Hornby Trading Results

[7013]

I am not sure this has been posted elsewhere, but on BBC tv this morning Frank Martin was on discussing Hornbys results, which appeared to be slightly down on last year, Mr Martin said that all the problems related to production difficulties in China which have now been resolved which is good news. When asked why production could not be shifted to Britain he waffled a bit but the indication was that it would be too expensive.

Lets hope it inspires them to greater heights and they take a look at the 2011 wish list!

[Fenman]

From the London Standard:

 

Model maker Hornby is enjoying a boom in sales of its London 2012 Olympics merchandise. It includes its £4.99 diecast Corgi taxis and £69.99 Scalextric Velodrome.

 

"My hope is that everyone who comes to the Games will go home with at least one of our products in their suitcase," said chief executive Frank Martin.

 

"The Olympics range is being taken by retailers like Tesco, Sainsbury's and Bhs, which we have not previously supplied."

 

Martin is also confident that supply issues that dogged the company at the start of last year have now been resolved but he cannot promise that the snow in December, which forced the company to issue a profits warning, will not recur.

 

Sales fell 1% to £63.4 million in the year to end-March with headline profits down from £5.7 million to £4.4 million. The dividend is unchanged at 5p a share.

 

Hornby has secured the worldwide licence for a range of Star Wars Scalextric products. These will be launched to coincide with the remastering of the six films by Lucasfilm starting in early 2012.

 

 

[AMJ]

A number of traders seem to think that they have been doing all of the Olympic models rather than the collectors stuff - probably knowing that this is the fast money stuff.

 

Oh good I'll wait for the dividend payment.

[The Stationmaster]

Interesting to see that their debt has risen quite sharply (but not explained in the statement - is it a result of Christmas or is it licence purchases?) and while turnover is down 1% their 'underlying profit' is down 20% as are the earnings per share although they are maintaining their dividend level. But they seem very bullish about 2012 and their supply chain - which, I paraphrase, 'will be supporting their growth ambitions in the UK'. Looks like they have an interesting year ahead but they are putting a lot of faith in the Olympics and their tv/film tie-ins and reputedly the latter didn't do Corgi much good. So I think it's fingers crossed time.

[7013]

This time last year Hornby blamed supplier problems (different ones). They now say the problems are resolved and the manufacturer/supplier is working at the levels they require.

Hornby are throwing a lot into the toy/olympic/licenced prducts arena, lets hope they are not overstretching themselves. the model railway side of the business especially the more serious modeller products got a very lukeward/cool reception on announcement.

The modelling/collecting fraternity need Hornby to do well for the sake of the hobby, with the advent of more models being commissioned by magazines and retailers and Bachmanns 2011 offerings getting a much more positive reception Hornby will have to watch their step (Admittedly there have not been many steam locos commissioned but that could chage) Unless Hornby respond to this section of the market they could find themselves losing out.

[The Stationmaster]

 

 

The modelling/collecting fraternity need Hornby to do well for the sake of the hobby, with the advent of more models being commissioned by magazines and retailers and Bachmanns 2011 offerings getting a much more positive reception Hornby will have to watch their step (Admittedly there have not been many steam locos commissioned but that could chage) Unless Hornby respond to this section of the market they could find themselves losing out.

 

That is my concern too although at least their programme this year suggests they are still committed to the more discerning railway modelling market. However I do wonder about the 'supplier' statement because I get the impression that there are still model railway items lagging behind their programmed release dates with B17s still on the horizon and a certain 'Castle' finally arriving later than the promised dates given for this year.

[spamcan61]

 

Hornby are throwing a lot into the toy/olympic/licenced prducts arena, lets hope they are not overstretching themselves. the model railway side of the business especially the more serious modeller products got a very lukeward/cool reception on announcement.

 

 

Indeed, but then this licensed products area was highlighted as one for growth by Frank Martin when he took over. Strikes me as a risky strategy, that market can be very fickle and if you get your delivery timing wrong, like I reckon happened with the Toy Story sets, retailers end up having to unload them at silly prices, which they'll remember next time they place an order with Hornby. Judging by the poor reviews for that set on Amazon (and the cheapest Scalextric set) they'd better watch out or they'll be getting the CityRover award for brand dilution.

 

At least the likes of Airfix and Corgi spread the risk a fair bit.

[The Stationmaster]

Indeed, but then this licensed products area was highlighted as one for growth by Frank Martin when he took over. Strikes me as a risky strategy, that market can be very fickle and if you get your delivery timing wrong, like I reckon happened with the Toy Story sets, retailers end up having to unload them at silly prices, which they'll remember next time they place an order with Hornby. Judging by the poor reviews for that set on Amazon (and the cheapest Scalextric set) they'd better watch out or they'll be getting the CityRover award for brand dilution.

 

At least the likes of Airfix and Corgi spread the risk a fair bit.

 

The licenced area reputedly 'did' for Corgi according to my local retailer who does a lot of diecast model business. When Hornby took over Corgi there was apparently masses of unsold 'themed' or licenced stuff in stock while customers were crying out for other ranges which had not been delivered at promised dates. Perhaps this time round things might be a bit different but it seems that with the themed ranges price can be an important factor and timing of release dates is critical in order to catch the market at the right moment.

 

Overall I do wonder if they have got their business model properly thought out. The Olympic link is, I think, a good idea but I do wonder about the others. Equally they have obviously had to diversify and 'internatlonaiise' in order to broaden the base of the business but their borrowings have gone back up at a time when I would have thought they ought to be looking to reduce them. The results will no doubt all come out in the wash but I'm still wondering if they are getting things wrong in the present model railway market (apart from the Railroad range which is a very clever move).

[beeman]

Whilst Hornby may been enthused about getting the supermarket chains to offer their products, it wont do much for their profitability considering the supermarkets expect at least 60% markup on sales. Company I used to work for said it was not worth their time to supply them due to the demands certain supermarkets insisted. Sounds a bit to me like 'More olympic mugs'.Beeman.

[bmg]

You could be right but at what contibution to the overall margin?

 

You have to go back many years (more than 7) to find a set of results when Hornbys operating profit was lower.

[Guest dilbert]

Is the share price inversely proportional to the RRP of goods with funny faces ? ...dilbert

[Legend]

Clearly the difficulties in the supply chain have caused them problems. But its been causing problems for at least the last three years and still has not been sorted out. Last year we were told it was a major supplier having problems with its new computer system but it was now sorted. Well the stream of models in 2010 didn't exactly support this and doesn't seem much better in 2011 even though we are told it is finally sorted. Management can be criticised for not sorting this out earlier.

 

Then there is the pricing policy. Inconsistant and usually on the high side. There is no doubt the models are less expensive than building kits , even if I had the ability to complete them to the same standard, which I don't. However people are watching what they are doing with their money and I really don't think locos in the £100+ range are flying off the shelves. There seem to be a lot of unsold stock around (witness Modelzone sale). Hornby are more expensive than Bachmann. I'm not getting into individual comparisons on models but as an example wouldnt many of us prefer to buy a good quality model with no frills (Bachmann 37 - although it has a very good lighting system so is not no frills!) @ £60 rather than a singing and dancing model with cab doors open and fans @ £85- £100. So whoever is advising them on pricing is getting it wrong

 

Finally there are a lot of emails about quality. In the last week I've seen issues on here about Class 31 Chassis issues and Class 67s with pedestrian speeds. Mud sticks! I'm certainly very careful before buying Hornby usually getting the shop to test the model first.

 

So if I was a shareholder I wouldn't be at all impressed. Seems to me there are some big issues that really need sorting out. It is all very well securing more merchandising deals but if you can't supply the goods at at reasonable price and to the requisite quality then you've just added to your expenses!

[RANGERS]

Hornby's problems are largely related to the supply chain which failed to deliver enough stock to retailers for them to sell, Frank Martin said on Radio Four on Friday morning that the takeover of a key supplier had been a major factor in this, presumably the Sanda Kan deal was what he meant. Overheads linked to licensing remain static but if the stock isn't there to sell, the profit level wil take a big hit.

 

Licensing is big business in toys these days and is key to the success of players around the world. The issues Corgi experienced were largely down to the US owners who had no idea of the market and little appetite to listen to those who did. That linked with their erratic approach to the production programming with suppliers was their downfall. An example was accelerating the production of the Beatles range ahead of other items in late 2006/ early 2007. Two items which suffered were the National Express Poppy Appeal model, which landed well after the appeal and the Plaxton Centenary models which appeared late in the year by which time the events which they'd been scheduled for had passed.

 

I'd hope Hornby have sorted the supply issues out, timing is critical to licensed items to tie in with events, late delivery on Olympic models could destroy the company given the sums they'll have committed in license fees.

[spamcan61]

 

Licensing is big business in toys these days and is key to the success of players around the world.

 

Hasn't it been so for decades? Growing up in the late 60s/early 70s lots of the TV ads I can remember were for licensed stuff. Hornby are more than a toy company though, let's hope they remain that way.

 

I noticed today Hornby are now trying to shift those Toy Story sets for under 40 quid on their web site, still can't shift 'em.

[Ron Ron Ron]

The official release is here.....

Hornby PLC - Final Results

 

 

Interesting to note that for the UK model railway part of the business, according to Frank Martin the two most important products they are pinning there hopes on are...

 

Tornado - "We expect this introduction to create a new market sector which is attuned to the more challenging economic conditions likely to be prevalent for some time to come..."

 

RailMaster - "We regard Railmaster as setting the standard for a new era of PC-based digital control".

 

 

.

[spamcan61]

 

Interesting to note that for the UK model railway part of the business, according to Frank Martin the two most important products they are pinning there hopes on are...

 

Tornado - "We expect this introduction to create a new market sector which is attuned to the more challenging economic conditions likely to be prevalent for some time to come..."

 

 

Interesting... is that the more expensive than Railroad but cheaper than the top notch stuff sector then? It'll be interesting to see where the next few loco releases are pitched price/detail wise.

[JeremyC]

<snip>

Interesting to note that for the UK model railway part of the business, according to Frank Martin the two most important products they are pinning there hopes on are...

 

Tornado - "We expect this introduction to create a new market sector which is attuned to the more challenging economic conditions likely to be prevalent for some time to come..."

 

<snip>

.

 

Which makes it somewhat unfortunate that as it's introduced the locomotive that's news of the moment is..................................... Flying Scotsman.

Jeremy

[bertiedog]

Hasn't it been so for decades? Growing up in the late 60s/early 70s lots of the TV ads I can remember were for licensed stuff. Hornby are more than a toy company though, let's hope they remain that way.

 

I noticed today Hornby are now trying to shift those Toy Story sets for under 40 quid on their web site, still can't shift 'em.

 

Those toy story sets may have been accurate to the film licence, but without a tender the loco could not be marketed separately etc., for On30, the typical lack of joined up planning at Margate.

With a tender the loco could have sold well in the States and over here for On30, I mentioned this to one of the sales staff, who's reaction was" what's On30 then?"............I give up!

Stephen.

[The Stationmaster]

Tornado - "We expect this introduction to create a new market sector which is attuned to the more challenging economic conditions likely to be prevalent for some time to come..."

 

 

Perhaps it means 'we'll do a lower standard model of something which is well known to the public but charge more than Railroad prices so we make bigger profits because we think we'll sell lots of them'. So it comes out in a different colour from the one the real thing is wearing this year - not exactly cleverly targetted marketing (but it might appeal to the, hmm, 'nostalgia market').

 

I remain to be convinced that Hornby have got their marketing right, certainly as far as their model railway products are concerned.

[Ozexpatriate]

From Hornby Earnings PR.

 

We have also achieved a major coup in securing worldwide Slot-racing rights to the Star Wars movie franchise. Beginning with the theatrical release of Star Wars: Episode I The Phantom Menace in 2012, Lucasfilm will convert the series of six Star Wars movies into 3D format. We believe that our association with this powerful franchise will drive incremental Scalextric sales for many years to come, particularly in the USA.

Huh!?!

 

What Star Wars items have wheels? I can't imagine how pod racers or land speeders or Jedi fighters could possibly make an interesting slot car model. Still, good luck to them.

[Ozexpatriate]

A not very detailed Flying Scotsman, and 3 equally basic caoches running round a decent 8 x 4 layout has a definate appeal to me...... It might not be "railway Modelling" but I bet it would sell - - As long as it was reasonably reliable

I'm not sure I follow you Mickey, isn't this exactly what the ubiquitous Flying Scotsman trainset attempts to do?

[bmg]

I don't get to viist model shops as often as I would like but whenever I do I see piles of Hornby branded boxes. But then I read that supply chain issues and the cold winter held back performance. Is it that peple stopped buying. No. Turnover dropped by only 1%.

 

The following statement from the Daily Mail made me wonder: "The firm, which was founded as Meccano by Frank Hornby in 1907, saw profits fall to £4.1million from £5.2million for the year to March 31, on sales down 1 per cent to £63.4million. It maintained a total dividend of 5p a share". Read more: http://www.dailymail...l#ixzz1OU4IoR3U

 

Turnover fell by 1% yet profits fell by 20%

 

By any measure a 20% slump against a small drop in turnover is not good. But why did this happen?.

 

It must mean that the newer items (which were held back by snow and delivery problems) are sold at much higher margins. Herein lies a problem for Hornby. Is their future profitability dependent upon pushing prices ever higher? If so, at what point does the bubble burst?

[brushman47544]

It must mean that the newer items (which were held back by snow and delivery problems) are sold at much higher margins. Herein lies a problem for Hornby. Is their future profitability dependent upon pushing prices ever higher? If so, at what point does the bubble burst?

I don't know about newer items but Hornby's pricing policy does sometimes make me wonder. I happened to be looking at their Italian site and noticed the Select controller R8213 with retail price of €135, but reduced to €69: R8213 Hornby Italia.

 

This compares to the Hornby UK RRP of £99.25: R8213 Hornby UK, which at current £/€ exchange rates of around 1.15 is €115, i.e. somewhat less. Perhaps it's on offer in Italy because the Italians realised and bought in the UK instead...?

 

But it does suggest that Hornby PLC sets its RRPs according to the market. As long as it gets it right, it's good for profitability and therefore long term survival.

[spamcan61]

 

But it does suggest that Hornby PLC sets its RRPs according to the market. As long as it gets it right, it's good for profitability and therefore long term survival.

 

That's certainly what I'd expect them to do in a more or less free market, it's just that some 2011 RRPs defy all logic.

[Pandora]

I cannot recall the last time I paid RRP for a Hornby item?