James May's Big Trouble in Model Britain. - Hornby's decline and struggle to survive.

[Mike Storey]

3 hours ago, The Stationmaster said:

Exactly so - this is what really interest me as well and has been more than amply listed above. by 'Legend'.  But it would be interesting, and in some respects instructive, to learn why Hornby followed the particular paths that it did in respect of both production and even more so in the matter of acquisitions and its subsequent business plans.  A look back through the company's annual reports shows a very clear, and sudden, movement from profitability to ever increasing losses and we will be forever left running if the marketing blunders over the Olympics played a part in that?  Unless these programmes address such issues.

 

While I doubt we'll be told much it would also be very interesting to learn how LCD has grabbed the cost issues and wider managerial issues in the Group by the scruff of the neck and is setting the cost base of the company at a more appropriate level for its turnover.  It's all of this, as much as nice new models, which will help secure the future of the company and has no doubt in part been responsible for stabilising the share price.

 

One stat stood out in the media reports, and I doubt the journalists made that up - 125 people will work at Margate after transfer. In the 2018 final accounts, there were 163 people (average monthly equivalent - Note 24) working directly for Hornby. Given that some may have been victims of the European sales team downsizing (although elsewhere the accounts do not show a change in staff costs for that), one wonders what this leaves in the domestic operation. Between 2017 and 2018 reports, headcount went down, but admin and operations staff costs went up. R&D and Sales & Marketing went down. I wonder if the programme will give us any better idea as to what that means.

 

Given the usual, positive news spouted in the 2018/19 Interim Report by LCD, to impress lenders, about reduced losses and accelerated procurement from the Chinese factories, and an explanation of why inventory had significantly increased, ahead of the Christmas season, I just wonder how much we will really learn from these programmes. We have all been impressed by the improvement to getting products on to shelves (at least compared to Bachmann) but I guess we will never know how much that is due to measures already taken by the previous cadre. It is of note in those same accounts, that capital investment (primarily new models) went up by a mere £300k. That would appear to amount to just one, or perhaps two, new model(s) (if explanations of such costs elsewhere on this forum, have any credibility).

 

To us, as consumers, it does not really matter, but as an objective analysis of a company's transition, I have no great confidence. There is no way that the management is going to allow a negatively critical appraisal (which may affect its share price, or more importantly, its credit-worthiness). But the fact that they have agreed to a programme of this type, does suggest they have reasonable confidence in a positive hearing.

 

 

 

[adb968008]

The story of Hornby is much like that of saving the Settle and Carlisle line

 

its an emotional one for its supporters who wanted it to thrive, not close.

lots of nostalgia and support for older details for a historic line that lost its profitable ways eventually saved it.

But  eventually OHLE will come to the S&C, signals and boxes will go and the line may go higher speeds to make money, some chocolate box stations may close or even move dependant on needs, and the reasons supporters gained support to keep it will have been lost to commercial needs behind its existence in the first place... to make profits.

 

The same is true with a reborn Hornby, we love our super detailed models, but what Hornby made most money was simple trainsets, toys.. and going back to that, who knows maybe even in maybe a digital form, may be the cold hard commercial reality.

Edited February 26, 2019 by adb968008

[south_tyne]

I for one am just looking forward to watching the programme next week. I like Hornby and want them to do well. It would be nice to leave the politics behind, particularly given the show hasn't even been aired yet......

 

As modellers, we should just all be pleased that our penchant for playing with toy trains is enjoying an unprecedented level of exposure in the mainstream national media. If that brings new or returning folk into the hobby then that is great from my (probably simplistic) point of view.

 

[jjb1970]

I think that if you are making a TV show about a much loved business which has fallen on hard times and it's struggle to return to profitability and with the cooperation of that company then it will always be a political exercise. However I do like James May so it should be worth watching. 

[The Johnster]

To extend the Settle and Carlisle analogy, nobody wants Hornby to fail; they are essential to the hobby in the UK even if you are a dedicated scratchbuilder.  Nobody wanted the S & C to fail either and it's potential closure was driven by hard economics, income and expenditure figures.  It has been saved by a very effective marketing exercise on the part of it's supporters which has generated more income, and is now a destination in it's own right.  It is not an entity in it's own right like Hornby, though, but part of a national network capable of being subsidised by overall levels of profit.  It conforms to the general standards of the network, and this will indubitably eventually mean OHLE and MAS signalling unless cab signalling is common by then!

 

A study of Hornby and it's struggles may or may not be less than objective about the company; I would imagine May is very much a supporter whose feelings will be sympathetic to the 'cause', but will be in any case illuminating and interesting.  Hornby were hobbled for many years by their 'train set' mentality and were at one time barely credible as a contender for serious modelling.  It is probably not a coincidence that this was at the start of what I regard as 'serious' RTR models' arrival in the market from the likes of Airfix and Mainline; Hornby have proved more resilient in the long run.

 

IMHO the failure of Palitoy and Airfix, and to some extent Lima, produced a dangerous level of complacency in Hornby (we've proved our policy works and have seen off the newcomers) who failed to react over the next 2 decades to ever better models from the competition, especially in blue boxes.  H seem to have thought that train sets and crude models would see them right, but the toy train market is a busted flush in the computer age.  Adapt or die, and they very nearly didn't adapt early enough or radically enough to survive.

 

That they have, and that we are all delighted about it, is indicative of an enormous level of goodwill which is probably their most valuable asset, goodwill so strong that it has provided bailouts and support from the hardheads and beancounters of the business world.  Compare this to what would have probably happened if Oxford or Heljan had gone under, or Kader had pulled the plug on UK operations not making the desired level of profit; howls of grief amongst the modelling community on websites like this, a few lines in the financial or business media, and a general shrugging of shoulders followed by a feeding frenzy for tooling among the survivors and products on 'Bay.

 

From the hobby's general perspective, Hornby = good, defunct Hornby = bad.  We should all be careful of an attitude that Hornby's stunning ability to survive these sort of crises does not become so ingrained that we are complacent about future crises; despite the goodwill, the company is not a Holy of Holies whose survival is guaranteed, any more than any other company is.  It is a competitive market and it is the nature of competition that there are more losers than winners, otherwise there's no point in winning!

 

I have no axe to grind here.  I will buy Hornby products as long as they suit my needs and I can afford them, in exactly the same way that I will buy any RTR products.  Hornby persist in doing things that irritate me, such as knocking out 16ton minerals on the wrong chassis and not putting modern standard 7' Collett bogies under the redacted auto trailer, but most of the competition irritate me in various similar ways (especially long lead times from announcement to delivery, and more so if the announced model, lets call it a 94xx for argument's sake, is repeatedly put back) as well; I do not have a preference except for models produced to a high standard that suit my period and location that i can afford to buy.  No manufacture will survive by taking any notice of my ramblings as I've already bought most of the stock I will ever need unless some very unlikely products appear.

[D9020 Nimbus]

Palitoy and Airfix were, of course, involved in far more areas than model railways and it isn't clear that it was the "railway" side that caused their demise — Airfix took over Meccano which had been a heavy loss maker and it's often been speculated that this was a factor in Airfix's demise.

Hornby hasn't been the only model railway firm in trouble — Märklin (whose standing in Germany mirrors Hornby's in the U.K.) has needed to be rescued more than once in the last few years; it had previously itself taken over Trix; Roco, Fleischmann, Arnold (on its own, then as part of the Lima group), Rivarossi/Lima, Jouef, Liliput have all been in difficulty; Klein Modellbahn has disappeared (Roco, I believe, acquired the tools).

[QuoitsPlayer]

"In the climatic finale, we see Simon take on two of his biggest rivals as Hornby’s 2019 range includes two products that have the competitors fuming, leading to a dramatic showdown" I'm looking forward to seeing what this part of the synopsis for Episode 2 on the BBC website refers to. Only speculation but I wonder if another manufacturer rings Simon up to complain about duplication? 

Edited February 27, 2019 by QuoitsPlayer
Edited due to Typo

[The Stationmaster]

1 hour ago, D9020 Nimbus said:

Palitoy and Airfix were, of course, involved in far more areas than model railways and it isn't clear that it was the "railway" side that caused their demise — Airfix took over Meccano which had been a heavy loss maker and it's often been speculated that this was a factor in Airfix's demise.

Hornby hasn't been the only model railway firm in trouble — Märklin (whose standing in Germany mirrors Hornby's in the U.K.) has needed to be rescued more than once in the last few years; it had previously itself taken over Trix; Roco, Fleischmann, Arnold (on its own, then as part of the Lima group), Rivarossi/Lima, Jouef, Liliput have all been in difficulty; Klein Modellbahn has disappeared (Roco, I believe, acquired the tools).

Don't forget that Hornby is a lot more than 'a model railway firm' and I hope the programmes will remind viewers of that.

[Steamport Southport]

1 hour ago, D9020 Nimbus said:

Palitoy and Airfix were, of course, involved in far more areas than model railways and it isn't clear that it was the "railway" side that caused their demise — Airfix took over Meccano which had been a heavy loss maker and it's often been speculated that this was a factor in Airfix's demise.

Hornby hasn't been the only model railway firm in trouble — Märklin (whose standing in Germany mirrors Hornby's in the U.K.) has needed to be rescued more than once in the last few years; it had previously itself taken over Trix; Roco, Fleischmann, Arnold (on its own, then as part of the Lima group), Rivarossi/Lima, Jouef, Liliput have all been in difficulty; Klein Modellbahn has disappeared (Roco, I believe, acquired the tools).

 

Details of Palitoy's demise here.

 

https://en.wikipedia.org/wiki/Palitoy

 

 

Jason

[andyman7]

2 hours ago, D9020 Nimbus said:

Palitoy and Airfix were, of course, involved in far more areas than model railways and it isn't clear that it was the "railway" side that caused their demise — Airfix took over Meccano which had been a heavy loss maker and it's often been speculated that this was a factor in Airfix's demise.

Hornby hasn't been the only model railway firm in trouble — Märklin (whose standing in Germany mirrors Hornby's in the U.K.) has needed to be rescued more than once in the last few years; it had previously itself taken over Trix; Roco, Fleischmann, Arnold (on its own, then as part of the Lima group), Rivarossi/Lima, Jouef, Liliput have all been in difficulty; Klein Modellbahn has disappeared (Roco, I believe, acquired the tools).

The story of the British toy and hobby industry is very much interlinked and doesn't just concern model railways. Airfix was brought down in May 1981 by crippling losses from Meccano with the decline and closure of the Binns Road factory followed by the recession and dramatic shift in toy buying habits to computer games etc from 1980. The whole group was acquired by General Mills who owned Palitoy in the UK. General Mills made a strategic withdrawal from the European toy and hobby market in 1985 which by then had changed beyond recognition in just a few short years. During this period, Rovex Limited (who were the makers of Hornby trains and Scalextric) went under in 1981 due to the failure of the parent group Dunbee-Combex-Marx, brought down by the same seismic changes in the economy and the toy/hobby market. From the ashes of this a new company 'Hornby Hobbies Ltd' was established, and has managed to survive now for 38 years, considerably longer than its previous owners. Hornby Hobbies diversified into other toys in the 1980s and shrank the model railway and Scalextric business - most mid 1980s locos had producton runs of low 000s compared to 15,000-20,000 before 1981. In the 1990s the first steps were taken to manufacture in China, leading to the shift of all production east in 1998. This coincided with another golden age - superdetail models at the same prices as the previous UK made ones selling in bucketloads to silver surfers spending their retirement dosh. This all began to unwind after the 2008 crash, with a perfect storm of tightening discretionary spending money, inflation of wages in China, shortage of production capacity and loss of the Sanda Kan production facility, Modelzone going bust, adverse exchange rates....in turn a number of poor business decisions were made (2012 Olympics, Design Clever, direct sales at the detriment of the independent dealer network), followed by the 'new broom' management which includes Lyndon Davies, formerly of Corgi (which as a brand has had a similar story since the crash of its original parent Mettoy in 1983). It's a rollercoaster ride!

Edited February 27, 2019 by andyman7
Spelling!

[Ron Ron Ron]

Here's a totally useless nugget I came across today ( yes...what a sad b*****d. !!!! )........

 

Did you know.......

One non-executive director of Locomotive Storage Ltd, Hornby's new landlords.....is no other than former Hornby Hobbies CEO, Frank Martin.

 

Well, there you go...... 

 

 

.

[Mike Storey]

1 hour ago, Ron Ron Ron said:

Here's a totally useless nugget I came across today ( yes...what a sad b*****d. !!!! )........

 

Did you know.......

One non-executive director of Locomotive Storage Ltd, Hornby's new landlords.....is no other than former Hornby Hobbies CEO, Frank Martin.

 

Well, there you go...... 

 

 

.

 

I believe there are other personal links too, regaled on another thread, but I cannot recall what. But this is certainly a "friendly" arrangement. And why not? There are clear synergies for both being at Margate. Hornby certainly will not be worse off financially, compared to the remote, double-glazed, faceless (and entirely inaccessible to the public) Sandwich industrial estate.

 

What screwed the previous team's aspirations, for capital injection, was the much lower value of the Margate site to that which they had believed they could obtain (for reasons expanded on another Hornby thread). alongside the failure of their aspiration for a much higher footfall site for the Visitor Centre.

 

The Margate site is still a visual dump and unattractive to passers-by, most of whom will be heading for the QEQM Hospital, or more likely the nearby ghastly shopping centre (I have spent MANY ghastly hours there, being blown from one windswept retail avenue to another). They really have to think hard about how to make the place more visually attractive and visitor friendly externally, if they are to truly capitalise on what is inside. "Hidden Gem" may not cut it, these days.

 

 

[Steamport Southport]

Why do I keep getting Chas & Dave songs in my head?    

 

 

 

 

Jason

[ThaneofFife]

saw the latest catalogue for the model trains in smiths yesterday and its over half an inch thick packed with models.

 

who remembers the wafer thin catalogues from their childhood?

 

anyway going by the way Hornby have ramped up their offerings in the last few years and with more great new models to come hopefully it should help turn things around.

 

didn't know Kohler was back but seems to be a good move by Mr Davies in getting him back.

[JohnR]

9 hours ago, Ron Ron Ron said:

Here's a totally useless nugget I came across today ( yes...what a sad b*****d. !!!! )........

 

Did you know.......

One non-executive director of Locomotive Storage Ltd, Hornby's new landlords.....is no other than former Hornby Hobbies CEO, Frank Martin.

 

Well, there you go...... 

 

 

.

 

No surprises here. The majority shareholder in Locomotive Storage Ltd is none other than Jeremy Hosking, owner of a number of locomotives, including some that are on display at Locomotive Storage Ltd. He also owns shares in Hornby (10% at one point). 

 

 

[Ron Ron Ron]

An old vintage postcard.....

 

 

 

[Fireline]

16 hours ago, QuoitsPlayer said:

"In the climatic finale, we see Simon take on two of his biggest rivals as Hornby’s 2019 range includes two products that have the competitors fuming, leading to a dramatic showdown" I'm looking forward to seeing what this part of the synopsis for Episode 2 on the BBC website refers to. Only speculation but I wonder if another manufacturer rings Simon up to complain about duplication? 

 

Two other companies had a ducking Giraffe wagon planned?

[The Stationmaster]

15 hours ago, andyman7 said:

The story of the British toy and hobby industry is very much interlinked and doesn't just concern model railways. Airfix was brought down in May 1981 by crippling losses from Meccano with the decline and closure of the Binns Road factory followed by the recession and dramatic shift in toy buying habits to computer games etc from 1980. The whole group was acquired by General Mills who owned Palitoy in the UK. General Mills made a strategic withdrawal from the European toy and hobby market in 1985 which by then had changed beyond recognition in just a few short years. During this period, Rovex Limited (who were the makers of Hornby trains and Scalextric) went under in 1981 due to the failure of the parent group Dunbee-Combex-Marx, brought down by the same seismic changes in the economy and the toy/hobby market. From the ashes of this a new company 'Hornby Hobbies Ltd' was established, and has managed to survive now for 38 years, considerably longer than its previous owners. Hornby Hobbies diversified into other toys in the 1980s and shrank the model railway and Scalextric business - most mid 1980s locos had producton runs of low 000s compared to 15,000-20,000 before 1981. In the 1990s the first steps were taken to manufacture in China, leading to the shift of all production east in 1998. This coincided with another golden age - superdetail models at the same prices as the previous UK made ones selling in bucketloads to silver surfers spending their retirement dosh. This all began to unwind after the 2008 crash, with a perfect storm of tightening discretionary spending money, inflation of wages in China, shortage of production capacity and loss of the Sanda Kan production facility, Modelzone going bust, adverse exchange rates....in turn a number of poor business decisions were made (2012 Olympics, Design Clever, direct sales at the detriment of the independent dealer network), followed by the 'new broom' management which includes Lyndon Davies, formerly of Corgi (which as a brand has had a similar story since the crash of its original parent Mettoy in 1983). It's a rollercoaster ride!

Things however didn't run together in quite the way you final sentences suggest.  Hornby remained profitable, with a reasonable return for shareholders, into its fiscal year 2011-12 although underlying operating profit had declined fairly steadily since 2008 despite revenues actually increasing over the same period. (source  - Hornby 2012 Annual Report).  But it then fell over the edge of a cliff in 2012-13 for whatever reasons but coincident with the Olympics of course, and it never recovered from that situation despite changes in management and trying various initiatives over the following 5 years, in fact losses piled up.  

 

The appointment of LCD has brought some very significant changes particularly in cost reduction (although there had been some of that before his arrival) and various marketing initiatives such as ending fire sales which were undoubtedly hitting retail trade orders and leading to a far bolder marketing strategy for the 2019 model year although most of that on the model railway side was obviously in development before his arrival.  

 

It is these sort of changes that I hope the programmes will examine and possibly explain as far as the drop into big losses is concerned and maybe the strategy for returning to profitability and paying off the substantial loan debt the company now has from what is known to be a predatory lender.

[RAF96]

16 hours ago, QuoitsPlayer said:

"In the climatic finale, we see Simon take on two of his biggest rivals as Hornby’s 2019 range includes two products that have the competitors fuming, leading to a dramatic showdown" I'm looking forward to seeing what this part of the synopsis for Episode 2 on the BBC website refers to. Only speculation but I wonder if another manufacturer rings Simon up to complain about duplication? 

 

high drama promised...fuming!!!

https://www.bbc.co.uk/programmes/m00037sz

 

[JSpencer]

5 hours ago, RAF96 said:

 

high drama promised...fuming!!!

https://www.bbc.co.uk/programmes/m00037sz

 

 

This will have the forum stirred up for months!

 

[lofty1966]

On 27/02/2019 at 10:37, The Johnster said:

Hornby persist in doing things that irritate me, such as knocking out 16ton minerals on the wrong chassis and not putting modern standard 7' Collett bogies under the redacted auto trailer

Only if it's pretending to be an A28.

If it's in A30 mood then 9ft required

[andyman7]

8 hours ago, The Stationmaster said:

Things however didn't run together in quite the way you final sentences suggest.  Hornby remained profitable, with a reasonable return for shareholders, into its fiscal year 2011-12 although underlying operating profit had declined fairly steadily since 2008 despite revenues actually increasing over the same period. (source  - Hornby 2012 Annual Report).  But it then fell over the edge of a cliff in 2012-13 for whatever reasons but coincident with the Olympics of course, and it never recovered from that situation despite changes in management and trying various initiatives over the following 5 years, in fact losses piled up.  

 

The appointment of LCD has brought some very significant changes particularly in cost reduction (although there had been some of that before his arrival) and various marketing initiatives such as ending fire sales which were undoubtedly hitting retail trade orders and leading to a far bolder marketing strategy for the 2019 model year although most of that on the model railway side was obviously in development before his arrival.  

 

It is these sort of changes that I hope the programmes will examine and possibly explain as far as the drop into big losses is concerned and maybe the strategy for returning to profitability and paying off the substantial loan debt the company now has from what is known to be a predatory lender.

That's a useful clarification, but the clue is the declining operating profit from 2008. Essentially, from that point the fundamentals were being eroded as the various issues compunded each other. By the same token, it takes time to restore underlying profitability but the good signs are that Hornby at last has a reasonably stable supply chain, product on the shelves, no drastic dicounting etc so I am more optomistic now. 

I am sure the programme will be entertaining - it will be nice to get some nuggets of insight but I'm not expecting a Pulitzer prize winning insider business documentary!

[The Johnster]

2 hours ago, lofty1966 said:

Only if it's pretending to be an A28.

If it's in A30 mood then 9ft required

Yes, this is correct and another example of one of my senior moments.  But the point is equally valid in relation to A30 and 9' bogies; better ones with brake blocks that align with the wheels instead of clawing uselessly at fresh air are available in the Hornby range.  I am aware of the slight irony of complaining about the position of correct brakes that do not align with incorrect 00 gauge wheels, and that they would be a lot more aligned to EM or P4 wheels, by the way...

[The Johnster]

31 minutes ago, Pete Darton said:

I hope Hornby are turning things around and not continuing to decline.

 

For me the decline is down to the ever increasing costs of the models, yes we all want good quality models but as the quality goes up the cost also increases. Cost is related to volume sold, the higher the cost the less people can afford them causing the volume sold to go down and price to keep rising. 

 

Hornby was setup to sell medium to low quality trains to the masses and this was very successful, over the years the quality has gone up and some of the modern models are very good but this hasn't been good for the success of Hornby. From this success is somewhere between high quality and low quality. We don't want poor models or models we can only view in shops because we can't afford them. 

 

There are also probably two markets: Children's Trains and Serious modellers for the older generations. These two markets have to work together as a lot of us older modellers have rekindled our love for model trains after doing it as kids.

 

Some people love steam and others love Diesel/Electric and other both. Those who are retired now grew up with Steam and this reflects in sales as these people have time on there hands to do the hobby, but Steam was replaced by Diesel/Electric 50 years ago now and more people in the near future will have more of an interest in Diesel/Electric. Not all younger people want to model Diesel/Electrics but the percentage will increase. Railways are becoming very popular again and this will reflect in the hobby in the future as people want to model this era in years to come.

 

I use Hornby Railmaster to control my trains and this is maybe the future of controlling trains using DCC and Computers. People over the last 20 years who have grown up with the computer, mobile phone as they have developed will expect to see this incorporated in the Hobby in the future. For me Railmaster has been under developed and have been over taken by other suppliers. Either this software has to catch-up with other software produced or the Hornby DCC controllers modified to work better with third party software programs.

 

For me the other big issue with Hornby is there lack of communication with customers, yes they do major announcements but for things like the long delayed Hornby Loco Detection as part of Hornby railmaster customers have been left guessing when it will ever be released and many have moved on to using other systems having given up waiting with no news. Railmaster hasn't been updated now for 8 Months, would be nice to hear message like we are doing a major upgrade or we are having issues with latest issue so please be patient.

 

Like most people want to see Hornby do well but many are customers are getting disillusioned or finding other suppliers cheaper which is effecting Hornby Sales. 

 

Some might attack me for saying this but we all have are era we want to model and all have different budgets. If Hornby aim at one particular area then everyone else will move away and then what will happen to Hornby.

 

Looking forward to watching program, although TV doesn't always tell the truth.

 

It might be a little simplistic to equate detail increased detail with increased production costs; Hornby Dublo could not get production costs down with a range that included tinplate sided coaches with printed detail and some some very crude and simple bodies, and went under as a result.  By and large, the more complex a product is the more it will cost to produce, but older mouldings of less complex items may well not be as cost efficient as current ones which are designed to be used in modern processes.  

 

It would be difficult to get the actual figures and nobody's going to bother as the matter is academic, but it is possible that, when costs are rounded out for inflation over the years, the current Princess Elizabeth  might not be all that more costly to produce than the Rovex one.  Another interesting figure would be the percentage of the retail price represented by the production cost; I bet this was higher for the Rovex model!

[Torn-on-the-platform]

Almost on topic, but I wanted to point out that James May's toy stories are now available on Amazon Prime for subscribers - including both Barnstable-Bideford episodes. The first series was in 2009! I've had a couple of enjoyable evenings re-watching these two episodes of 'nostalgia'! There's quite a treasure trove of railway documentaries available as well.