Hornby's financial updates to the Stock Market

[Ed Winterbury]

RIP Hornby.

[Legend]

RIP Hornby.

Not quite that bad, but they do need to react to the new market. Business as usual clearly won't work, but then they've already made changes

[Ed Winterbury]

'Railroad' is quite limited- you get things you don't want but never the desirable products. I think it's their strategy to sell the unpopular stuff. Forget about Tri-ang tooling locos, more unsellable rubbish.

[Ed Winterbury]

The only GWR tender loco I could get my hands on was 'County of Devon' I was more looking for a 'King' or 'Hall'. Also, the Railroad coaches have nothing but horrible plastic wheels!

[Intercity125]

Personally I think Hornby needs to look at its long term strategy and look at owning its production facilities rather than being at the mercy of subcontractors and the availability (or lack of) production slots.  Giving modellers the products they want and in a reasonable timeframe will reduce the likelihood of competition/duplication by other manufacturers/retailers, help restore sales, control costs, and return Hornby to profitability.  The majority shareholder will have to invest in such facilities against the background of high debt which has arisen as a result of poor decisions made in the past.

 

The Hornby brand name is one of the most recognised brands in the UK and held in esteem by modellers and children/parents alike.  It's now time for Hornby's majority shareholder to come up with a cunning plan to guarantee survival.

 

Regards,

 

B Aldrick

[JSpencer]

The old way is dead. Once small players started appearing doing RTR, Pandora's box was open with stark realisation that major retailers could equally produce their own.

From here on the risk of duplication is greatly increased (personally I am afraid Hornby's huge H may in fact be a small P, someone else posted somewhere that they had scanned the loco).

 

Secondly, the extra increase in numbers of new classes being modelled before means that the market slice for each release will be smaller. Increasing costs will dictate that this expansion of new classes is unsustainable.

The increases in shop exclusives (especially exclusive loco classes) means smaller market share for smaller model shops.

 

One could quickly have the impression that the increasing range of all new models is a good sign for the market, but we could actually be on the point of a sharp fall or near collapse. Under those conditions, Hornby can only really cut back, become more agile and nimble. But this is no easy task in world were business agility is now paramount.

[johnd]

Hornby diversifying with a new range of garden gnomes?

 

 

 

 

Poynton Garden Centre.

That model shop is an absolute disgrace.

Mostly stocked with really old secondhand model railway items, most of which appears to be junk.

What new stuff they have, seems to be jumbled up amongst the secondhand stuff; full price to boot.

The whole store is a complete muddle.

The main purpose of the place, seems to be a social club for the local old boys.

Almost certainly the worst model railway store I have ever been into.

 

 

 

.

.

I shall be bringing your views to the attention of the owner. The lack of new models comming through isn't helping stocking levels.

Maybe full price shown but a discount is usually given.

Edited September 11, 2017 by johnd

[cal.n]

Stock market announcement a few moments ago:

11^th September 2017

 

Directorate change

 

Hornby Plc, the international models and collectibles group, today announces that following the increase in Phoenix UK Fund's stake in the business the Group's strategy is under review. As a result, it has been mutually agreed that Steve Cooke will step down as CEO at a date to be agreed. Steve will remain as CEO for a transitional period and an announcement will be made concerning a new CEO in due course. Steve joined the business as CFO in June 2015 and stepped up to the CEO role in April 2016.

 

Lets hope Hornby didn't have a Barclay for Warley. Note the time of this announcement relative to other significant news.

[Clearwater]

Worth noting that Hornby has actually had a decent stab at reducing its debt.

 

On strategy, rather than invest multimillions in fixed production sites, Hornby would be better advised at looking at what it does well and building to its strengths. I'd be amazed if you could make a return on that sort of investment. They are clearly good at actually getting models from idea to shop but have been wed to a branded distribution strategy. What they could do is sell their research, design and logistics (you can't really call it production since that is outsourced) to wannabe producers. I.e. Work for the commissioners' market and sell the research, CAD, production management skills as a service. If they don't think they have the work load to keep the fixed cost of the design team busy, use them for other people doing niche models that don't fit the broader retail market.

 

However, the likes of Hattons and Kernow, as observed above, have realised they can do that themselves already. However, there are probably some smaller players, preserved railways, museums, loco groups, individuals(?), crowd source groups etc who may have capital but lack the direct knowledge of how to actually make a model.

[Barry O]

working direct with the Chinese factories seems a great idea....BUT looking at the way some of the models promised which have been delayed  you have to wonder how long before Hattons, Kernow etc get the me problems as other (including Hornby) have had with companies in China who seem to promise a lot and then put prices up and delay deliveries.

 

Hornby have a problem with being a "big" company with some poor business planning in the past. Hopefully they can turn themselves around.

 

 

Baz

[jjb1970]

Hornby and Bachmann do face problems competing with smaller, more responsive competitors, some of whom operate pre-order and manufacture to order type systems or rely on crowd funding to outsource project risk and do not have the sort of staff and overhead costs and retail mark up that Hornby have to price in. As time goes on I think the UK will follow the NA market in going more and more towards the pre-order system and at some point I believe Hornby will probably look at prioritising direct sales again.

[pirouets]

Not sure whether 1 persons habits since switching from N to OO reflect the challenge but flicking through this thread it does strike me that Hornby might not be covering all the key things then need to. In switching to OO I am playing around with that nice blue era. I'll ignore what I have spent on track as its not relevant but in stock terms I have bought 1 thing new that is Hornby (Ex LMS brake van) along with a class 31 off ebay. Everything else is Bachman along with a rake of Dapol concrete wagon.

 

So I know there are many people who model other era's who say there are things missing, but does anyone else recognise this as a seeming complete gap? I'm not saying I spend enough to save Hornby or anything daft like that but I can't be the only one in this position or is this just another view of Hornby's lack of a product roadmap that has been covered in depth prior to this?

[JSpencer]

Hornby and Bachmann do face problems competing with smaller, more responsive competitors, some of whom operate pre-order and manufacture to order type systems or rely on crowd funding to outsource project risk and do not have the sort of staff and overhead costs and retail mark up that Hornby have to price in. As time goes on I think the UK will follow the NA market in going more and more towards the pre-order system and at some point I believe Hornby will probably look at prioritising direct sales again.

I am curious to know what you mean by more responsive as there several senses here. It could mean producing what the market wants. I think a Hornby gave chosen much of its subject matter well - sure more Pecketts could have followed. It could mean lead times, but over the past couple of years Hornby have been faster than most. Only Hattons this year, with their own products have beat them. It could mean making improvements following feedback, here they do respond to feedback maybe not quickly but they do.

Edited September 11, 2017 by JSpencer

[Fenman]

Not sure whether 1 persons habits since switching from N to OO reflect the challenge but flicking through this thread it does strike me that Hornby might not be covering all the key things then need to. In switching to OO I am playing around with that nice blue era. I'll ignore what I have spent on track as its not relevant but in stock terms I have bought 1 thing new that is Hornby (Ex LMS brake van) along with a class 31 off ebay. Everything else is Bachman along with a rake of Dapol concrete wagon.

 

So I know there are many people who model other era's who say there are things missing, but does anyone else recognise this as a seeming complete gap? I'm not saying I spend enough to save Hornby or anything daft like that but I can't be the only one in this position or is this just another view of Hornby's lack of a product roadmap that has been covered in depth prior to this?

I don't think any manufacturer is big enough to cover every interest. You've found Bachmann covers your interests. You may be surprised to learn that, for East Anglian transition era types like me, Hornby does 95% of what I need. The other manufacturers are notable only by their absence.

 

Swings and roundabouts - YMMV, etc. It's always dangerous to extrapolate from personal experience.

 

Paul

[Ozexpatriate]

Hornby and Bachmann do face problems competing with smaller, more responsive competitors, some of whom operate pre-order and manufacture to order type systems or rely on crowd funding to outsource project risk and do not have the sort of staff and overhead costs and retail mark up that Hornby have to price in. As time goes on I think the UK will follow the NA market in going more and more towards the pre-order system

I'm not convinced that crowd-sourcing will be popular for established providers, but pre-ordering (without necessarily requiring a down-payment) is inevitable.

 

and at some point I believe Hornby will probably look at prioritising direct sales again.

Small, nimble North American suppliers (people here are familiar with Rapido, but there are others like Red Caboose/Intermountain) depend on the combination of retailers and pre-ordering - not direct sales. They may do some direct selling but are not usually very serious about this channel strategy.

 

The new Hattons announcements make them look more like Walthers who are a manufacturer/retailer.

[Ozexpatriate]

"Current trading for this financial year to date has been behind the Board's expectations in part due to softer market demand over the summer months and increased competition in the important UK Independent channel. In addition, as previously indicated, some new product releases have moved into the second half of the year and there has been a reduction in the amount of promotional activity and discounted stock being offered to the market, which was a feature of the comparative period last year.

 

It is expected that trading this year will be more heavily weighted to the second half than last year due to the relative timing of the new product releases year-on-year and to the significant stock reduction in the first half of the previous financial year.

 

Whilst the Group still has the important Christmas trading period to come and significant opportunities remain to improve trading performance there is a risk that the shortfall in performance to date may not be recovered fully over the remainder of the financial year. "

Frankly the two statements made (the one above on Wednesday and the CEO change announced today) are pretty gloomy for Hornby PLC.

 

What we tend to ignore here are the impacts from the other brands (primarily Scalextric, Airfix, Corgi). Hornby model railways have been pulling their weight, but I have to wonder whether the diversification strategy in acquiring the failed Airfix, Corgi and Humbrol, is now as much a part of the problem as increased competition in the flagship segment of model railways.

 

When people were still buying trainsets and 'all-Hornby' systems, it didn't matter what these businesses did, but with increased competition in the model railway segment the PLC now relies on them to contribute. My guess is that the real albatross continues to be Scalextric.

 

The fact that there are now a lot of providers offering British outline model railway items indicates that this is a healthy market, even if Hornby's position in it is eroding. Absent recent data beyond my own purchases, Bachmann is not growing right now either, having little of late besides reissues to tempt steam-era customers.

 

The way to read these statements is to break them down.

 

"increased competition in the important UK Independent channel" is indeed a tantalizing clue. To me it suggests more of a reference to Hattons than it does about independent retailers in general - unless it relates, as some have suggested above, to reluctance from retailers in committing to orders with Hornby.

 

I haven't done the assessment of all Hornby delivery dates, but each of the new Pecketts (October), GWR HST (December) and H class (January) are certainly scheduled for the second half (October through March). I do expect these to sell pretty well - though Hattons will steal a little of the bloom from the rose of the Pecketts. I similarly wonder if Scalextric and Airfix have new releases pending.

 

EDIT: (somehow my last paragraph got replaced)

This announcement indicates some rough weather ahead for an already struggling company.

Edited September 11, 2017 by Ozexpatriate

[Guest Midland Mole]

I cant comment much on financial matters, but I can comment on what sells in the shop.

 

Train Sets/Packs - Hardly any, but what few do get bought are usually Hornby. This tends to only happen around Christmas though.

Locomotives (all types) - I would say a healthy 50/50 split between Hornby and Bachmann, but again I can count how many locos are sold in two weeks on one hand.

DCC Sound Locomotives - Very rare, but again a 50/50 split between Hornby TTS and Bachmann DCC Sound.

Coaches - Mainly Hornby, Bachmann coaches tend to be slower sellers.

Wagons - Hands down Bachmann! I would say 70-75% of wagons we sell are by Bachmann, followed by Hornby then Dapol. I think a lot of Hornby wagons suffer from being older designs with non-NEM couplings.

Buildings/Scenic items - Not great sellers, but more Bachmann (Scenecraft) than Hornby (Skaledale).

Control systems DC/DCC - For DC the older type Hornby controllers (big red knob) sell FAR better than the newer type, but are split about 50/50 with Gaugemaster. For DCC Bachmann and especially Gaugemaster win hands down on numbers sold compared to Hornby.

Track and accessories - Peco win that contest any day of the week. We rarely have to restock the Hornby track boxes. Hornby buffers and power clips tend to be consistent sellers, and points to some degree but still nowhere near as much as Peco ones.

 

Alex

Edited September 11, 2017 by Midland Mole

[cal.n]

The one thing Hornby still has the advantage over any other model company is the brand name and image which makes them the first choice for Christmas etc. 

 

 A single large ad in a national broadsheet newspaper leading up to Christmas could be just what they need for brand exposure for (wealthier) parents who don't want to buy the latest iphone for children.

 

Think this is a much wiser PR move than a train set ad in Railway Modeller or other model press, which is (funnily enough) aimed at railway modellers.

 

If they play the brand card right, it could be a merry christmas for them.

[RJS1977]

 based on their past business model, giving lower cost to the consumer in order to generate volume. 

 

I'd hardly say £99 for an 0-4-0 tank was 'Lower cost to the consumer'.

 

Again, I would have liked to have seen Hornby do the Barclay (and possibly the P class) as Railroad (or perhaps Railroad + ) items - they're the sort of size of loco which is ideal for anyone expanding from a train set, and having numerous preserved examples, ideal for selling to families through preserved railways - IF the price is right. And anyone wanting a Barclay 0-4-0ST for their layout would probably still have bought them anyway! Instead Hattons are bringing them out a high-spec £100 version - another opportunity missed.

[RJS1977]

'Railroad' is quite limited- you get things you don't want but never the desirable products. I think it's their strategy to sell the unpopular stuff. Forget about Tri-ang tooling locos, more unsellable rubbish.

 

Personally I've no issue with the level of tooling - it's supposed to be a cheap way into the hobby, a way for youngsters/less well-off modellers to expand their collections.

 

The big issue I have with the Railroad range is its incoherence - not enough of any particular era/region, except for BR blue diesel which is somewhat over represented, and no prototypes from the last 30 years or so.

[Legend]

2 markets :the Trainset or returning Modeller market for which the Hornby brand certainly counts. The experienced Modeller market where people are much more open in looking at Bachmann, Hornby , Heljan mainly depending on the class of loco they need but also detail, price and quality (will it run, are there any paint defects) .

 

I'm not surprised that Bachmann coaches are slow sellers, they tend to be more expensive, nor am I surprised that Bachmann wagons sell more , as they have an extensive range more relevant to the market they are in (experienced Modeller)compared to Hornby who are catering for the Trainset market too.. I'd be interested in knowing if you sell as many now as you did before the price increases. I used to pick up the odd Bachmann wagon at exhibitions to supplement the fleet , but it stopped dead when prices increased, although I did see a pipe wagon for sale at £13 recently which nearly had me open the wallet.

 

For Hornby I've said before Railroad should include 66, 67, 156, class 91, maybe an emu. Something that people see in the real Railway and want a model of.

 

I suspect Scalextric is suffering badly from computer games and maybe needs slimming right back. I think Airfix is doing ok . A critical point here is that you can pick up a relatively complex kit for £50 , so makes it much easier for someone to enter hobby than a trainset , plus additional equipment to make it relatively realistic or interesting, which is pretty expensive

Edited September 12, 2017 by Legend

[Guest Midland Mole]

Cant say I have seen a drop in sales of Bachmann wagons since the price increases, and they still comfortably out sell the cheaper ones from Hornby, Dapol and Oxford.

 

I imagine you are correct about Scalextric, but I wonder about Corgi as well. Is that still doing well or is that suffering in the current market? It would be a shame to loose any of these brands, but sadly times have changed and tastes with it.

Alex

[adb968008]

Reading the above posts it reads like...

 

People demand top quality detailed models, but they can't afford the price after £130+.

The demand seems to be there, but only for new toolings, after that it's a slow burn trickle.

 

The stated new competition is individual retailers releases, these are large batch feast/famine models (12 variants then none).

Hornby isn't catering to this market, so the fact they aren't competing to tool up a model and supply 3000-5000 models to one retailer in one go is their choice, they can't blame the market if they aren't in the race.

 

At the same time, they aren't playing their own game in the same way either, they seem to make 1-3 variants, then pause, then some more etc etc, it doesn't sell out and it doesn't become rare*. Instead it gets dumped making it even harder to sell the next batch.

 

Imho it's Hornby that needs to adapt, they can't expect the competition to play it Hornby's way.

 

They don't need a catalog of 80+ different locos every year, small batches of just about everything.

Similarly trying to flog dead horses isn't a good industry either, I really don't get upgrading the railroad B17 at all, it competes with their own super detailed model, which is being dumped below the rrp of the railroad one ! Similarly why Railroad is being bespoke loco Drive upgraded too has limited sense... the market is for kids and I don't think they care how it's motored.. a new one size fits all tenders worked in the past and could have saved Hornby a small fortune in the future..., and the important capex spending too.

 

What made Railroad work in the 70/80s was due to it being models for kids, or slightly older ones who saw or recently remembered the big ones.

In 2017 that's preserved steam, and EMUs, apart from Scotsman and Mallard I can't remember the last preserved loco in the Railroad range, as for anything modern...

 

I'm glad to see the Q1 with rails as a limited release alongside the main range (and it's 50% sold in a weekend), more of this, on more existing tools, is much more efficient, more focused and caters to what modellers want.. it needs no capex, serves the larger retailers and takes on the competition.. 2018 is year of 1968 (everyone likes black 5's).

 

I like shiny new tender engines as much as the next man, but when they all end in the discount bucket after 1 release (K1, Stanier Mogul etc), and the competition is nibbling on small tank engines below £100, then maybe Hornby should sweat its larger tender engine assets more with limited releases of specific numbers for individuals retailers, and focus investment on the same smaller tank engines (Fowler, Stanier 2-6-2t, tilbury tank etc all await), and more affordable EMUs at lesser detail for those keen, younger but less well off.

 

* (peckett excepted as this is a new market).

Edited September 12, 2017 by adb968008

[adb968008]

I cant comment much on financial matters, but I can comment on what sells in the shop.

 

Train Sets/Packs - Hardly any, but what few do get bought are usually Hornby. This tends to only happen around Christmas though.

Locomotives (all types) - I would say a healthy 50/50 split between Hornby and Bachmann, but again I can count how many locos are sold in two weeks on one hand.

DCC Sound Locomotives - Very rare, but again a 50/50 split between Hornby TTS and Bachmann DCC Sound.

Coaches - Mainly Hornby, Bachmann coaches tend to be slower sellers.

Wagons - Hands down Bachmann! I would say 70-75% of wagons we sell are by Bachmann, followed by Hornby then Dapol. I think a lot of Hornby wagons suffer from being older designs with non-NEM couplings.

Buildings/Scenic items - Not great sellers, but more Bachmann (Scenecraft) than Hornby (Skaledale).

Control systems DC/DCC - For DC the older type Hornby controllers (big red knob) sell FAR better than the newer type, but are split about 50/50 with Gaugemaster. For DCC Bachmann and especially Gaugemaster win hands down on numbers sold compared to Hornby.

Track and accessories - Peco win that contest any day of the week. We rarely have to restock the Hornby track boxes. Hornby buffers and power clips tend to be consistent sellers, and points to some degree but still nowhere near as much as Peco ones.

 

Alex

Not judging, but just to put a different dimension to this...

 

Back in the 1990's when I was in a shop, my numbers and experience was broadly similar, though I'd say loco sales were in two hands, not 1. Obviously a new release puts a blip on the chart. (There was no DCC back then) and wagon sales were an even split between Hornby Bachmann and Dapol.

 

Other wise nothing changed.

But swapmeets were bun fests for discounting and clear outs, anything goes, and in the s/h world selling 50 odd items was an ok day, if you reached 100 items sold you know you had a good day.

 

This summer I had to clear much of my late fathers collection, and after reconciling my wants vs duplicates in our collections I put up the balance to ebay.. I cleared 350 locomotives in 6 weeks. (I even got a mail from ebay saying I was in the top 10% of sellers in the oo gauge category one week).

 

That 350 astounded me, as the price achieved was healthy, I cleared 80 on one weekend and it was Herculean having to wrap and ship it all, I had 1 single Intl sale (to Hungary), everything else was UK.... but clearly if the price is right the demand is there in 2017.

 

As an FYI, and market indicator:

 

A. 1968 items were sold in the oo gauge category of ebay 12:00 midnight Monday 11/9/2017-09:17 this am... 31 hours...

B. 27 were above £130 (many of those included more than 1 loco, plus one was an LNER W1!) (9 "new" "buy it now").

C. 183 were between £50-£129, of which 35 were "new" "buy it now".

Edited September 12, 2017 by adb968008

[Fireline]

I'd hardly say £99 for an 0-4-0 tank was 'Lower cost to the consumer'.

 

Again, I would have liked to have seen Hornby do the Barclay (and possibly the P class) as Railroad (or perhaps Railroad + ) items - they're the sort of size of loco which is ideal for anyone expanding from a train set, and having numerous preserved examples, ideal for selling to families through preserved railways - IF the price is right. And anyone wanting a Barclay 0-4-0ST for their layout would probably still have bought them anyway! Instead Hattons are bringing them out a high-spec £100 version - another opportunity missed.

 

Given the cries of horror when so much as a hand rail is out of place, how would the forums have reacted to a P class released only in Railroad? There would have been a large number of people who would have walked away from it, just because of the addition of the "R" word. It really does seem that someone will complain, no matter what the model companies produce. I am beginning to realise that they can't win whatever they do.