Hornby's financial updates to the Stock Market

[Pete47401]

Since the catalogue was released (and we can make a more informed choice), we've placed our 2016 order. -  though for the third year in a row, I'm not ordering everything.

 

Perhaps others have done the same and the Feb figures might start to look more promising!

 

I've not seen this catalogue yet, but most likely won't be ordering much apart from the brand new items, none of the old tat. Customers have got too wise to subsequent dumping/Black Friday sales.

 

I always said to the rep that 20% of Hornby catalogue was of interest and 80% not, and with Bachmann it was the other way round.

 

We are just small fry, so I doubt they would miss us at all!

[Oldddudders]

I've not seen this catalogue yet, but most likely won't be ordering much apart from the brand new items, none of the old tat. Customers have got too wise to subsequent dumping/Black Friday sales.

 

I always said to the rep that 20% of Hornby catalogue was of interest and 80% not, and with Bachmann it was the other way round.

 

We are just small fry, so I doubt they would miss us at all!

Yes, but we the market would. Model shops - the few of you left - remain the public focus of our hobby, starting with sales, of course, but also often with intelligent advice available on many subjects, and links in many cases to local clubs and other resources.

 

While the Internet has much to answer for - although it is a lifeline for those of us overseas - the dismal relationship the leading UK brand now has with its outlets is a very sad state of affairs for all.

[Coryton]

A few of the model outlets that I speak with are ordering no Hornby products what so ever, not as a result of Hornbys financial issues, simply as a result of the awful treatment they've had. And to be honest, who can blame them? It says a lot that Ian Allen (certainly in B'ham) are one of those outlets who are winding down on stocking Hornby. I'm beginning to wonder if this is an accumulation of a few problems over the years, the production issues, the 2012 debacle and alienating a massive chunk of their domestic retail just for starters...something seems to be coming home to roost, and it looks like it could be trouble.

 

So if I understand it right, shops would normally be placing (significant?) orders with Hornby in January, but thanks to the way they've been treated lots haven't. Customers probably didn't buy much direct from Hornby in January because it's the month after Christmas and in any case they've now been trained not to pay full price but to wait for a sale.

 

And amazingly sales in January are down?

[Coryton]

Yes, but we the market would. Model shops - the few of you left - remain the public focus of our hobby, starting with sales, of course, but also often with intelligent advice available on many subjects, and links in many cases to local clubs and other resources.

 

While the Internet has much to answer for - although it is a lifeline for those of us overseas - the dismal relationship the leading UK brand now has with its outlets is a very sad state of affairs for all.

 

It would be understandable if this policy was improving Hornby's bottom line even at the expense of model shops and their customers. But it doesn't particularly look as if that's the case...

[The Stationmaster]

Yes, but we the market would. Model shops - the few of you left - remain the public focus of our hobby, starting with sales, of course, but also often with intelligent advice available on many subjects, and links in many cases to local clubs and other resources.

 

While the Internet has much to answer for - although it is a lifeline for those of us overseas - the dismal relationship the leading UK brand now has with its outlets is a very sad state of affairs for all.

 

Absolutely true Ian - if a company slashes the trade discount to the extent where it is barely profitable to stock their products, persistently undersells direct to the public at lower than trade prices and fails to maintain proper contact with some of its retailers then it should hardly be surprised if its sales to the retail trade take a dip; it has simply got what it wished upon itself.  Throw in then an atrocious situation where retailers trying to place orders are told by sales staff that they simply don't know if the stuff is in stock or when it will be in stock and you are left wondering about the efficiency of the new IT system.

 

Equally if it treats the specialist press, which serves its end customers, with disdain that is not going to score positive points either.  In circumstances such as these it hardly matters if it is producing highly marketable products which the market is demanding because if people don't know about them they won't order them from retailers and retailers won't order them from Hornby.  Compound that with continuing to sell long outmoded product simply by tweaking the brand name but still charging the earth for it and you might as well write your own commercial suicide note.

 

Add to that - as someone recently observed - the fact that salaries and directors fees make up 20% of your cost base and then compare that with your competitors most of whom have much lower staff cost overhead and one again is left wondering about the way the company manages its cost base.  I want to se Hornby survive, I want - among other things - to see it carrying on producing the sort of models aimed at our level of the market which it is again getting good at but I seriously wonder at times if that is what its own management either want or are actually capable of delivering?

 

edit to correct typo

Edited February 24, 2016 by The Stationmaster

[raymw]

if you use google trends (not something necessarily to rely on), for the UK it  appears that interest in rail transport modelling has halved between 2005 and 2011, but stayed more or less at that level since. Seasonal variations are similar for all years. Over the same period, the interest in lego has steadily increased (with similar seasonal variations). However, between 2011 and 2013,  the interest in mobile phone apps doubled - and there is little seasonal pattern. Anyway, some pretty graphs to look at/play with

[Ian Hargrave]

I think the issue here is that we don't understand why Hornby, which while certainly struggling, did appear to have fixed some fundamentals and a £2M loss on the year would not have had this result.  It is the dramatic reversal of fortunes with a poorly explained, projected £6M loss that is so shocking. There is more to this story than publicly available numbers alone can show.

 

Which is the most succinct and pithy observation I have read on this vexed thread to date. A sudden "unexpected "slump in sales in January of all months is surely of insignificant importance.

 

Wryly,I remember not so long ago there were strong arguments and not a few equally strong disagreements on this forum on Hornby's decision to excise the media from its publicity management and then to undertake direct sell literally by any which way you can.A number of members of this forum thought it was the best way forward for Hornby.

What did happen inevitably alienated most of its faithful and long suffering retailers and at a stroke the press who have supported the company over many years to the mutual advantage of both.Good will towards men? (Apologies to GF Handel)

Then we have the outsourcing of warehousing and distribution.Not exactly the best of "outcomes " it seems.

 

But as OZ observes correctly....it's too simple to reason away the suddenness of the statement of a couple of weeks ago on the basis of some policy decisions that appear to be misfiring. None of what has been posted here can actually bottom that.

[dibber25]

if you use google trends (not something necessarily to rely on), for the UK it  appears that interest in rail transport modelling has halved between 2005 and 2011, but stayed more or less at that level since. Seasonal variations are similar for all years. Over the same period, the interest in lego has steadily increased (with similar seasonal variations). However, between 2011 and 2013,  the interest in mobile phone apps doubled - and there is little seasonal pattern. Anyway, some pretty graphs to look at/play with

Would be interesting to know where/when/how Google obtained the data to support that first assertion. Not something I'm aware of among the mainstream media. Ask the wrong question of the wrong people and you get the wrong answer. (CJL)

[Classsix T]

Purely on the algorithms of their search engine/advertising hits etc. I should think Chris.

 

Ray correctly points out it isn't the definitive guide to the hobby's fluctuations. For a start, I should think a large chunk of the older and or more clued up modellers rarely use Google to garner info on the hobby, even less their chosen specialities.

It is though possibly an indicator of people new to the hobby, using the Internet to find their way.

 

C6T.

[raymw]

Go to https://google.com/trends/ and enter in the search field at the top, whatever topic you want. afaik they simply go through search history - there is a bit of information on what they do if you poke around enough. wrt model railways, for each year it peaks in December, at the lowest point in Jun/July, but a spasm of interest in September. TV type video games dropped down a couple of years ago, but other games rose (mobile apps) at about the same time. (There appears to be not enough info on Bachman to get any results). It is, what it is.  Interesting to see the regional splits, but I think the towns are locations of isp, not folk making the searches. My previous post was what I derived from the graphs, not what google stated.

[davknigh]

It would be understandable if this policy was improving Hornby's bottom line even at the expense of model shops and their customers. But it doesn't particularly look as if that's the case...

I'm puzzled as to Hornby's thinking. The (hopefully still) upcoming Peckett is shown for pre-order on Hornby's website for 79.99 GBP and the same locomotive is listed at a well know west coast dealer for 70.00 GBP. Does Hornby really think that anyone will pay an extra 10 quid to get the item factory direct?

 

Cheers,

 

David

[dibber25]

Go to https://google.com/trends/ and enter in the search field at the top, whatever topic you want. afaik they simply go through search history - there is a bit of information on what they do if you poke around enough. wrt model railways, for each year it peaks in December, at the lowest point in Jun/July, but a spasm of interest in September. TV type video games dropped down a couple of years ago, but other games rose (mobile apps) at about the same time. (There appears to be not enough info on Bachman to get any results). It is, what it is.  Interesting to see the regional splits, but I think the towns are locations of isp, not folk making the searches. My previous post was what I derived from the graphs, not what google stated.

Thanks. Interesting stuff. I think many of us need to recognise the degree to which the hobby is contracting, due to the failure (over the past 3-4 decades) to attract sufficient new railway modellers to replace the 'baby boom generation' which has been the lifeblood of the hobby for the past 50 years. I suspect that large numbers of us have spent huge sums on our hobby in recent years, producing a bubble of good fortune for manufacturers, retailers and magazines. That bubble is now shrinking as increasing numbers of us reach our personal 'stop block'. That, in turn, results in a secondhand market flooded with estate sales which will increasingly draw spending away from the market for new product. I don't think the efforts of manufacturers to attract young modellers will have much effect. There are too many more exciting toys to attract them these days. The best hope lies in a smaller, more dedicated customer base among young and middle-aged modellers attracted by the quality, accuracy and performance of the models. Hornby had that in the bag but they've returned to the bad old days of not knowing what they want to be, trying to be all things to all ages of modeller and clutching at the straws of 'merchandising' in the hope that they'll pick a winner. Downton Abbey will surely follow London 2012 into oblivion. (CJL)

[Dunsignalling]

I'm puzzled as to Hornby's thinking. The (hopefully still) upcoming Peckett is shown for pre-order on Hornby's website for 79.99 GBP and the same locomotive is listed at a well know west coast dealer for 70.00 GBP. Does Hornby really think that anyone will pay an extra 10 quid to get the item factory direct?

 

Cheers,

 

David

 

Depends how quickly they supply the "West coast dealer" after they start flogging them on-line - and with how many...............

 

Plenty on here will start panicking if Hornby have started selling them on Monday and you-know-who haven't by Thursday. 

 

J.

[Dunsignalling]

So if I understand it right, shops would normally be placing (significant?) orders with Hornby in January, but thanks to the way they've been treated lots haven't. Customers probably didn't buy much direct from Hornby in January because it's the month after Christmas and in any case they've now been trained not to pay full price but to wait for a sale.

 

And amazingly sales in January are down?

Most of the interesting stuff isn't scheduled for delivery until August-September so, for retailers, what's the hurry?

 

If I'd been treated the way they have, I'd be inclined to make Hornby sweat a bit..........

 

John

[Richard E]

I'm puzzled as to Hornby's thinking. The (hopefully still) upcoming Peckett is shown for pre-order on Hornby's website for 79.99 GBP and the same locomotive is listed at a well know west coast dealer for 70.00 GBP. Does Hornby really think that anyone will pay an extra 10 quid to get the item factory direct?

 

Cheers,

 

David

And that retailer also says:

 

Pre-order prices are calculated using the suppliers Recommended Retail Price (RRP). If suppliers increase the RRP, we may proportionately increase our selling price.

 

So the pre-order price is not firm ........

[PCW]

Maybe a lack of sales in January is down to having Black Friday sales before Christmas and sales for another 300 days of the year as well.

 

  'January Sales' can kind of make January a good month and clear out slow moving stock in readiness for the new year.

 

If you move the January sales to other times of the year don't complain when January is quiet.... Doh!

 

In a the run up to Christmas you can often sell stuff at a proper price that would be slow moving for the rest of the year. So, in my opinion the correct way to go about sales is to leave everything at proper price until it is too late for Christmas delivery, then see what you have left that might be slow moving for the majority of the following year, and then, well, erm, have a 'January Sale'.

[Coryton]

 

In a the run up to Christmas you can often sell stuff at a proper price that would be slow moving for the rest of the year. So, in my opinion the correct way to go about sales is to leave everything at proper price until it is too late for Christmas delivery, then see what you have left that might be slow moving for the majority of the following year, and then, well, erm, have a 'January Sale'.

 

That's how it used to work. But it seems to be an outmoded view these days.

[Mike Storey]

 

First productivity –(re post 834) is based on hours worked and worth created – by definition I believe it excludes the unemployed. If you have a country like one or two EU ones with high unemployment but say high rates of overtime or highly paid senior workers, versus one with a young work force working in a service sector or at the start of their career and low unemployment, you can quickly see how productivity can be misread even if you do not subsidise low wages.

 

 

Shareholder Knowledge – Mike Storey Re post 846 I would say that you might be a little pessimistic. Mr Canham is Chairman of Hornby, where his role is to look after shareholders interests, he also happens to be a director of Phoenix Asset Management – one of the major shareholders (20%)  in Hornby. As Chairman  and on a basic salary of significantly more than Mr Ames he/they should know what is going on. New Pistoia (23%) and Ruffer LL  (who have recently upped to11%)the other major shareholders might find it more difficult but are probably relying on Mr Canham – he’d better get it right if he is now becoming CEO as well !!

If people read the Rights Issue and Annual Report particularly the financial sections – there is some interesting stuff buried in the boring detail.

 

On Productivity, I cannot remember the post, but what you are stating here is contrary to the concern expressed across a number of financial institutions. Essentially they are concerned that the UK (plc or govt) is not investing enough in order to improve productivity. Nothing to do with the factors you mention.

 

On Shareholder Knowledge, Mr Canham's remuneration was about half of Mr Ames' whilst Ames was CEO and Canham was Chairman. Canham has been Chairman and CEO before and was then paid £300,000 pa, and I assumed he would return to that figure, at least, given his return to the CEO position.

 

Other than that, I agree with the rest of your points entirely.

[Mike Storey]

Go to https://google.com/trends/ and enter in the search field at the top, whatever topic you want. afaik they simply go through search history - there is a bit of information on what they do if you poke around enough. wrt model railways, for each year it peaks in December, at the lowest point in Jun/July, but a spasm of interest in September. TV type video games dropped down a couple of years ago, but other games rose (mobile apps) at about the same time. (There appears to be not enough info on Bachman to get any results). It is, what it is.  Interesting to see the regional splits, but I think the towns are locations of isp, not folk making the searches. My previous post was what I derived from the graphs, not what google stated.

 

Thanks for access to this! Very interesting.

 

I can't work out the vertical scale - is it absolute numbers of searches or numbers relative to other searches? Anyone know? (When looking at other variations, it is clear they are relative rather than absolute, where the most popular is always shown as 100 and everything else is relative to that.)

 

Nonetheless, it would appear that the number of searches for the generic terms surrounding Model Railways (or others classed under Rail Transport Models) starts to level off when the various railway modeller websites start to come on line, including this one. Searches would then become far more specific within those fora, and generic searches would be confined to those not yet familiar with the existence of such sites, of which there must still be a fair few, given the number of new members that regularly appear on here. It also coincides perhaps with the increase in retailers' and manufacturers' websites, so that generic searches would also be less used. This it may be no guide to activity within the hobby at all. Just a theory, but still very interesting in its own right.

 

What must be clear is that the huge rise in both fora like this plus retailers'/manufacturers' websites, plus sites like AnyRail and Train Simulator etc, can only be a very positive thing in attracting the younger peeps to this hobby?

[jjb1970]

I'm not sure Hornby's issues are down to their relationship with model shops and I really don't think their relationship with the model media has anything at all to do with their current problems. If this was just about model shops then that particular horse bolted many years ago and a large percentage of the market has relied on mail order to buy models for a long time even if they'd prefer to support a local shop. We have speculated about problems with an ERP roll out but I'm not sure that's the answer either. At the moment it is all just speculation but the suddenness of the change is worrying. Certainly it is not the quality of product which has rebounded and is as good as anything else being done in OO RTR at the moment and better than most.

I do think the bigger picture is a declining customer base which is worrying for the future of the hobby. I think it is possible to attract children if the product is right and offers suitable play value. I think a mistake many modellers make when considering the children's toy train market (as opposed to the more expensive toys grown ups buy) is to look at it through adult eyes rather than trying to imagine what things might look like to children. Plenty of traditional toys still do sell well and I do not see there is anything pre-determined about the death of the toy train as a traditional toy if the product was right.

[Coryton]

I'm not sure Hornby's issues are down to their relationship with model shops and I really don't think their relationship with the model media has anything at all to do with their current problems. If this was just about model shops then that particular horse bolted many years ago and a large percentage of the market has relied on mail order to buy models for a long time even if they'd prefer to support a local shop. We have speculated about problems with an ERP roll out but I'm 

 

Well yes people have been ordering over the internet for some time, but until recently this has mostly been from model shops, hasn't it? The difference is that recently Hornby seem to have been doing just about everything they can (short of actually refusing to supply shops) to get everybody to either buy directly from them on-line or through their concessions. 

[RJS1977]

I'm not sure Hornby's issues are down to their relationship with model shops and I really don't think their relationship with the model media has anything at all to do with their current problems. If this was just about model shops then that particular horse bolted many years ago and a large percentage of the market has relied on mail order to buy models for a long time even if they'd prefer to support a local shop. We have speculated about problems with an ERP roll out but I'm not sure that's the answer either. At the moment it is all just speculation but the suddenness of the change is worrying. Certainly it is not the quality of product which has rebounded and is as good as anything else being done in OO RTR at the moment and better than most.

I do think the bigger picture is a declining customer base which is worrying for the future of the hobby. I think it is possible to attract children if the product is right and offers suitable play value. I think a mistake many modellers make when considering the children's toy train market (as opposed to the more expensive toys grown ups buy) is to look at it through adult eyes rather than trying to imagine what things might look like to children. Plenty of traditional toys still do sell well and I do not see there is anything pre-determined about the death of the toy train as a traditional toy if the product was right.

 

I've been having a bit of a think about this the last few days based on other things I've read in this thread. What are the factors which encourage a child from playing with a train set to being a fully-fledged modeller?

 

First of all of course, there has to be parental encouragement. I was fortunate in that my father's just as big a model railway enthusiast as I am which meant I was looking at pictures in Railway Modeller before I could read, and when I was given my first 00 train I was also able to borrow some of his Tri-ang locos to ring the changes. But other family members (mostly non-railway-minded) were instrumental too. In those days most of the Hornby range was suitable for birthday/Christmas presents, and of course Lima was around then as well. Not only that, but with several well-stocked model shops around, all a relative had to do to find me a present was to go in one. Not only did the shops stock rolling stock, but there were all the other accessories by different manufacturers, like Superquick card kits and Dapol/Airfix plastic kits, which were an introduction to the constructional side of the hobby - an important facet - otherwise I'd have been left watching a train going round in circles, which eventually becomes stale and leads to the child "growing out of" the hobby and the set going in the bin.

 

One of the downsides of purchasing from the Hornby website is that naturally it only covers Hornby products so the constructional models don't really get a look in. This means that the well-meaning relatives looking for little Johnny's present only see the trains and the ready-to-plant buildings, so he gets deprived of that side of the hobby and is more likely to drop out.

 

A child is also more likely to be encouraged in the hobby if their father is active in it - but fathers with young families are largely missing from the hobby themselves these days, partly at least because this is the time of life where they have mortgages to pay and mouths to feed, and not enough disposable cash to afford the mainstream models, which of course are too delicate for little Johnny's hands anyway.

 

So I think a decent range of more affordable models is a must, both for the youngsters and their parents, along with more constructional models either in the Hornby range,or at least linked to it from their website, in much the same way as Ratio/Wills etc are from the Peco site (in some ways I can't help thinking that a merger/takeover of Hornby and Peco could serve the hobby quite well!). Likewise as much support for the remaining model shops as possible.

 

Mention was also made in the Independent article of the hobby having little appeal for the sort of children who "can build half a dozen robots in an afternoon". Yet there are plenty of railway accoutrements which could be motorised without too much expense - level crossings, cranes, water cranes, semaphore signals, uncouplers etc. Servos can be obtained for about £1:50 each and MERG do a range of 'Pocket Money' electronic kits for under £2, including a couple of servo drivers. If Hornby were to put together a similar 'accessory motorisation pack', containing a piece of breadboard (as opposed to the Veroboard of the MERG kits), a bag of components and a servo (or more than one in the case of a level crossing) for around the £5-£6 mark, and make it available with the accessories, it would be something capable of appealing to the robotic-minded child but of course would be of use to the adult modeller as well. 

 

None of which of course guarantees that Johnny will still be in the hobby as an adult, but it increases the chances!

[Ron Ron Ron]

 

Edited February 24, 2016 by Ron Ron Ron

[Ozexpatriate]

We have speculated about problems with an ERP roll out but I'm not sure that's the answer either. At the moment it is all just speculation but the suddenness of the change is worrying. Certainly it is not the quality of product which has rebounded ...

Agreed on those points. We do not have sufficient data to make any conclusions other than this is probably the closest to an existential crisis Hornby has come for a long while.

 

Having said that of course, they've been there before, but I do think it is likely the brand will live on in the present PLC or some other form.

[roythebus]

I haven't followed this thread right through, but has anyone thought of the fact that cashflow might be the problem? There's many ways of managing cash flow.

 

Sell direct to the end user, cream all the profit for yourself. Wait a while for cash to come in.

 

Pre-Oder and sell direct to end user, get cash flow in advance (something used by the likes of Kernow to fund new products even if it is only a deposit up-front).

 

Sell to model shops, give them the usual trade terms, wait maybe 30 days or more to get cash in at a reduced rate due to trade discounts, but maybe spread the risk amongst model shops and get bigger initial orders.

 

Sell to box-shifters, slightly better terms than proper shops, possibly get some cash in advance but at a reduced rate due to bigger discounts demanded.

 

In an ideal world any manufacturer would use a combination of all those outlets, has Hornby gone too far in one direction on that front?