provided that they have been made and sold in sufficient numbers to cover the investment.  But what might be profitable to a small concern such as Oxford or a commissioner such as Kernow or Hattons is a very different kettle of fish from profitability for Hornby with its large managerial and overhead costs.

[Ron Ron Ron]

...That's very interesting - 30% of sales to children, not 30% of sales are of train sets and Railroad stock.

 

Now this presumably includes parents/grandparents etc. buying a train set out of nostalgia that gets used once and chucked away (still a sale, but not likely to lead to more), but it's still a lot higher than you'd think from reading discussions here.

 

Those figures given by Hornby, 10 years ago, would relate to sales in the early to mid-'noughties. 

The situation may be very different today.

In that period the Thomas range was a big'ish seller and the Hogwarts sets were a very successful product for Hornby.

The former is still sold, but doesn't appear to sell in the same volumes (our trade friends may comment on this), and the Hogwarts line finished many years ago.

Also, the number of High St. toy outlets that sold this stuff, has significantly diminished.

The concessions in various retail stores have also gone.

 

.

[apollanaut]

I appreciate the very fine and generally well-written contributions to this thread, and my own take on it is that the future lies in 00 models of quality, with trainsets at best as a sideline, albeit profitable, in the future.

 

Hornby are very good at this RTR manufacturing of outstanding models, the market may have shrunk but I don't see it disappearing. The fascination of such as fine model ships in an office reminds me of the pleasure of simply looking at a very fine model 'Duchess', with or without a layout, these models are simply beautiful in their own right, and are of an age many of us know about, whether it be Edwardian, WW2 or 1960s-on.

 

I grew up with gauge 1 NZR models hand-made by Frank Roberts in the 1930s for the 1940 NZ Centennial Exhibition' which were truly superb, a whole wall in my father's office was glass-covered cabinets full of these, so I am familiar with modelling of the highest calibre and Hornby both UK and International are 'up there' in 00 models of similar quality, all power to them.

 

A lot of my thinking may be wishful, but even at the lower investment rates of today from Hornby and Bachmann I wish them well and think that intelligent management of costs, wise marketing by people who understand good models and their buyers, is the way to profit and sustainability.

 

In short, quality RTR 00 is the best, the trainset thing is a good and sustainable companion.

 

That's my twopennyworth. I enjoy this thread, armchair or not! 

 

Hi Rob, I was thinking along similar lines earlier today with regard to Hornby.

 

I still have some of my old Hornby models from the 1970's, and whilst I'm still fond of them for what they are, there is simply no comparison with the superb models Hornby have turned out (for the most part) in recent years. And not just in terms of improved detail and decoration, but performance as well. After acquiring a new property with plenty of room, I have finally been able to set up a demo layout of decent size in order to experiment with track formations and actually run some of my extensive collection of Hornby and Bachmann OO locos. I have been hugely impressed with the running qualities of most modern locomotives when compared to my older models, both in terms of power and reliability.

 

But overall, I have to say that the Hornby locos are consistently outstanding in terms of performance, from the top-of-the range sound-fitted Britannias, Duchesses and Black Fives all the way down to the cheapest budget Railroad loco. The performance of my Bachmann locos is less consistent by far. The best are as good as Hornby, quiet, smooth and powerful, but I've been a little disappointed with some others in terms of haulage power, reliability and running qualities through complex track formations. And a handful are real clunkers. I eagerly acquired an updated, sound-fitted Bachmann Class 40 but did not get to test it until the warranty had expired. Imagine my disappointment at the jerky, intermittent stuttering caused by excessive amounts of non-conducting grease. This beautiful-looking (and expensive!) machine is now consigned to the Naughty Box until I summon up the courage to dismantle and clean out the insides. I live in New Zealand, so returning it to Bachmann for repairs isn't an option.

 

My lovely Bachmann sound-fitted Jubilee had an unreliable drawbar coupling which meant the wires between the loco and tender were taking the weight of the whole train. I only noticed this problem when it stopped working because the teeny-tiny wires had all been pulled out of the socket under the strain. So she is also banished to the Naughty Box until I acquire the necessary tools to fix it and the magnifying glass needed to even see the wretched wires!

 

My most recent purchases have all been TTS-fitted Hornby steam locos, all of which look and sound great and have worked flawlessly from the moment I placed them on the track. Six months later they are still going strong without any maintenance or attention needed from me.

Edited November 20, 2017 by apollanaut

[adb968008]

The simple fact is that we don't know what profit Hornby make on a Peckett,

One would be forgiven for concluding they made a loss given the scarcity of production of these things.

They did the right thing in not initially over supplying them, but it’s a year now down the road and no sign of a follow up reaching the shelves.

 

I would hope a company producing on the scale of Hornby would have a good enough relationship with its suppliers that something at a minimum could have been swapped in the schedule to get more made.

I know these things are booked years in advance, but other much smaller entities have managed to squeeze some extras in or out of a schedule, cancellations do happen and we all know delays happen... indeed the follow up Peckett is one of them.

[Caledonian]

We obviously don't know what's going on with the Pecketts, but the initial follow-up in the shape of the black Lilleshall one was originally intended to be out by now with release delayed until March, but then followed about a month later with another green one and then a third before christmas. 

 

There is a suspicion therefore that, with it selling out on pre-order, Hornby did indeed do some negotiating and managed to swop the original Lilleshall slot for a bigger one but slightly later in the year

[Andy Hayter]

One would be forgiven for concluding they made a loss given the scarcity of production of these things.

They did the right thing in not initially over supplying them, but it’s a year now down the road and no sign of a follow up reaching the shelves.

 

I would hope a company producing on the scale of Hornby would have a good enough relationship with its suppliers that something at a minimum could have been swapped in the schedule to get more made.

I know these things are booked years in advance, but other much smaller entities have managed to squeeze some extras in or out of a schedule, cancellations do happen and we all know delays happen... indeed the follow up Peckett is one of them.

 

If Hornby had all its production eggs in one basket as it did with Sanda Kan then I might agree with you, but with its production split between half a dozen or so companies its position at any one of them does not add up to a whole load of beans.  [That is not a criticism of the current strategy, just a statement of fact.]

 

So the only opportunity to make more Pecketts would be to delay a run of something else - Wainwright H perhaps.  

 

I think you and others just have to be patient (perhaps next weekend we will have a new view on things).   The one thing they do not want to do is pre-plan 6 runs of more Pecketts only to find the market demand is for just 2 as Mike (Station Master) alludes to.

[adb968008]

If Hornby had all its production eggs in one basket as it did with Sanda Kan then I might agree with you, but with its production split between half a dozen or so companies its position at any one of them does not add up to a whole load of beans. [That is not a criticism of the current strategy, just a statement of fact.]

 

So the only opportunity to make more Pecketts would be to delay a run of something else - Wainwright H perhaps.

 

I think you and others just have to be patient (perhaps next weekend we will have a new view on things). The one thing they do not want to do is pre-plan 6 runs of more Pecketts only to find the market demand is for just 2 as Mike (Station Master) alludes to.

I think you misread me,

I don’t need to be patient, I’ve got 3 already.

 

Thing is, do I need another 3 ?, after all I’ve got Barclays to chose from, and quite possible Warley may spring another surprise.

 

Thats the point I’m trying to make, the desirability of Pecketts could be about to wane, I initially ordered 3 little black ones, but since cancelled two, and I may not bother with the other two Green ones as it seems the market is supplying greater variety and catching up.

 

I can easily disperse a dozen industrials on my layout, but with limited choice, colour (or Black) made up for it, the Peckett was a breather from J94’s and kits, but with two more rtr choices to pick from, and maybe a third, I can think now of being a but choosey, where as 12 months ago i’d Gladly take as many Pecketts as I could get.

 

18 months between releases may have been too big a gap, indeed were heading on 2 years since the first three sold out to advance pre-orders. Chinese production isn’t the golden egg it’s supposed to be when suppliers have the companies over a barrel in both supply and price, meanwhile on another thread a limited edition 500 run of the BSC Janus is on the scene, and I was chastened for suggesting supply of those may not be so easy to come by down the road so buy them whilst there here.. yet look at the Peckett supplies and that wasn’t limited.

Edited November 20, 2017 by adb968008

[Legend]

One would be forgiven for concluding they made a loss given the scarcity of production of these things.

They did the right thing in not initially over supplying them, but it’s a year now down the road and no sign of a follow up reaching the shelves.

I would hope a company producing on the scale of Hornby would have a good enough relationship with its suppliers that something at a minimum could have been swapped in the schedule to get more made.

I know these things are booked years in advance, but other much smaller entities have managed to squeeze some extras in or out of a schedule, cancellations do happen and we all know delays happen... indeed the follow up Peckett is one of them.

I think it’s a big leap to conclude there was no profit on Pecketts because they were scarce.

 

My reading is that the Pecketts were fantastically successful. The initial batch sold out in weeks. Hornby had secured manufacturing slots for a specific number and the manufacturing plant could not accommodate an extension to production or an additional run. That’s it.

 

One of the down sides of not having your own manufacturing facility is this lack of flexibility. We do not know but I bet Hornby have to book slots at factories a long time in advance and therefore you cannot extend or drop runs easily.

 

As to profitability. Yes the Peckett is a well engineered exquisite model and more complicated than say a Railroad Jinty, but if you can make and sell these at £30-£40 a go I’m sure there’s Profit in a Peckett at £80-£90. If they can’t adaquately cost an item and know how much money they will make things are indeed dire at Hornby, but I somehow doubt it.

Edited November 20, 2017 by Legend

[phil gollin]

.

 

The Pecketts are an interesting case.

 

For their size, they are too expensive for a child's toy, but they ARE detailed (and fun/attractive) enough to attract adult collectors and "proper" modellers.  They were popular.  Indeed, their popularity has led to a cascade of similar locos.  (Indeed, the "Holy Grail" would seem to be coming in the shape of the extremely popular SECR livery on a small [P-class] loco.)

 

This shows that companies can tempt modellers out of their ruts and buy cute locos.  Hornby really "should" have got their black/red Lilleshall out for this Christmas, by the time their three Pecketts are out next year their competitors will be producing equivalent models.

 

Hornby "stole a march" on the rest, but threw it away.

 

.

[Coryton]

I think it’s a big leap to conclude there was no profit on Pecketts because they were scarce.

 

 

I don't follow that either.

 

We can assume that they set a price to make a profit (either immediately or in the longer term over subsequent runs). This may or may not have been based on all the first batch selling at full price.

 

But they did all sell at first price, and quickly, so they will have made at least as much as they expected.

 

Now, if they had been able to make more, or if they'd set a higher price, they would presumably have done better than they did. But they've still done better than if some of them ended up hanging around in their warehouse for years.

[Mike Storey]

Some of the Rivarossi Italian models have been very heavily discounted over the last couple of years, I've picked up some superb models such as the E444R, E326 and ETR401 at discounts of around 50%. I also got a couple of the outstanding Lima Expert E636's at very nice discounts.

One of the mysteries of Italian models is the relationship between Lima Expert and LE Models. I believe both companies have denied a link but I have models of the E636 and E646 from both companies and they're identical, the packaging is also identical. Whether Lima Expert designers went to LE to go on their own, whether the tooling is shared or whether the factory ripped one of them off I have no idea but the similarities are too marked for it to be happenchance IMO.

 

I have noticed something similar going on too, but with the Dapol Silver Bullet China Clay wagons. Modelbahn Union have just released, what appears to be, the identical wagon, both in pristine and in weathered condition, at a very similar price to Kernow. I am no expert on these and do not have one of either, but the pictures look pretty identical. Being a ferry wagon, I guess the fact that one is sold as 00 and the latter as HO makes next to no difference, but even if it has been re-sized, it seems a strange model for a German manufacture to have splashed out the full cost of development on, given they are restricted to only two flows in the whole of Europe that I am aware of. Especially as it is the only wagon they sell under their own brand.....

 

Incidentally, Modelbahn Union, Dortmund, are a main dealer for Dapol (and Hornby, Peco and Bachmann). Quite unusual in Europe.

 

Is some clandestine cooperation going on? Good for the industry I would guess, but a bit confusing for the punters. Anyway, if you missed the boat on Dapol's wagon, here is your second chance, at RRP 49.99 euros for the weathered version, and 45.99 euros for the silver one......

[DonnyRailMan]

Will Hornby survive with these new appointments of people at the helm now.

[it's-er]

Will Hornby survive with these new appointments of people at the helm now.

I am sure we all hope so. What I don't understand is what is in it for Lyndon Davis. He has been head and owner of Oxford Diecast, which apparently makes a good profit, and is a real mold breaker in its markets, setting new standards - and making wonderful ranges of products for us to enjoy.

 

Now he is head of Hornby, where things seem rather more uncertain, and Hornby has bought 49% of his business. I'd have thought that is a bad deal for him - I'm sure I would have steered clear of that, because of the risks involved for Oxford Diecast. Is anyone with reasonable knowledge of business finance and corporate matters able to comment on this aspect?

 

John Storey

[The Stationmaster]

I am sure we all hope so. What I don't understand is what is in it for Lyndon Davis. He has been head and owner of Oxford Diecast, which apparently makes a good profit, and is a real mold breaker in its markets, setting new standards - and making wonderful ranges of products for us to enjoy.

 

Now he is head of Hornby, where things seem rather more uncertain, and Hornby has bought 49% of his business. I'd have thought that is a bad deal for him - I'm sure I would have steered clear of that, because of the risks involved for Oxford Diecast. Is anyone with reasonable knowledge of business finance and corporate matters able to comment on this aspect?

 

John Storey

 

Provided he can make a go of things at Hornby (and some things I have heard do give me cayuse concern for the model railway side although that doesn't seem to be down to him) he will be £1 million plus better off (less any tax due) in a year's time, or whenever it is, and he will still have the controlling stake in LCD Enterprises and thus in Oxford Diecast.  Strikes me as quite a good deal for him - provided he can pull off a turnround at Hornby. 

[RJS1977]

 

 

My most recent purchases have all been TTS-fitted Hornby steam locos, all of which look and sound great and have worked flawlessly from the moment I placed them on the track. Six months later they are still going strong without any maintenance or attention needed from me.

 

Whilst accepting that it's better than your Bachmann locos, saying the locos you probably paid £150 each for are still working 6 months later is hardly a cause for celebration.

 

OTOH my father's Triang Princess is still going 61 years later with no more mechanical attention than an occasional lubricate, wheel clean and change of brushes. (You can't change the brushes on the modern models!).

[KymN]

We "grey pounders"  are we not developing a thirst for 7mm?.

 

I'm not!   

[Mike Storey]

We "grey pounders"  are we not developing a thirst for 7mm?,  Helan diesels, Dapol 08 /  Jinty and wagons etc , I'm finding not a great deal of extra outlay over 4mm, and I derive  more pleasure from my 7mm acquisitions over 4mm. will Hornby ever risk a dip of the  toe into the 7mm field? It does not have to be a locomotive,  one of their more popular wagons, the 21T hopper scaled up  would open my wallet again

 

I considered it but:

 

a) I have spent the last 20 years collecting the necessaries for my ultimate 00 layout. I would never get back that investment, not in my lifetime.

 

b) Whilst I am luckier than most in having a very large area in which to eventually build my layout of a lifetime, I could still not build what I wanted to model in that space in 0 gauge.

 

c) My brother has gone into 0 gauge, big time, and with a very prestigious club, and has learned and delivered skills I never dreamt he could achieve. S0d that.

[DonnyRailMan]

In an ideal world i would have gauge ONE in the garden to run in summertime,but my garden is not

big anothe nor is my wallet .

[Silver Sidelines]

Yes good idea

In an ideal world i would have gauge ONE in the garden to run in summertime.....

but summer is not very long here in Scotland (and it was wet)!

Edited November 21, 2017 by Silver Sidelines

[apollanaut]

Whilst accepting that it's better than your Bachmann locos, saying the locos you probably paid £150 each for are still working 6 months later is hardly a cause for celebration.

 

OTOH my father's Triang Princess is still going 61 years later with no more mechanical attention than an occasional lubricate, wheel clean and change of brushes. (You can't change the brushes on the modern models!).

 

I take your point, though all I was doing is comparing the amount of maintenance my older models needed to maintain good running with the newer ones. By now, I would have had to lubricate the wheels, motion and motors, and clean or replace the brushes in the locos I've had running extensively. So far, all I've had to do is once lubricate a Hornby Black Five which has been running on and off for five or more years. This is the upside of modern technology, but not being able to change brushes or easily service the internal workings is the downside.

 

What happens when the motor finally needs some attention or repairs? Do I pay someone else to do it, or is it more economical to simply buy a replacement model? Assuming it is still available, of course, which is a big if in these days of limited production runs. So it's not all good news.

 

As for prices, they have more or less risen in line with inflation since the 1970s when I started collecting, but you do get more for your money now. Including lots and lots of teeny tiny bits of plastic detail, which have an annoying tendency to fall off on a regular basis even when I handle them with extreme care. After a running session, I often find a trail of unidentifiable plastic gubbins beside the track. I keep these in a small box in the hope that one day I will find out where they came from and reattach them (sigh!)

[RJS1977]

I take your point, though all I was doing is comparing the amount of maintenance my older models needed to maintain good running with the newer ones. By now, I would have had to lubricate the wheels, motion and motors, and clean or replace the brushes in the locos I've had running extensively. So far, all I've had to do is once lubricate a Hornby Black Five which has been running on and off for five or more years. This is the upside of modern technology, but not being able to change brushes or easily service the internal workings is the downside.

 

What happens when the motor finally needs some attention or repairs? Do I pay someone else to do it, or is it more economical to simply buy a replacement model? Assuming it is still available, of course, which is a big if in these days of limited production runs. So it's not all good news.

 

As for prices, they have more or less risen in line with inflation since the 1970s when I started collecting, but you do get more for your money now. Including lots and lots of teeny tiny bits of plastic detail, which have an annoying tendency to fall off on a regular basis even when I handle them with extreme care. After a running session, I often find a trail of unidentifiable plastic gubbins beside the track. I keep these in a small box in the hope that one day I will find out where they came from and reattach them (sigh!)

 

Whilst the trend may have been for prices to have kept pace with inflation, I think there have been plateaus at some times and big leaps at others. I can't guarantee this without digging through several back years of RMs but I seem to remember prices in the late 80s- mid 90s (pretty much up to the move to China) remaining roughly constant at coaches approx £10, diesel & electric locos £20-£30, big steam locos approx £50. On the other hand, particularly when an old version of a model is phased out and replaced by a new one, there can be a massive increase in price - e.g. I think the Hornby HST went from about £70 for two power cars and a Mark 3 coach to £180 just for the power cars. Granted there's been a massive improvement in the quality, but a big step like that can easily make the difference between someone being able to afford one and not. There's also the psychological factor when certain price levels are reached - I remember being told by several traders that sales dropped off for them when the first locos started to break the £100 barrier. That wasn't all that long ago, and now some are nudging £200.

[JohnR]

Does anyone recall the siren voices that said that locos for more than £100 would kill the hobby? Where are they now?

[Chamby]

.....What happens when the motor finally needs some attention or repairs? Do I pay someone else to do it, or is it more economical to simply buy a replacement model? Assuming it is still available, of course, which is a big if in these days of limited production runs. So it's not all good news.....

You can buy a new motor for a fraction of the price of a new model. (Peters Spares).

 

Phil

[Steamysandy]

I'm frankly bemused at the prices being asked nowadays for Hornby and Bachmann OO gauge items.From the other side of the Sea of Japan,models of Japanese prototypes are appearing in N gauge at a fraction of the cost of an equivalent Graham Farish model.

OK it's not a British loco but it's what I like and can afford.

China has turned out to be a real pig in a poke - and not just for British models