Hornby 2023 Annual Report

[The Stationmaster]

The Hornby 2023 Annual Report has been published.  Only time fr a brief read but some interesting points noted

 

No further information on 'capsule ranges but it's made clear they are going to offer suitable pricing and 'value for money' for 'national retailers - could we call ot Design Clever Mk2 ?

Very much as I thought/hoped might happen there is going to be a major emphasis within brands of assessing the financial impact of developing new models taking into account marketability, costs, and expected profit - hooray and long overdue in my view.

Major effort to clear down inventory without harming brand values.

TT120 commitment again made clear with more releases planned for this year. 

Some sales growth in teh start of this financial year.

Some very strange English in places and one hilarious typo!

[BachelorBoy]

5 minutes ago, The Stationmaster said:

The Hornby 2023 Annual Report has been published.  Only time fr a brief read but some interesting points noted

 

Thanks for the heads up. An interesting read for this evening.

 

(I expect you will have found all the good bits by the time I have time to look at the details. Bah!) 

[phil gollin]

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To save Google being overwhelmed ;

 

https://wp-Hornby-2020.s3.eu-west-2.amazonaws.com/media/2023/07/42393-Hornby-–-AR23_Web.pdf

 

.

[JSpencer]

Inventory is up by £4million but that does not fully explain the £5million loss.

 

I think it is the first report I have seen quoting Retailers saying the price is too high. I do not see an easy solution to this though.

When they tried to reduce component parts in the past, it did not really drop the price, merely increased the criticism. 

 

There will need to be some clear definitions with the factory like:

Railroad = 50 parts

Top end = 250 parts

Value = 150 parts

So the cost falls in between.

 

Quite a challenge IMHO especially as inflation could make a 150 part model (by the time it actually comes out), the same price as 250 part model today.

[spamcan61]

43 minutes ago, The Stationmaster said:

 

Very much as I thought/hoped might happen there is going to be a major emphasis within brands of assessing the financial impact of developing new models taking into account marketability, costs, and expected profit - hooray and long overdue in my view.

 

Surely they've always been doing that anyway, how else would you generate a business case for a new product. Whether they e been very good at it is another matter.... As I've said in the past I wouldn't want SK's job for all the tea in China.

[BachelorBoy]

24 minutes ago, JSpencer said:

Quite a challenge IMHO especially as inflation could make a 150 part model (by the time it actually comes out), the same price as 250 part model today.

 

China's economic recovery from covid is spluttering.  Foreign investors are, on balance, cashing in their investments and taking it out of the country. 

 

Consumers aren't spending much. And inflation is very low. It might even have turned negative last month (prices lower in July than a year earlier, which is bad for an economy as consumers delay buying stuff if they think it's going to be cheaper in a few months' time). 

 

So ... there's a growing chance that China might devalue the currency very sharply to get things going again.

 

That would suddenly make its exports much cheaper. Great news for Hornby

 

 

[The Stationmaster]

1 hour ago, JSpencer said:

Inventory is up by £4million but that does not fully explain the £5million loss.

 

I think it is the first report I have seen quoting Retailers saying the price is too high. I do not see an easy solution to this though.

When they tried to reduce component parts in the past, it did not really drop the price, merely increased the criticism. 

 

There will need to be some clear definitions with the factory like:

Railroad = 50 parts

Top end = 250 parts

Value = 150 parts

So the cost falls in between.

 

Quite a challenge IMHO especially as inflation could make a 150 part model (by the time it actually comes out), the same price as 250 part model today.

The reference to 'national retailers' was included in the Financial Report.  The An nual Repirt basically repeats it with a bit of added emphasis.  But note that it clearly refers to 'national retailers' - that does not mean model shops etc but department stores and the big retailers such as the mail order house and the likes of Argos or Smyths.

 

Don't forget that the big inventory bulge was down to them not taking stock which Hornby had bought in for the Christmas market because it was too expensive or did not represent good value for money.  That's a huge potential market - just over 12% of Hornby's UK market - if it includes the whole £5 millions worth of stuff Hornby purchased in aticipation of selling into it.  a quick look at some of the websites in that market area and you can see exactly what their buyers meant.

[1andrew1]

I think this paragraph indicates why someone with solid retail experience was chosen as the new CEO, as well as helping Hornby to understand how the national retailers like The Entertainer work.

Quote

We have spent the last year developing plans to launch a multi-brand retail experience, bringing our key brands to life in a meaningful way. The aim of this work was to explore routes for creating and testing concepts that customers love and that can be subsequently rolled out across multiple sites, if successful. We have learned a great deal from the development process and, in January 2023 concluded that creating the first iteration of a new retail experience should be done on site in Margate, by reimagining and redeveloping the current Hornby Visitors’ Centre. Whilst this decision undoubtedly means we will be able to test and learn more effectively, helping us get to the best solution in a controlled way, it’s fair to say that the need to pivot our approach only became clear once we had carried out a substantial amount of development work.

Edited August 1, 2023 by 1andrew1

[1andrew1]

1 hour ago, BachelorBoy said:

So ... there's a growing chance that China might devalue the currency very sharply to get things going again.

 

That would suddenly make its exports much cheaper. Great news for Hornby.

Yes, but it would also make its warehouse stock worth less. The currency benefits would also be gained by its competitors as well.

[The Stationmaster]

1 hour ago, spamcan61 said:

Surely they've always been doing that anyway, how else would you generate a business case for a new product. Whether they e been very good at it is another matter.... As I've said in the past I wouldn't want SK's job for all the tea in China.

I seriously wonder if they have?  Judging by some of the model railway items which have hung around for ages, or not even been around that long, before being sold off at reduced priced.  The sheer fact, current 'bulge' apart, their inventory has grown over the years indicates that there is a lot of unsold stuff hanging round their neck like a finacial millstone.  And obviously spending £5 million on stock for Christmas which didn't sell says to me that there was serious failure to read the market or an important part of iof

 

So yes - no doubt they did did do a proposal for approval which hopefully included all the numbers.  But it looks now as if they intend to take more notice io what their information tells them that the market wants.  Which in some areas will definitely be rather different from announcing something because someone else has decided there will be market demand for it.

[The Stationmaster]

5 minutes ago, 1andrew1 said:

I think this paragraph indicates why someone with solid retail experience was chosen as the new CEO, as well as helping understand how the national retailers work.

His immediate past retail experience was with Paperchase - and look what happened to them (although he did come when the company was already very deeply in the mire.  Previous 'retail experience' involved betting shops - so he might well recognise a good bet when he sees one.

 

But he has seen the things which Hrnby need to do pretty quickly - b get back into that 'national retailer' area with the right product at the right prices and sell, sell, sell..

[The Black Hat]

4 minutes ago, The Stationmaster said:

I seriously wonder if they have?  Judging by some of the model railway items which have hung around for ages, or not even been around that long, before being sold off at reduced priced.  The sheer fact, current 'bulge' apart, their inventory has grown over the years indicates that there is a lot of unsold stuff hanging round their neck like a finacial millstone.  And obviously spending £5 million on stock for Christmas which didn't sell says to me that there was serious failure to read the market or an important part of iof

 

So yes - no doubt they did did do a proposal for approval which hopefully included all the numbers.  But it looks now as if they intend to take more notice io what their information tells them that the market wants.  Which in some areas will definitely be rather different from announcing something because someone else has decided there will be market demand for it.

 

Agree with sentiments above. Hornby have had some choices that have been very much aimed at a market and section of it that has worked out well for them. However, I think that they have been standing on that ground for ages and not moved on with the way the market has changed and the way that spending trends have altered. As someone who did do data on the poll results and by adding this to the items listed in bargain sections or flying off the shelves its clear that Hornby for too long has been focusing on the BR transition period, Southern Region or Eastern Region express for too long. There are other ones in there, but these are almost tokenism by choice and often lack the detail and checks to ensure that the product is done properly or even listed accurately. Ive lost count of the times in which Hornby have mis-labelled a product because it was outside the three topics mentioned previously - its normally something recently up to date.

 

That just means that they are making stuff that people dont always choose to go for, or have been pushing ideas that did sell well and then gone too far into that territory as the profitable choices dry up (ie Southern Region). I can't help but think that a changing of the guard recently should cure some of this and allow a better focus on accuracy but then also allow the range to diverse and tap the market and choices that other competitors have and are now stealing a march on the red box company. When they do this and find choices and areas that are the true items people want, Hornby will get the sales, get the cashflow, not have the inventory of stock and get the profitability that will please shareholders, the market and customers alike. In some ways that changing of the gaurd is overdue to allow this to happen... hopefully.  

[Legend]

Very interesting 

 

So they increased turnover by £1.366 m  but only increased Cost of sales by £0.143 . That’s quite impressive .  Where they came a cropper was in Distribution Costs up £1.205m and Sales and Marketing up £2.616m . I think that’s the basics .

 

Inventory going up 30% clearly not healthy . It’s pointed out that they didn’t have enough inventory of some new ranges , while too much of other stuff . Wonder who was in charge of setting stock levels , particularly for new products…………..

 

You can see re-organisation going on with the appointment of Head of Export Sales and a new Sales Director . Seem to be good moves to get responsibility for delivering sales and getting revenue up . This re-organisation is perhaps while we are seeing some established figures move on . 
 

I know there’s a bit of corporate blurb in there “Building Happiness “ but looks like a good few initiatives going on .  Perhaps a retail presence with a partner .  A “Capsule” range . I’m hoping we are talking here of things that are models and not a series of starter 0-4-0s 

 

 

 

[maico]

Their website is doing well. Transaction volumes grew by +37% and accounted for 15.5% of total sales.

That was helped a bit by TT launch sales of £1.5m

[RJS1977]

7 hours ago, JSpencer said:

Inventory is up by £4million but that does not fully explain the £5million loss.

 

I think it is the first report I have seen quoting Retailers saying the price is too high. I do not see an easy solution to this though.

When they tried to reduce component parts in the past, it did not really drop the price, merely increased the criticism. 

 

There will need to be some clear definitions with the factory like:

Railroad = 50 parts

Top end = 250 parts

Value = 150 parts

So the cost falls in between.

 

Quite a challenge IMHO especially as inflation could make a 150 part model (by the time it actually comes out), the same price as 250 part model today.

 

Here's an idea... slightly tongue in cheek.

 

How about Hornby make the loco mechanisms, and Airfix make the bodies as plastic kits?

[Mike Harvey]

Interesting that of the four major brands, Corgi does not feature in the “capsule” development. Perhaps that is another signal that a bundling of Corgi and Oxford Diecast into a disposable unit is on the cards. 

[AY Mod]

15 minutes ago, RJS1977 said:

How about Hornby make the loco mechanisms, and Airfix make the bodies as plastic kits?

 

I did suggest such on a visit there once. I must have farted at the same time judging by the reaction.

[blueeighties]

7 hours ago, The Stationmaster said:

 

Some very strange English in places and one hilarious typo!

Same as most of your posts 😆

[AY Mod]

6 minutes ago, blueeighties said:

Same as most of your posts 😆

 

He's got a note from his mom; they haven't.

[Legend]

As a trainee Chartered Accountant part of the job was to proof read sets of accounts , making sure all the numbers had been typed correctly and they added up . Amazing how many typos were uncovered . 

[phil gollin]

10 hours ago, The Black Hat said:

 

...  and then gone too far into that territory as the profitable choices dry up (ie Southern Region). ...

.

 

Strange comment.   Dapol (with the D and D1's) and (rumoured) Rapido with the E1 seem to be doing well with Southern subjects.  According to the Wishlist Poll, Southern locos are still popular.

 

Somewhere, somehow, Hornby seem to have lost heat, or been misled.

 

Hope they produce a few money-spinners (whether Southern, or not).

 

.

[adb968008]

10 hours ago, The Stationmaster said:

His immediate past retail experience was with Paperchase - and look what happened to them (although he did come when the company was already very deeply in the mire.  Previous 'retail experience' involved betting shops - so he might well recognise a good bet when he sees one.

 

But he has seen the things which Hrnby need to do pretty quickly - b get back into that 'national retailer' area with the right product at the right prices and sell, sell, sell..

Relies on convincing the retailer to want to buy buy buy though.

 

I’m interested to see what retail channels they go for.
 

The 3 point focus was clear, TT120, Digital Market Place and Hobby Rewards.. none of these obviously relate to “National Retail” as far as I see.

 

National Retail isnt defined, whether thats the existing channel, or an attempt at high st supermarket/ amazon etc is unknown.

Capsule range said it was based around dumbing down existing models to reduce price.

 

I take this to be more main range relegated to railroad, in some cases, like the 153 or 8F imo its already there, in others I actually see some sense in dialing back the detail on the 50,56,60 as theyve a serious challenger in front of them. In steam I am less sure what avenues they could turn, most of the last 6-7 years has been tooling renewal, (duplication),  or producing oddballs and experimentals which really have a short half life… if you have a W1 are you really going to buy a dumbed down second one ? The other option is resting superdetail and reverting back to old 1980’s toolings (25/58/142 etc)

 

if I were to guess, i’d link Existing retail to Capsule and Digital, Hobby and TT to their website.

where this leaves the superdetail models, I do not know.

 

Reading between the lines though it feels that 00 as we know it in Hornby is going to change, whether it works for modellers is one thing, and whether it works for Hornby may just be another.

 

 

 

 

 

[shunny]

I think Hornby need more specialist to help with predicting demand, some good examples I spoke to several retailers after mine told me he was allocated 3 full rakes of Mk3 coaches but only 1 set of power cars. They all have said something similar so there will be a glut of coaches but not enough power cars to pull them. Another example new TTA wagons shops being allocated 3 of each. If Hornby understand the market better they would know these are block train wagons and people will buy multiple (yet no triple packs in range) so again missed sales. My local shop often says he can't get enough items from Hornby due to production numbers but was allocated  more M7's in BR malachite green than any other loco and he is based in central Scotland?

Edited August 1, 2023 by shunny

[Clearwater]

The problem with Margate isn’t necessarily is what is in the Centre but that it’s in Margate.  It’s geographically remote, hence also bad as a distribution centre, but won’t have anything like the passing casual visitors that another location might otherwise secure.

 

It’d be interesting to compare their visitor numbers with pecorama.  But the pecorama offering is quite multi-dimensional (gardens, soft play, mini railway, mini golf etc).  What exactly are they planning and how are they going to get the numbers to visit?

[BachelorBoy]

14 hours ago, 1andrew1 said:

Yes, but it would also make its warehouse stock worth less. The currency benefits would also be gained by its competitors as well.

 

Don't forget us, the consumers :-)