Hornby 2023 annual results

[The Stationmaster]

35 minutes ago, 1andrew1 said:

 

 

Given the state of Hornby's finances and the UK economy, other things I would consider doing are:

- Selling Oxford Diecast and possibly licensing/selling Corgi to the new owners. Maybe Lyndon Davies's family will be interested? Writing down the value of Corgi  has meant that if it is disposed of in the future, there will be no loss and the stock market should react positively.  

- Selling Scalextric. This is really more in the toy market than Airfix and Hornby although I acknowledge Airfix and Hornby do dip their toes into the toy market. Perhaps the Chinese OEM manufacturer might be interested or the Spanish Scalextric company? 

But the simple fact is we don't know which brands, if any, are loss making and which brands return a good level of profits at the bottom line.  If you sell off a profitable brand you might well get a decent price for it but you only get that once.  If that brand is profitable it will continue to deliver to your bottom line so it might not be a good idea to sell it.  A lot depends on the balance between short term and long term targets for the company.

 

Not much different with inventory - we can work out what some of it is likely to be but Hornby now has a stack of 'whatevers' that exceeds 50% of the value of last year's sales revenue.  A large chunk of it is stuff they bought for last year's expected Q3 market and we don't know what that was. Although we do know - reading between the lines  and from what the report does say - that they ran into price resistance from 'national retailers' so that might be clue - but only for a guess, and little more than that on our part.

[Guest]

1 hour ago, andyman7 said:

The high end models are not 'toys'- well, no more 'toys' than detailed scale model railway engines. It's not massively different to Hornby's train range, a proportion is toy/hobby/boys toys market and a a proportion is for scale models of individual racing cars in period correct liveries with the right details. 

A sale only makes sense if the range is a drag on the bottom line which is not necessarily the case. Tecnitoys is the current owner of the Spanish Scalextric/SCX range, having acquired it in 1997 when Tyco (the previous owner) was bought by Mattel. Tyco had acquired it in 1992 when the original Exin company sold out, Exin had been the original licensees from Triang Minimodels; it was back in 1992 that the Scalextric trademark got split between territories. A future in that direction would be better than ending up anywhere else, were it to be sold.

From the impression I have of Scalextric ARC Pro, they’re using parts of the HM7000 architecture to enhance the brand and that’s a good reason to hang onto and develop it, thus maximising the value of investment in HM7000.

[andyman7]

53 minutes ago, 1andrew1 said:

Good points.

All I would add is that Tecnitoys went bankrupt in 2012. The brand in Spain is now owned by  Amro Invest and licensed to Scale Competition Xtreme based in Madrid, formed in 2017. 

See: https://www.slotcar-today.com/en/notices/2018/05/entrevista-l.-m.-arnau-scx-en-el-2019-habra-grandes-sorpresas-7264.php

Thanks, it's been a while since I've bought any SCX models...! Interesting to see the Exin references in the current ownership. Scalextric is interesting because its heritage is entwined with the Spanish operation - EXIN may have started as licensees but during the golden years of the brand made many of the most iconic and collectable Scalextric models; the heritage/DNA of the brand has a home there too, and Spain is as intertwined with the history of Slot Cars as Germany is to model railways.

[JohnR]

1 hour ago, The Stationmaster said:

But the simple fact is we don't know which brands, if any, are loss making and which brands return a good level of profits at the bottom line.  If you sell off a profitable brand you might well get a decent price for it but you only get that once.  If that brand is profitable it will continue to deliver to your bottom line so it might not be a good idea to sell it.  A lot depends on the balance between short term and long term targets for the company.

 

Not much different with inventory - we can work out what some of it is likely to be but Hornby now has a stack of 'whatevers' that exceeds 50% of the value of last year's sales revenue.  A large chunk of it is stuff they bought for last year's expected Q3 market and we don't know what that was. Although we do know - reading between the lines  and from what the report does say - that they ran into price resistance from 'national retailers' so that might be clue - but only for a guess, and little more than that on our part.

 

That's why ive always been puzzled by the fact they only publish a breakdown by region, rather than brand, saying that breakdown is the one that management finds most useful. 

 

If I was a manager I would find a breakdown by brand much more useful - Hornby have collected brands over the years, most recently Oxford, but which are delivering? Which need investment? Which need dumping?

[Graham_Muz]

6 minutes ago, JohnR said:

 

That's why ive always been puzzled by the fact they only publish a breakdown by region, rather than brand, saying that breakdown is the one that management finds most useful. 

 

If I was a manager I would find a breakdown by brand much more useful - Hornby have collected brands over the years, most recently Oxford, but which are delivering? Which need investment? Which need dumping?

But just because one breakdown happens to be part of such a report it does not mean it is the one management might find the most useful internally, and I am sure they have all manner of internal breakdowns like any business would do. 

[JohnR]

39 minutes ago, Graham_Muz said:

But just because one breakdown happens to be part of such a report it does not mean it is the one management might find the most useful internally, and I am sure they have all manner of internal breakdowns like any business would do. 

But they have stated in previous reports, if not in this one, that this IS the breakdown that management use because they find it most useful. 

[adb968008]

30 minutes ago, JohnR said:

But they have stated in previous reports, if not in this one, that this IS the breakdown that management use because they find it most useful. 

You dont want to expose too much to your competition.

 

I have a bakery at the bottom of my street, its turnover, according to companies house, is greater than some of Hornbys regions.

I have to wonder why there are so many EU entities, when 1 may be sufficient (Europe is one market now for a few decades) ?

 

Hornbys EU range Ive always felt a bit half hearted, ive not bought anything in it for years (PKP double deck stock was fantastic and I thought they may have made a run on Eastern Europe, but they left it to others).

 

Edited June 25, 2023 by adb968008

[D9020 Nimbus]

AFAIK there may be several EU brands, but they're collectively managed (by Hornby Italia)  and the same models often appear in several different ranges.

 

Honby acquired several brands during the early 2000s — with the exception of Electrotren they were all loss making. Arnold had been bankrupt in its own right before being taken over by Lima, as had Jouef — twice.

[JohnR]

Coincidentally, my wife listens to a business podcast, and the episode she's listening to is an interview with Mark Tilbury, the owner of Model World in Sittingbourne. Obviously a fair bit of refocus is on model kits, RC aircraft etc, but he said this about retail.

 

Quote

The only company we deal with where we have to buy well in advance and to the maximum we can sell is Hornby Hobbies, because, and I'll put this on record, they're very backward in the way they do business.

 

My wife said she guessed which company it was before he named them!

Edited June 25, 2023 by JohnR

[SteveM666]

Sadly, Mr Tilbury lost my custom some years ago just ahead of his move to Sittingbourne. Announcing the move he also said he was dropping model railways. When asked what would his rail customers do in future, his reply was a ‘colourful’ version of ‘don’t care’.

Never set foot in his shop after that to see if he carried through on that part of his plan.

[Dunsignalling]

On 24/06/2023 at 14:32, spamcan61 said:

I'd say at the end of the day toy trains are a very mature market, and nobody is making huge piles of cash from them. We're not going to see Google/Apple style ivory palaces inhabited by toy train manufacturers.

Agree in principle, but the number of new entrants, plus an evident up-tick in new activity from Dapol that largely seems to have escaped comment, suggest a worthwhile living is still to be made from OO r-t-r end of the hobby. 

 

I found the pure numbers from Hornby disturbing enough taken in isolation, and some of the "management speak" that accompanied them did nothing to alleviate my discomfort.

 

The phrase "capsule ranges" brought to mind the lack of focus I consider has blighted Hornby ever since they coined the term "Railroad". They have never got to grips with what they think that is, let alone what they want us to think it might be.

 

TT:120 seems to be (at least so far) a well-defined "capsule range". However, some major aims of it, budget prices and relative robustness, echo the original ambitions that underpinned Railroad. The major difference, of course, is a clean slate, unpolluted by the mish-mash origins of the latter.

 

The "new" scale is "self-contained" in a way that no OO equivalent is ever likely to remain, whatever the intentions. Should Hornby (reading between the lines) be contemplating an OO "capsule" range along similar lines, there will need to be minimal carry-over from Railroad (I can think of fewer than a dozen items), which will have to disappear in order to distance its successor from what has gone before.

 

The need, either to replace Railroad (or at long last) sort it out, probably exists, if only to prevent Hornby's OO turnover declining faster than any growth in TT:120 volumes can compensate. If "too good / successful", however, it would risk becoming part of the problem, rather than the solution, by cannibalising Hornby's own OO sales rather than pegging back the competition.

 

John

Edited June 26, 2023 by Dunsignalling

[blueeighties]

20 hours ago, The Stationmaster said:

 teh full inventory accounting 

 

Following the prcices clue

 

 has so fa been  

 

comes bav ck 

 

afvertised and 

 

I think it's time you renewed your spell checker. Chunks of your musings are becoming increasingly incomprehensible.

[Ravenser]

10 hours ago, Graham_Muz said:

The R3434 21c1 Channel Packet was not an off load as your unsubstantiated statement implied, but a second production run released

this year, and like the first batch hasn't exactly hung around long. 

 

It appeared in the Clearance section of the Hornby Shop (also labelled Last Chance to Buy)  - for whatever reason - along with the SECR Thomas (also marked as "Sold Out") , and a W1 variant. 

 

Those were the only locos listed there, so it would appear Hornby do not currently feel they have very much in the way of locos to clear.

 

I was reacting to a comment just above:

 

Quote

    variety alone is 266 different coaches in stock…

if that splays out to locos and kits in stock, it soon adds up.

 

 

The actual Clearance section is a much shorter listing, but it is overwhelmingly dominated by coaches. Any issue with inventory therefore presumably does not "splay out to locos and kits in stock". Just 3 locos and 1 wagon were listed under Clearance

 

And if one of the 3 locos listed in Clearance yesterday is not in fact a clearance, that simply sharpens the point.

 

With the possible exception of the generic 4 and 6 wheelers, I'm not aware of any question mark over the tooling for any of the coaches. Queries seem to relate to the detailed execution of a particular batch of a particular livery. We are not talking about fundamentally flawed models - any issues can perfectly well be dealt with on future runs.

 

A slightly cynical view might be that if time and attention was no longer being spent on developing exotica like Turbomotive and diecast prototype Deltics in Dublo packaging, then more time and attention could be spent on going through the livery details of reruns with a fine tooth comb. Its very easy to imagine that sort of argument being advanced to help support the curtailing of new tooling development in OO - something which might be on the cards for other reasons

[1andrew1]

I thought the emergence of two new subsidiaries in the annual report was interesting:

• Hornby World, described as "a retail and consumer experience business". According to Companies House, this was registered in January 2022. Could this be the brand by which the proposed high street retail business will be known? 
• Hornby Hobbies India...are distributors of models". It makes sense as the majority of Airfix kits are manufactured there and it's seen as a growing market. Could this be one of the international markets referenced in the section about the capsule range? "... and our pricing has also limited some of our opportunities to grow our distribution in certain International markets."?

Edited June 25, 2023 by 1andrew1

[Chris M]

I thought the results weren't too bad. The decision to mark down Corgi goodwill is one that can be made any time (within reason) so Hornby must have decided that this year was a good year to do it. 

TT:120 does seem to have been a huge success so far. I'm not a fan but clearly many folk are and sales appear to have been great. More items are coming into stock so hopefully this will be a good year for Hornby. Here is a clue to where Hornby is going with TT:120 and I think it explains something that was said in their notes about future development.

 

Despite the headline loss there does appear to be plenty to be optimistic about.

[Dunsignalling]

8 hours ago, Chris M said:

I thought the results weren't too bad. The decision to mark down Corgi goodwill is one that can be made any time (within reason) so Hornby must have decided that this year was a good year to do it. 

TT:120 does seem to have been a huge success so far. I'm not a fan but clearly many folk are and sales appear to have been great. More items are coming into stock so hopefully this will be a good year for Hornby. Here is a clue to where Hornby is going with TT:120 and I think it explains something that was said in their notes about future development.

 

Despite the headline loss there does appear to be plenty to be optimistic about.

 

It was inevitable that returns from TT:120 would lag investment for the first few years and that has undoubtedly skewed the numbers somewhat, despite the new venture apparently making a strong start.

 

The destiny of Hornby's entire model railway side, for the foreseeable future, though, is inevitably tied to their much larger historical commitment to OO. Competition within the non-train-set end of that market is nowadays much hotter than Hornby could have anticipated even five years ago.

 

Unless the (evident) "direction of travel" changes significantly, Hornby's overwhelming dominance of the sector is a thing of the past. For the future, they need a clear vision of two things.

 

What volume they can realistically retain, and how the business needs to change in order to do so whilst making a viable return from it.

 

That won't be easy, as "acceptable" price/quality relationships are increasingly being defined by leaner, more efficiently structured, 21st century businesses. Ratios that are probably less than comfortable for a "mature" company such as Hornby.  

 

John

Edited June 26, 2023 by Dunsignalling
Tidying up

[Legend]

With TMC selling A1s at half price £129  is this the start of the Hornby sell off ? Tempted. I had to resist as really don’t need one …….but at that price 

[woodenhead]

13 minutes ago, Legend said:

With TMC selling A1s at half price £129  is this the start of the Hornby sell off ? Tempted. I had to resist as really don’t need one …….but at that price 

They've had an up to 50% off sale on for some time now.

[meatloaf]

3 hours ago, woodenhead said:

They've had an up to 50% off sale on for some time now.

Fairly sure the A1 only went on sale in the last few days

[Covkid]

On 25/06/2023 at 12:35, adb968008 said:

there must also be stock lines that have predictable sales volumes and patterns.

managing inventory, orders to customer orders shouldnt be that hard with planning.

(time over we have heard retailers complain of some key lines being out of stock for long periods).

 

You would certainly think so wouldn't you.

Ask yourself how a certain manufacturer just five years old developed multiple new ranges of wagons and sold out. My particular interest is 1960s transition into the early 1970s so he HUOs and 21 tonners were very welcome for me.  Sold in numerous triple packs with individual numbers.  What a sure fire way of selling more product whin you are selling to railway enthusiast people who just love numbers. Not saying Hornby haven't sold triple packs nor individual numbers, but the HUOs and 21 tonners, indeed the "standard HTO and HTV" and absolutely ripe for producing.  Sadly it seems Hornby prefer to fixate on gimmicky stuff and leave the surefire breadselling to their competitors.    

[HExpressD]

9 hours ago, meatloaf said:

Fairly sure the A1 only went on sale in the last few days

The two A1s they have for £126 are mid-2022 releases. 

[adb968008]

On 26/06/2023 at 00:04, Ravenser said:

 

It appeared in the Clearance section of the Hornby Shop (also labelled Last Chance to Buy)  - for whatever reason - along with the SECR Thomas (also marked as "Sold Out") , and a W1 variant. 

 

Those were the only locos listed there, so it would appear Hornby do not currently feel they have very much in the way of locos to clear.

 

I was reacting to a comment just above:

 

 

 

The actual  Clearance section is a much shorter listing, but it is overwhelmingly dominated by coaches. Any issue with inventory therefore presumably does not "splay out to locos and kits in stock". Just 3 locos and 1 wagon were listed under Clearance

 

And if one of the 3 locos listed in Clearance yesterday is not in fact a clearance, that simply sharpens the point.

 

 

you seem obsessed with clearance.

what if the terms of their loan prevents clearance ?

if its a loan based on stock levels and valuation, then emptying the warehouse for cash may not be in their gift.

it may not make sense either… now they have it, they need max revenue from it, replacing it could have long lead times even if they got cash quick, sitting and letting it slowly release may make more sense.

 

What Hornby needs isnt a clearance sale, they need to get on top of “exceptionals”, and explore more ways of having stock rotating through the door faster, in tune to whats arriving.

 

This maybe part of a legacy problem of “make it in bulk now, sell it over years” approach of Hornby in the 20th century, which doesnt seem to be the model of other manufacturers in the hobby today, who seem to mix between “small batches every couple of years”, or “big bangs of every livery/variant all at once”.

 

I do have to wonder though in the short term, having a large inventory, and a loan with increasing interest rates, presumably incurring storage costs will become a liability further down the road this year… it maybe they reduce prices to be more competitive come autumn ?.. there may be sense in paying down the loan rather than buying more stock, unless capital to buy more stock becomes an issue ?

 

I did look over the special offers on their website, but I decided to look at vacations instead.. thats how interesting it was, and the post covid competition the hobby faces now we are out of lockdown, though I did buy the latest fashion accessory “a Bachmann G7” from TMC. Everyone is heading to the beach, this isnt the time for a clearance.

I maintain big ticket items of this hobby is a fashion… fashions change regularly. So large batches for years doesnt fit with fashion… I’m sure we all own socks and underwear for years, but the jeans and jumpers go to the back of the wardrobe after a while… thats the difference between things on wheels and things that arent in our hobby.

 

I think the issue was Hornby priced things on wheels too high with those 20% price rises, and the fashion moved on,leaving them jeans and jumpers at the back of Hornbys wardrobe instead… Getting them our isnt as simple as a clearance, some reinvention maybe needed.
 

That said I do suspect modern image interest may take a tumble come autumn. Its been on the ascent the last few years, and is more of an interest to the working middle age groups, with good disposable spend… however they also have mortgages.

There is precious little in the contemporary market for younger 20’s modellers, so younger groups with cash and no mortages have little to aim for, meaning the hobby may have to lean back on that ever present retirement group for spend.

 

 

 

Edited June 27, 2023 by adb968008

[The Stationmaster]

Don't forget that Hornby do appear to sell stuff out of their inventory stockpile every year (as do Bachmann of course).  Their problem is the value, and its cost, in their accounts of what is in their inventory,  That will probably in any case limit the pace at which they can sell it at reduced price apart from any conditions that come with the loans they have taken out.  Plus there is inevitably only so much the market can absorb even if some of the retail prices finish up at 70% discount off RRP.

 

The problem I think lies at the other end, and that appears to be recognised by part of the action Raeburn has instituted.  If you don't get your marketing right in the first place you are not going to keep your surplus inventory under control.   A typical example of this was the Year 2 syndrome of rapidly restocking things which sold well on release but had largely sated the market.  The result was buying in more after demand had shrunk.  And let's not forget that inventory also includes current stock not yet sold or distributed as well as old (effectively surplus) stock that couldn't be sold.

 

Hence putting an emphasis on sales.   But there is still a major need to sort out marketing and make the right stuff in the right ranges ina profitable manner (once they're sorted) in the first place.

[Clearwater]

On 23/06/2023 at 11:03, The Stationmaster said:

Someone has a bit of faith - shares trading at 19.50 currently so there are a few bulls in the market for what they see as a cheap buy.

But it didn't last - what I presume is the bid price is now done to 18p.  

 

That effectively means that the stock market this afternoon is valuing, by share price, the company at £16,8 million less than it valued it, by a share price, at the beginning of this year.

 

Enterprise Value (Market Cap plus Net Debt) = c£38m.  Stock is £21m (lower of cost and realisable value - hope auditors kick that tyre).  It does look cheap....

[Clearwater]

What's interesting to me is the change in strategy since LCD came in.  IIRC, one of the things he came in saying (and I'm paraphrasing) is that H needs to stop its online sales, value retailers etc etc.  Now this report has gone back to talking about the value of the D2C channel....