Bachmann 2016 Announcements

[The Stationmaster]

Perhaps some numbers - taken from 'Company Check' so possibly not reliable(?) but definitely in the public arena - will indicate the situation Bachmann Europe face and go some way to explain what might be happening.

 

These are year end figures (to 31 December, the end of their accounting year -

 

Turnover has changed from broadly £15.6 million in 2010 to c.£14.4 million in 2014 having risen in 2012 to c.£17.4 million.

 

Cost of Sales has risen slightly from c.£10.1 million in 2010 to c.£10.25 million in 2014 having peaked at over £12 million in 2012

 

Gross Profit has declined from c£5.05 million in 2010 to c.£4.14 million in 2014

 

Wages & salaries increased by c14% between 2010 and 2012 but have been reasonably constant since then.

 

Directors emoluments have increased by c.20+% between 2010 and 2014 (don't forget most of the Directors are based in China so no knocking 'wicked capitalists' in Barwell - or anywhere else come to that)

 

Operating Profit has dropped dramatically from c.£1.98 million in 2010 to £ 273,765 in 2014, a fall of c.£1.25 million while 

 

Pre Tax Profit has dropped equally dramatically from c.£1.937 million in 2010 to £262,121 in 2014, a fall of c.£1.67 million  (Post Tax Profit has obviously suffered a similar decline which means less Tax as well of course.)

 

So clearly gross profit has declined (and nett profit too of course) while Cost of Sales as a proportion of turnover has risen - for reasons which are already well know so need no further explanation.

 

Looked at against the background of these numbers, let alone what might still be happening in respect of the cost of sales, it is hardly surprising that RRPs are being increased.  There seems to me a very simple equation in all of this - either Bachmann increase their RRPs to reflect what is happening or they cease trading as a business.  The choice at the end of the day lies with us - the end consumers - if we want them to stay in business to our benefit we have to accept what is happening.with their RRPs and continue to buy what we want for our layouts,collections, or whatever.  If our means are reduced then if we buy anything from them we have to think more carefully, save - they give us plenty of time for that - and still buy but less prolifically.  If we don't give a tuppeny damn about the continued future of the company, or those it employs (and those who rely on those employees), then we don't buy anything from them but boycott their products, sit back and drip on about 'wicked price rises', and don't bother to stick our heads above the parapet when they go out of business.  Simples really isn't it?

[Legend]

Interesting Mike

 

I'm not sure you can just look at Bachmann Europe , I think given the Parent , subsidiary relationship you would really need to look at Kader too, which is a whole different kettle of fish. Bachmann Europe includes Lilliput as well doesn't it , so it probably doesn't show what's specifically going on in UK?

 

The accounts are to Dec 2014 which was after one set of large price increases, if I remember correctly July 2014 but before the 2nd large increase in March 2015 and, of course , the latest one this month.so this is at the start of their new business model rather than the end. Some interesting points though:

 

Turnover is down despite increase in selling prices, which means units sold must be considerably down , given a price increase of 20% on average in July 2014. So 5 months worth of increases in these accounts which possibly is the busiest period in run up to Christmas.This is before the 2015 and 2016 increases , so probably is in line with Gareth's comments that he is down in volume. Of course turnover can also be a reflection of the number of new releases in the year , I'm not sure if 2014 was particularly busy in that respect or not. Too early yet, I think to see if the market is taking these increases, but initial indication would suggest not.

 

Cost of Sales is up , but presumably the vast bulk of costs are from Kader , so that could simply be that they are charging more as a Transfer Cost and keeping more profit in China rather than in Europe. All I would say is it's not as straight forward as costs are up given that it's an inter company relationship.

 

Even so declaring a gross profit of 28% is not too shabby . The largest increase seems to be in Op Expenses causing net profit to be down to £262k , partly as you say to directors emoluments , but I don't think that's too relevant in the scheme of things

 

Will be interesting to see the 2015 accounts and what the effects have been. Thanks for this

[The Stationmaster]

Interesting Mike

 

I'm not sure you can just look at Bachmann Europe , I think given the Parent , subsidiary relationship you would really need to look at Kader too, which is a whole different kettle of fish. Bachmann Europe includes Lilliput as well doesn't it , so it probably doesn't show what's specifically going on in UK?

 

The accounts are to Dec 2014 which was after one set of large price increases, if I remember correctly July 2014 but before the 2nd large increase in March 2015 and, of course , the latest one this month.so this is at the start of their new business model rather than the end. Some interesting points though.  

Turnover is down despite increase in selling prices, which means units sold must be considerably down , given a price increase of 20% on average in July 2014. So 5 months worth of increases in these accounts which possibly is the busiest period in run up to Christmas.This is before the 2015 and 2016 increases , so probably is in line with Gareth's comments that he is down in volume. Of course turnover can also be a reflection of the number of new releases in the year , I'm not sure if 2014 was particularly busy in that respect or not. Too early yet, I think to see if the market is taking these increases, but initial indication would suggest not.

 

Cost of Sales is up , but presumably the vast bulk of costs are from Kader , so that could simply be that they are charging more as a Transfer Cost and keeping more profit in China rather than in Europe. All I would say is it's not as straight forward as costs are up given that it's an inter company relationship.

 

Even so declaring a gross profit of 28% is not too shabby . The largest increase seems to be in Op Expenses causing net profit to be down to £262k , partly as you say to directors emoluments , but I don't think that's too relevant in the scheme of things

 

Will be interesting to see the 2015 accounts and what the effects have been. Thanks for this

 

As you say it does need to be read with a knowledge of wider impact and I think - without checking - that what you might find is a corresponding (but not matching) reduction in Kader's losses although they are not - obviously - wholly related to the UK market.

 

The point about new releases is, I think, critical when looking at any of these companies and I'm sure explains some if what has happened at Hornby however the key thing in Bachmann's case is that the cost of sales as a proportion of turnover has risen (which I presume reflects higher charges for product from Kader - but that might be an incorrect assumption of course).

 

I too think that we would need to see the 2015 figures (due out in June this year) before drawing any realistic conclusions regarding the impact of price increase because overall there was a considerable movement in turnover (in both directions) between 2010 and 2014.

 

However I do stick firmly with my overall message conveyed by the figures but particularly gross profit as a percentage of turnover.

[dibber25]

As you say it does need to be read with a knowledge of wider impact and I think - without checking - that what you might find is a corresponding (but not matching) reduction in Kader's losses although they are not - obviously - wholly related to the UK market.

 

The point about new releases is, I think, critical when looking at any of these companies and I'm sure explains some if what has happened at Hornby however the key thing in Bachmann's case is that the cost of sales as a proportion of turnover has risen (which I presume reflects higher charges for product from Kader - but that might be an incorrect assumption of course).

 

I too think that we would need to see the 2015 figures (due out in June this year) before drawing any realistic conclusions regarding the impact of price increase because overall there was a considerable movement in turnover (in both directions) between 2010 and 2014.

 

However I do stick firmly with my overall message conveyed by the figures but particularly gross profit as a percentage of turnover.

Cost of sales may also include such things as reps and the glass display cabinets in the shops, which (Gareth can correct me if I'm wrong) belong to Bachmann. (CJL)

[Ian J.]

Could 'cost of sales' include advertising?

[Legend]

Cost of sales may also include such things as reps and the glass display cabinets in the shops, which (Gareth can correct me if I'm wrong) belong to Bachmann. (CJL)

Cost of sales is usually related to material costs to compare directly with turnover, Chris. Reps should be in Operating Expenses and Glass Display Cabinets , if of value are probably in assets, unless the policy is to write them off immediately ( they maybe can't keep track of all the displays, if you can't verify the asset you write it off) in which case they would show up in Operating Expenses again.

[ruggedpeak]

I agree in essence. It certainly isn't extortion. However, a reality for all manufacturers aiming at the UK market is that pay isn't keeping up with mortgage or rent, especially for the younger generation. This means that true, we can't afford it so we don't buy it, but that means that Bachmann et al won't get anything like as many sales as the last couple of decades. It does mean that 'indulging' in the hobby becomes less viable, and so exit from the hobby becomes a likely probability (if new people could get into it in the first place). I'm not crying, I'm still here though I've no discretionary income at all. I'm just pointing out an unfortunate reality that appears to be the growing canyon between income and discretionary spend.

Exactly. Criticising people for daring to question price rises when wages for many are frozen (well going down in real terms) for many, whilst facing a range of rising prices is out of order frankly. Model trains is not Soviet tractor making, and so we are free to complain about price increases and not end up in a salt mine. Unless someone comes into power and nationalises model trains as well as real ones!

 

And Ben A made the comparison with football - well Liverpool fans made their views clear about price rises and got them stopped.

 

I got a pay rise last year Net of tax it was less than the increase in my season ticket to get to work i was lucky to get any sort of rise, but you can forget something as outrageous as an inflation linked rise.

[Dunsignalling]

Bachmann Europe, as part of the Kader group, are expected to contribute to the recovery thereof. The price rises are a part of this.

 

Whether or not the strategy works will decide how many blue boxes will be in evidence on dealers' shelves/websites in two or three years time (if any).

 

I've already decided how to deal with the situation as it affects me. I placed a modest number of pre-orders yesterday but am hanging fire on a couple of items. Purchase of them will depend on whether their release coincides with that of items I already have on pre-order from other suppliers.

 

It is abundantly clear that others have decided that the new prices are unaffordable or "unjustifiable" and intend to cease buying Bachmann models unless they are being sold off at a discount following failure to shift at or near RRP. Frankly, lots of people have always done this, and with every maker's output, but without feeling the need to repeatedly make a song and dance about it.

 

It is clear that this policy will run its course, reversing it (even if they could) would result in everybody ceasing to buy until it became apparent how low prices might drop.

 

I suspect that, if anyone at Bachmann ever was following these threads, they will have (wisely) hit the "ignore this Topic" bar when the "discussion" commenced its third lap (about this time last year). 

 

Can I suggest that someone who wants to continue banging his head against a metaphorical brick wall, should start a topic entitled "Bachmann Prices" to which further discussion of the matter should be confined, leaving this one to do "what it says on the tin". 

 

John

[Ozexpatriate]

I'm not sure you can just look at Bachmann Europe , I think given the Parent , subsidiary relationship you would really need to look at Kader too, which is a whole different kettle of fish. Bachmann Europe includes Lilliput as well doesn't it , so it probably doesn't show what's specifically going on in UK.

I expect Kader to publish their annual finances for the year ending December 31, 2015 by the end of April. The 2014 results were posted on April, 23 2015. 

[Ozexpatriate]

... the cost of sales as a proportion of turnover has risen (which I presume reflects higher charges for product from Kader

"Cost of sales" is usually separately measured from COGS (cost of goods sold). It's usually mostly composed of the cost of the sales channel which is salary + incentive packages. There are other expenses too of course - equipment, office space etc, but most of it is directly related to the reps and their management.  Of course I can't speak authoritatively for your source.

 

EDIT: Based on the numbers you quoted, my guess is much more than the direct channel costs are included here.

 

Cost of sales may also include such things as reps and the glass display cabinets in the shops, which (Gareth can correct me if I'm wrong) belong to Bachmann. (CJL)

Could 'cost of sales' include advertising?

Cost of sales is usually related to material costs to compare directly with turnover, Chris. Reps should be in Operating Expenses and Glass Display Cabinets , if of value are probably in assets,

Perhaps Mike's source is different, but cost of sales usually refers to the sales channel itself and could include promotional activity. There are all kinds of buckets where this might be reported including as you say 'operating expenses' which would include G&A (the general & administrative expense which includes corporate overhead.)

 

Kader Holdings does not break out cost of sales as a line item in their financial reports. Given the entity that Bachmann Europe PLC is, the cost of the sales channel is a big overhead cost for them. It is an essential part of maintaining their retailer network. Having reps to support the retailers means managing a material cost of sales.

[Ian Hargrave]

Bachmann Europe, as part of the Kader group, are expected to contribute to the recovery thereof. The price rises are a part of this.

 

Whether or not the strategy works will decide how many blue boxes will be in evidence on dealers' shelves/websites in two or three years time (if any).

 

I've already decided how to deal with the situation as it affects me. I placed a modest number of pre-orders yesterday but am hanging fire on a couple of items. Purchase of them will depend on whether their release coincides with that of items I already have on pre-order from other suppliers.

 

It is abundantly clear that others have decided that the new prices are unaffordable or "unjustifiable" and intend to cease buying Bachmann models unless they are being sold off at a discount following failure to shift at or near RRP. Frankly, lots of people have always done this, and with every maker's output, but without feeling the need to repeatedly make a song and dance about it.

 

It is clear that this policy will run its course, reversing it (even if they could) would result in everybody ceasing to buy until it became apparent how low prices might drop.

 

 

 

 

I suspect that, if anyone at Bachmann ever was following these threads, they will have (wisely) hit the "ignore this Topic" bar when the "discussion" commenced its third lap (about this time last year). 

 

Can I suggest that someone who wants to continue banging his head against a metaphorical brick wall, should start a topic entitled "Bachmann Prices" to which further discussion of the matter should be confined, leaving this one to do "what it says on the tin". 

 

John

Agree entirely.Indeed,they don't.(follow the forum)

[Willie Whizz]

...

 

Look at most luxury goods brands, if you pay £25k for a handbag versus say £25 for one in John Lewis, is there really 1000x more utility than the Chanel one? Can it carry 1000x more stuff? Of course not. Is it technically superior in some major way, in the way a Ferrari does have significant technical superiority (bit faster, better round corners etc) over a Dacia Duster? No, slightly better materials and finishing. That's it.

...

 

Er ...exactly how long is it since you last bought your Wife/Mother/Partner/Mistress/Significant Other a handbag for £25 in John Lewis?  Even in the Sales?

 

They have about three moving parts (if that), come in only two or three simple liveries per type, are not motorised or DCC chipped ... and from that store you can barely get one of the market-leading brands for five times your 'target price' quoted; and sometimes ten times for one as comparatively good looking as an A4.  £25 eh ... my word, those were the days.

 

Mind you, if I have do £125 (say) to spend, I know what would give me more satisfaction as between buying a new Bachmann loco and a nice Radley handbag ...

 

 

... yes, it's the handbag - because then, having kept Lady Whizz happy and contented for a while longer, I can get on with more modelling without too much grief!

[NINJA]

Disillusioned with the way prices have climbed with British 00, changed over to American HO, a refreshing change, no longer did I need all these passenger coaches, just plenty of freight wagons and it also brought me back to scratch building.

[90rob]

£25 for a handbag! They've gone up. I'm sure I bought one as a present a couple of years back and it cost something like 10 shillings and sixpence...

[The Stationmaster]

"Cost of sales" is usually separately measured from COGS (cost of goods sold). It's usually mostly composed of the cost of the sales channel which is salary + incentive packages. There are other expenses too of course - equipment, office space etc, but most of it is directly related to the reps and their management.  Of course I can't speak authoritatively for your source.

 

EDIT: Based on the numbers you quoted, my guess is much more than the direct channel costs are included here.

 

Perhaps Mike's source is different, but cost of sales usually refers to the sales channel itself and could include promotional activity. There are all kinds of buckets where this might be reported including as you say 'operating expenses' which would include G&A (the general & administrative expense which includes corporate overhead.)

 

Kader Holdings does not break out cost of sales as a line item in their financial reports. Given the entity that Bachmann Europe PLC is, the cost of the sales channel is a big overhead cost for them. It is an essential part of maintaining their retailer network. Having reps to support the retailers means managing a material cost of sales.

 

Wages & Salaries are accounted separately on a line below gross profit so i doubt they're taken off twice - and that will include the reps salaries no doubt (but not the cost of keeping them on the road I presume. 

 

'Cost of Sales' might include promotional costs - and that is not clear because the line is simply show as 'Cost Of Sales'.

Exactly. Criticising people for daring to question price rises when wages for many are frozen (well going down in real terms) for many, whilst facing a range of rising prices is out of order frankly. Model trains is not Soviet tractor making, and so we are free to complain about price increases and not end up in a salt mine. Unless someone comes into power and nationalises model trains as well as real ones!

 

And Ben A made the comparison with football - well Liverpool fans made their views clear about price rises and got them stopped.

 

I got a pay rise last year Net of tax it was less than the increase in my season ticket to get to work i was lucky to get any sort of rise, but you can forget something as outrageous as an inflation linked rise.

The situation with your, or my, personal income is irrelevant as far as Bachmann's pricing policy is concerned - they base their pricing on their numbers not yours, or mine, although they no doubt consider how they sit on price indices when considering any increase or changes.  But when it comes down to it their concern has to be the future of their business.

 

Fair enough to say you don't like (who does like price increases of anything?) but what right have we to question their financial policy or decisions - we're not shareholders, we're not employees, we are simply customers and if we don't like their prices we have a  choice and either save for things we want or don't buy them.  I somehow think comparison with Premiership football finances and prices would hardly hold water - the Premiership is awash with huge sums of money and pays out 'wages' (a term I use very advisedly) in a manner which would put the exchequer of a small country to shame so it's no wonder su[porters get hot under the collar.  

 

Years back I - like many in BR at that time - went through several years of negative pay 'rises' and my spending on model railways was nil or little more than nil and what little I did buy came from swap meets.  I'm sorry but that's life and there are times when it can be tough especially with a young family when you are bringing the only income into the home.  But at the time I didn't blame model railway manufacturers for increasing their prices or anyone else for doing the same, I didn't blame the holiday/travel industry for being unable to afford a holiday as they increased their prices - that was a result of my situation, not theirs.

[Ozexpatriate]

Wages & Salaries are accounted separately on a line below gross profit so i doubt they're taken off twice - and that will include the reps salaries no doubt (but not the cost of keeping them on the road I presume. 

 

'Cost of Sales' might include promotional costs - and that is not clear because the line is simply show as 'Cost Of Sales'.

Thanks Mike. I think I understand your source better now.

 

For contrast, the company i work for reports the following as separate line items:

 

Revenues

 - Product

 - Services

Cost of Revenues

 - Product

 - Services

Operating Expenses

 - R&D

 - Marketing & Selling

 - General & Administrative

 - other financial items

 

Without seeing the balance sheet, I suspect your 'cost of sales' (in this case the same as 'cost of revenues') is likely to be (as you suspect) payments to Kader Industries. The 'marketing and selling' operating expense is a different 'cost of sales'.

[locoholic]

Sorry to interrupt the forensic accountancy, but I was wondering if anything had been said officially about the tooling for the new 2-HAP unit: is it really half a 2 EPB and half a Kernow 2H? If that is the case, I wonder how Bachmann are recompensing Kernow for the use of their tooling. Is it too much to hope that a centre trailer for the 2H might be the result?

[jjb1970]

I'm still planning to get a 450, even at the higher price but assuming a typical 15% discount the model is still within what I consider an acceptable price based on past experience with the 350. I'll also be in for the 2-HAP as I'm a bit of a Southern buggy fan and Bachmann's previous Southern efforts have been superb. Beyond that I'll wait and see. I am one of those identified by Ben A in that I have an amount I'm willing to spend on models, if prices go up it just means I buy fewer models but c'est la vie. As with the Station Master I've been through periods where I didn't buy any models because money was tight and I survived it.

[Revolution Ben]

 

Hello Locoholic,

 

I don't know the details of the Kernow deal with Bachmann, but when the NGS commission models Bachmann retain ownership of the tooling, and simply guarantee exclusivity for a fixed period.

 

The upshot is that they don't require thousands of pounds upfront for tooling, just guaranteed orders for at least 3000 units. By the time the bill needs paying we have usually generated enough sales to avoid any of the cash-flow issues we would have it we had to pay before development.

 

My guess would be that Kernow's period of exclusivity is up and Bachmann are now free to use the tooling as they see fit.

 

Cheers

 

Ben A.

[ThaneofFife]

Wages & Salaries are accounted separately on a line below gross profit so i doubt they're taken off twice - and that will include the reps salaries no doubt (but not the cost of keeping them on the road I presume. 

 

'Cost of Sales' might include promotional costs - and that is not clear because the line is simply show as 'Cost Of Sales'.

The situation with your, or my, personal income is irrelevant as far as Bachmann's pricing policy is concerned - they base their pricing on their numbers not yours, or mine, although they no doubt consider how they sit on price indices when considering any increase or changes.  But when it comes down to it their concern has to be the future of their business.

 

Fair enough to say you don't like (who does like price increases of anything?) but what right have we to question their financial policy or decisions - we're not shareholders, we're not employees, we are simply customers and if we don't like their prices we have a  choice and either save for things we want or don't buy them.  I somehow think comparison with Premiership football finances and prices would hardly hold water - the Premiership is awash with huge sums of money and pays out 'wages' (a term I use very advisedly) in a manner which would put the exchequer of a small country to shame so it's no wonder su[porters get hot under the collar.  

 

Years back I - like many in BR at that time - went through several years of negative pay 'rises' and my spending on model railways was nil or little more than nil and what little I did buy came from swap meets.  I'm sorry but that's life and there are times when it can be tough especially with a young family when you are bringing the only income into the home.  But at the time I didn't blame model railway manufacturers for increasing their prices or anyone else for doing the same, I didn't blame the holiday/travel industry for being unable to afford a holiday as they increased their prices - that was a result of my situation, not theirs.

maybe this view should be copied and pasted and then rolled out after every round of new announcements as it might save a lot of time and deep breath's (unless the poster himself/herself already found and copied it from an older post or similar that they found out on the net and rejigged it for model railways then pasted it in here).  tedious I know.

[Clearwater]

The figure that intrigues me in the Bachmann Europe plc accounts is "stock held for resale". At c£8.5m, that is a material percentage of sales.

[Trains&armour]

Disillusioned with the way prices have climbed with British 00, changed over to American HO, a refreshing change, no longer did I need all these passenger coaches, just plenty of freight wagons and it also brought me back to scratch building.

Funny, I changed in 2010  from German H0 to British 00 for, amongst others,  that reason. (It certainly wasn't the most important reason...) I did need all kind of  passengers coaches, but, sadly, there were almost none compared to what I was used to! It did indeed bring me back to  kit & scratch building, which I thoroughly enjoy.

 

Only now, six years later, are the prices of British 00 creeping up to the level of pricing I was used to back then. But they are still not there, and certainly not when compared to prices of HO now! Still not spoiled for choice concerning coaches, but overall the choice in 00 models has been greatly expanded in those six years, and detailing and quality have improved. I will continue buying British OO, be it Bachmann, Hornby (hopefully...) DJM, Kernow, etcetera. 

 

And as to the real topic of this thread,  not much in it for me this year, but to me that's not a bad thing, hopefully Bachmann will now have time to do something about their backlog.

Still eagerly awaiting the:

 

Ransomes & Rapier 45T Steam Crane

94xx Pannier Tank

WD Warflat

SE&CR Birdcage Coaches

LB&SCR H2 Class 4-4-2

Webb Coal Tank

LMS Stanier Mogul 2-6-0

USA 0-6-0T (exclusively for Model Rail)

20T Tank Wagon

 

Come on Bachmann!

ANTB: Yes, I know, some(!) non GWR stuff there. Just don't ask!

[Andy Hayter]

The figure that intrigues me in the Bachmann Europe plc accounts is "stock held for resale". At c£8.5m, that is a material percentage of sales.

An important point in trying to analyse that number is at what point in the chain do Bachmann Europe become financially responsible for the stock.  I would be surprised if they were not "paying" from the moment the goods leave the factory gate, but it could be that they become financially responsible (for example) as items are moulded, since at that point they become bespoke to Bachmann Europe.

[Clearwater]

An important point in trying to analyse that number is at what point in the chain do Bachmann Europe become financially responsible for the stock.  I would be surprised if they were not "paying" from the moment the goods leave the factory gate, but it could be that they become financially responsible (for example) as items are moulded, since at that point they become bespoke to Bachmann Europe.

Yes - I'd thought that certainly the items become barwell's on leaving the factory gate but I take your point about whether title transfers on moulding. However, whether that is "stock" or "work in progress' may be debateable. I also suspect that they carry a fair amount of stock awaiting distribution to retailers in the UK. Highlights the working capital issue these businesses face. Nonetheless, it equates to c57% of sales ie about 7 months stock! It's possible I'm missing something and happy to be enlightened

 

David

[The Stationmaster]

maybe this view should be copied and pasted and then rolled out after every round of new announcements as it might save a lot of time and deep breath's (unless the poster himself/herself already found and copied it from an older post or similar that they found out on the net and rejigged it for model railways then pasted it in here).  tedious I know.

 

I wrote it (although I appreciate that you weren't really suggesting otherwise) and I mainly wrote because, as I said, I've been there - couldn't afford the tee shirt - but didn't have to spend my life going on about it (not that there was an internet then anyway).  But I think I might keep a copy and have it handy as you suggest