Hornby Trading Results

[Ozexpatriate]

I don't think even railway modellers want the shelf full of 'Merry Christmas 2010' Hornby wagons that Modelzone still have on the shelf though .

I don't think I wanted one of those in 2010 either!

[The Stationmaster]

There's no question about the trend to toys and tie-ins: movies, the 2012 Olympics, etc. (I suspect they just want Airfix to hold it's own.) The real question is, can they compete in the "toy" market at their pricepoint, rather than the "collectible" and "hobby" market.

 

 

Cars 2 was released at the movies (at least in the US) this weekend. It will likely be the number one movie for at least the opening weekend. Where are the Scalextric Lightning McQueen models? The best they can do is send you an email when the toys become available.

 

Here in the US, the box market "Target" is advertising itself as something like 'the home for Cars 2 toys' in a TV ad blitz. So, if Hornby is serious about winning toy sales that tie in to movies they absolutely MUST be on the shelves the day the movies open. This is the way the other toy sellers promote movie tie-in toys.

 

Hornby also failed to do this with Toy Story 3. They don't have an adequate supply chain for these massive global roll-outs. They released the Toy Story 3 train before Christmas to tie in with the DVD and I think this strategy backfired for them.

 

Like it or not, we Railways past-loving anachronists live in a world with a short attention span. I'm not sure Hornby "get's" this reality.

 

Looks to me like they have inherited some of Corgi's worst 'strategic' ideas and are beginning to repeat Corgi's mistakes. i have a suspicion that bringing in top people from outside the toy industry might not have been their cleverest move (in much the same way as they appear to have not learnt from Corgi's errors).

[spamcan61]

i have a suspicion that bringing in top people from outside the toy industry might not have been their cleverest move

 

Have they done that? ...not a loaded question!

[The Stationmaster]

Have they done that? ...not a loaded question!

 

Interesting area - the present senior directoships date from November 2007 although Frank Martin, the CEO of Hornby PLC and listed as 'a decision maker' at Hornby Hobbies had taken over the CEO role before then - he did have experience in the toy industry at Raleigh (toy division closed down) 1973-77; Berwick (Timpo) 1979-82, Product Development Director; and Hasbro 1981-86 where he brought in the 'My Little Pony' range and Transformers to the UK market; he's also been at Pretty Polly, Shaw Carpets, and Royal Winton - the last two as MD; he went to Humbrol in 1995 as Chief Executive leaving in 2000 and joining Hornby in 2002. It looks likely that he was responsible for the takeover of the remnants of Humbrol/Airfix after it went bust and he might well have been behind expansion and diversification into the wider toy field with the acquisition of Corgi etc plus the overseas acquisitions.

 

 

The Group Finance director Andrew Morris joined Hornby in 2007, he had been Finance Director at Speedo from 2000 -2006 and before that had spent what looks like his entire career, from age 22 or thereabouts, with Glaxo Smithkline including time in posts in South Africa.

 

New Non-Executive Directors appointed in November 2007 - and now listed on Hornby's website as the only Non-Execs - are

Mark Rolfe who was Finance Director of the Gallaher Group from 2000-April 2007 and who had spent 'the previous 21 years in various finance and executive roles', and

Nigel Carrington who is a corporate lawyer but also involved in an NHS Trust

 

John Stansfield is Company Secretary and has been with Hornby in various roles since 1996. In the 2007 reorganisation he ceased to be Group Finance Director (replaced by Andrew Morris) but remains Finance Director of the Hornby Hobbies Division of Hornby PLC.

 

I can't find anything about the Chairman, Neil Johnson but he seems to be very good at giving out encouraging messages about the supply chain.

 

As far as Hornby Hobbies are concerned one city website lists Frank Martin and someone called Michael Walters (who I can't run to earth anywhere on the 'net) as the only 'decision makers' but I can't find a thing about this particular Michael Walters

 

Recent additions as Group Directors are Dutchman Frits Passet appointed International sales Director in November 2009 - he is Dutch and his background seems to include time at Mattel Toys and Hasbro and Nathaniel Southworth who, again, seems not have made any public impact on websites - he was appointed early this year but neither are listed on the Hornby Railways website.

 

So if you look at it the top end of the executive tree of Hornby PLC - excluding the Chairman - includes only Frank Martin with any toy/hobby industry experience and it is heavily weighted towards the toy area, something which is seemingly backed-up by the later appointment of Passet with a Mattel/Hasbro background (neither of which appear to include model railway ranges although Mattel owns a non-railway Tyco brand). In other words the experience and weight at the top is very much towards a general toy market and away from model railways. As far as the company is concerned that might or might not be a bad thing but it does look as if they might have some timing a bit off in the USA and they are getting heavily into film/tv tie-ins, which scuppered Corgi. Look too how there was a change at the head of the finance tree in late 2007 with someone heavily involved for the past decade in the railway/Scalextric area losing overall financial responsibility and that going to someone with no experience in this market area. Maybe I'm looking for things which aren't there but there can be little doubt that Hornby PLC has changed a lot (because it had to) and that might be impacting on the railway segment with a greater emphasis on profitability levels against profitability in other product areas?

[spamcan61]

Nat. Southworth is on Linkedin:-

 

http://www.linkedin.com/profile/view?id=32159809&authType=NAME_SEARCH&authToken=E03c&locale=en_US&srchid=d2d425dd-b688-4701-a97d-1efe901a7dc3-0&srchindex=2&srchtotal=3&goback=.fps_PBCK_nathaniel+southworth_*1_*1_*1_*1_*1_*1_*2_*1_Y_*1_*1_*1_false_1_R_true_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2_*2&pvs=ps&trk=pp_profile_name_link

 

Licensing specialist!

[Ron Ron Ron]

....Frank Martin, the CEO of Hornby PLC and listed as 'a decision maker' at Hornby Hobbies had taken over the CEO role before then ............he went to Humbrol in 1995 as Chief Executive leaving in 2000 and joining Hornby in 2002.

From what I've read in the past (....and have just checked up on), he left Humbrol when "headhunted" to take over at Hornby; leaving towards the end of 2000 and joining Hornby immediately after the Christmas & New Year holiday on 3rd January 2001.

 

 

 

.....It looks likely that he was responsible for the takeover of the remnants of Humbrol/Airfix after it went bust and he might well have been behind expansion and diversification into the wider toy field with the acquisition of Corgi etc plus the overseas acquisitions.

Mike, he is widely credited with taking Hornby forward into acquisitions and a widening of their product base.

 

 

.........In other words the experience and weight at the top is very much towards a general toy market and away from model railways. ......Maybe I'm looking for things which aren't there but there can be little doubt that Hornby PLC has changed a lot (because it had to) and that might be impacting on the railway segment with a greater emphasis on profitability levels against profitability in other product areas?

Hornby has indeed changed a lot from the company of 10 years ago and the old Hornby model railway part of the business is now just one of the many areas they are now involved in.

The company was almost "dead in the water" before strategic changes were made, starting in the late 1990's and continuing throughout the last decade.

 

Transferring production to China, commencing in 1997 and taking 5 years to complete, is cited as one of the key changes that enabled Hornby to survive. Another key element was the arrival of Frank Martin and his recognition that the two existing Hornby businesses, model trains and Scalextric, would not allow the company to grow on their own, or be as resilient to the cyclic nature of the toy and hobby market as a more broadly based portfolio.

 

The story goes that in 2001 there was an over-dependance on Scalextric which accounted for almost ³/₅ (58%) of revenue, but was very much a seasonal business, with the overwhelming bulk of sales confined to the few weeks in the run-up to Christmas.

With the decline in the sale of model railway products sold as toys (train sets etc) during the 80's and 90's, Hornby realised that the bulk of their model railway sales were going to a Adult collectors and modellers , accounting for approx. 70% of sales. This at a time when adult modellers were calling for better quality and more new product, hence the recent move into producing the high detail, modern standard models we enjoy today. This 3rd element is what has carried Hornby sales forward, based on the first and second changes.

 

The way I see it (...and I could be completely wrong) is that the recent period where we have seen an increase in the "spending wealth' and relative affluence of "empty nesters' and retirees on generous pensions, may be coming to an end.

With the demise of so many pension funds and the reduction in peoples expectations of those funds that have survived, it seems to me that the times ahead will not be so rosy for those that are following on.

If you couple that with the age demographic of the railway modelling "fraternity", I can understand how a company like Hornby have been making moves to look elsewhere for their future survival. Relying on one customer group, such as the "modeller market" is always a risky affair, unless you're in the Undertaking business.

 

Profitability is one thing, but sustainability is equally important.

[Ron Ron Ron]

On the previous page of this topic, the subject of Hornby closing it's present Margate HQ was discussed.......

 

.....I don’t know if anyone else has heard about this about Hornby and the Margate factory, my father lives in Whitstable and told me about this; in the locale “Whitstable time†news paper, they had an article about the Hornby factory in Margate, Kent.

According to this article Hornby are planning to shut their factory and move to a new premises...........

 

There was a report in their local paper just last week..... Isle of Thanet Gazette - Weds. 22nd June 2011 ......in which the following is quoted from the Hornby CEO......

 

"He remains committed to building Hornby into a world-class hobby business while retaining its Kent roots. After being refused planning permission to expand, the company entertained selling to neighbours B&Q but the model maker is glad it kept its roots in Thanet".

 

So it appears they've looked at a couple of options. If the need is there, presumably they're looking at others?

 

 

 

[The Stationmaster]

The way I see it (...and I could be completely wrong) is that the recent period where we have seen an increase in the "spending wealth' and relative affluence of "empty nesters' and retirees on generous pensions, may be coming to an end.

With the demise of so many pension funds and the reduction in peoples expectations of those funds that have survived, it seems to me that the times ahead will not be so rosy for those that are following on.

If you couple that with the age demographic of the railway modelling "fraternity", I can understand how a company like Hornby have been making moves to look elsewhere for their future survival. Relying on one customer group, such as the "modeller market" is always a risky affair, unless you're in the Undertaking business.

 

This point about 'spending wealth' is interesting as the amount of money going towards some hobby areas currently seems to be increasing rather than shrinking although it is more than possible that people with money to spare are getting out of cash and into 'things' because of poor interest rates and rising/more persistent inflation. Quite how this might impact on Hornby's place in its collector market is difficult to say and although they seem to have again pushed hard for that market this year it will be interesting to see what happens next year after the Govt's financial plans have started to become reality for many people.

And yes, I think we are firmly agreed about Hornby's need to diversify their product base and go for a much broader range of markets; my concern is that such a strategy might lead to less interest on their part in the model railway market particularly if it does not produce the profitability of their other ranges especially against the background you paint above and when some of their pricing for 2011 has resulted in much adverse comment among the hobby fraternity. Only time will tell and clearly it is to be hoped their expansion will pay off for the PLC - and to hope that some of that 'rubs off' on the model railway arm.

[Ozexpatriate]

... my concern is that such a strategy might lead to less interest on their part in the model railway market particularly if it does not produce the profitability of their other ranges when some of their pricing for 2011 has resulted in much adverse comment among the hobby fraternity.

I think that products for the modelling market will have consistently higher margins than those for the toy market, particularly so with 2011 pricing.

 

Margins for toys are low - and in Hornby's case (as with many toys these days) several of the toy lines have the added burden of licensing fees. From a profitability standpoint, a low margin product can only exceed a higher margin product if it sells better leaving no inventory that has to be heavily discounted to shift it.

 

Being a publicly traded company, Hornby's first responsibiliy is to its shareholders, but I can't imagine them straying too far from their roots just yet.

[Invicta]

On the previous page of this topic, the subject of Hornby closing it's present Margate HQ was discussed.......

 

There was a report in their local paper just last week..... Isle of Thanet Gazette - Weds. 22nd June 2011 ......in which the following is quoted from the Hornby CEO......

 

He remains committed to building Hornby into a world-class hobby business while retaining its Kent roots. After being refused planning permission to expand' date=' the company entertained selling to neighbours B&Q but the model maker is glad it kept its roots in Thanet".[/quote']

 

So it appears they've looked at a couple of options. If the need is there, presumably they're looking at others?

 

 

I won't swear to this, but I've got a vague recollection that it's a possibility that had been aired before, maybe a couple of years back- B&Q are on an adjoining site on the other side of Enterprise Road, the access road to the Hornby site

[coachmann]

Now that the 'OO' balloon appears to be coming down to earth, the 'O' gauge baloon continues to be bouyant with ever more expensive RTR hitting the market. Someone is buying into it. On that score there is no shortage of money and interest in the hobby despite the recession. The question is, what went wrong in 'OO' and why. Hornby's funiculus umbilicalisis is still attached to the toy market plus its prices have gone beyond what buyers want to spend. With Bachmann appearing to be content with its 4mm railway market and continuing to market its products at reasonable prices, why should scale modellers be worrying?

[The Stationmaster]

Now that the 'OO' balloon appears to be coming down to earth, the 'O' gauge baloon continues to be bouyant with ever more expensive RTR hitting the market. Someone is buying into it. On that score there is no shortage of money and interest in the hobby despite the recession. The question is, what went wrong in 'OO' and why. Hornby's funiculus umbilicalisis is still attached to the toy market plus its prices have gone beyond what buyers want to spend. With Bachmann appearing to be content with its 4mm railway market and continuing to market its products at reasonable prices, why should scale modellers be worrying?

 

'Quality' 0 gauge secondhand is going for increasingly higher prices and even some of the Ace Trains stuff is hitting ever higher prices while Hornby Dublo also seems to be creeping up again at auction and large scale handbuilt stuff is beating auction reserves by a substantial margin at the right sales. Might be down to the 'things are better than money' approach of course?

[Guest dilbert]

Hornby's funiculus umbilicalisis is still attached to the toy market plus its prices have gone beyond what buyers want to spend. With Bachmann appearing to be content with its 4mm railway market and continuing to market its products at reasonable prices, why should scale modellers be worrying?

 

I don't think scale modellers are worried - Bachmann is not 'ersatzHornby' but a credible reference in its sphere of the market... dilbert

[RAF]

Why do I get the feeling that one day in the future we will see Hornby merge with Bachmann in the same way Tri-ang did. I think we as customers would all benefit from that.

[phil-b259]

Why do I get the feeling that one day in the future we will see Hornby merge with Bachmann in the same way Tri-ang did. I think we as customers would all benefit from that.

 

Why do you think customers would benefit from a monopoly situation which is basically what we would end up with?(OK I know that there are others that have a presence in the market e.g. Heljan & Dapol, but they do not produce the range of products that Bachmann & Hornby do). Experience in every other retailing environment suggests healthy competition is far better for the consumer than monopolies so why would the model sector be any different. As modellers we benefit from having two major players in the 00 scale getting more new releases, etc than we would do were there only one.

 

So If Batchman & Hornby were to merge then I would say it would actually harm the hobby because the end result would be less new releases each year, less drive to commission new subjects and a change in attitude where customers cease to mater - after all with no competition they can hardly go elsewhere.

[The Stationmaster]

So If Batchman & Hornby were to merge then I would say it would actually harm the hobby because the end result would be less new releases each year, less drive to commission new subjects and a change in attitude where customers cease to mater - after all with no competition they can hardly go elsewhere.

 

I think you're absolutely right in that view - look what happened last time we had a near monopoly situation in the UK 00 market, and what then happened as others entered and broadened it, which arguably got the market to where it is today.

 

The other thing with Hornby is that while it has greatly broadened its model railway base into a much wider market through acquisitions it has more recently - as discussed above - increasingly diversified beyond its model railway/Scalextric base. Whether that diversification will help move it into a bigger league is, as yet, unknown but what it is presumably intended to do is secure the overall strength of the business and at least remove the threat of it being swallowed by a competitor. Maybe that will work, maybe it won't, maybe their view of their model railway business has changed - all in all lots of imponderables as far as we are concerned but if this year's marketing plan does not work out for them a whole new ball game opens. As it is I suspect their attention is more likely currently centred on finding an equally highly marketable follow-on to 'Tornado' than anything else.

[Ron Ron Ron]

Why do I get the feeling that one day in the future we will see Hornby merge with Bachmann in the same way Tri-ang did. I think we as customers would all benefit from that.

I agree with the previous 2 posts.

A merger or more likely a take-over of Hornby by the much larger Kader (Bachmann's parent company), would not benefit the customers. Quite the reverse.

 

 

 

[bmg]

There are 2 words buzzing around our company:

Intensification - encouraging more profit from each employee; and

Extensification - driving more profit from existing assets and/or driving development into higher margin and volume products.

 

Hornby don't appear to do either.

 

Their profit per employee speaks for itself:

 

 

 

 

Is tthe move into the licensing business backed by a supply chain that is able to put product onto shelves when new films are launched? Cars 2 has already screened in t he USA. There is no product on the shelves. It will shortly screen in the UK.

 

Has Hornby filled those shelves in preparation? I don't think so.

 

Would another owner do it differently and would that benefit us as modellers. Who knows? I'm just glad we have Bachmann.

[The Stationmaster]

There are 2 words buzzing around our company:

Intensification - encouraging more profit from each employee; and

Extensification - driving more profit from existing assets and/or driving development into higher margin and volume products.

 

Hornby don't appear to do either.

Their profit per employee speaks for itself:

 

That tells a very interesting story but maybe reflects the acquisition and expansionist phase as well as supply difficulties? And I suspect the latter has had a very serious impact in the very area which would seem to have been their salvation only a few years ago - the move to higher grade products which while no doubt accompanied by higher production costs also facilitated higher margins. That area of the market has undoubtedly been changed by competition (not necessarily in the same scale) as others have upped their game and possibly more carefully 'read' the market but also the whole problem of supply chain, with occasional quality issues as well, can't have done them much good at a time when cash flow must also have been an important factor as their interest payments rose.

 

And it seems that supply chain might still be a problem if the model railway range - let alone the crucial licensing deals - is any guide. Throw in an increasingly balkanised UK model railway market as commissioned models start to come through in greater numbers then deduct the money that isn't available to spend for other reasons and they must be facing a rather awkward situation to manage through (and be saying a very big 'thank you' for 'Tornado' I suspect) until they get other promised items onto the shelves.

[S.A.C Martin]

Maybe it's just me, but I find the rate at which Hornby's movie tie ins appear on the shelves to be - well, farcical. They missed the boat with Toy Story 3, and look to do so again with Cars 2. They have a model tie in (Industrial Shunter "Dart") to a new Thomas film appearing in the September of this year - will that make it to the shelves at the same time?

 

They did the same thing with a previous Thomas special - The Great Discovery (Pierce Brosnan narrated that one) - where the merchandise appeared about three months behind the release of the special. Box shifters have been trying to clear the Great Waterton stock ever since!

 

You would think that merchandise from big brands as those described above would get some form of precedence over their other goods, and maybe even get the odd advertising campaign and be released on time. But every single time, Hornby have been late getting into the shops and onto the shelves, and the tie ins are barely related to the consumer via the usual channels (TV/Newspapers/Magazines) that they exist in any event.

[Ozexpatriate]

Maybe it's just me, but I find the rate at which Hornby's movie tie ins appear on the shelves to be - well, farcical. They missed the boat with Toy Story 3, and look to do so again with Cars 2.

Yes, I agree. While I might not use the word "farcical", I would say at a minimum, "late". So late as to miss the market window. This is a function of their supply chain problems. I think we are all well acquainted with these by now.

 

Hornby's supply chain management has clearly improved but it will take several consecutive quarters of consistent deliveries to convince me that the problems are solved.

[brushman47544]

Perhaps the Cars 2 tie-in is planned for the release of the DVD...

[darren01]

HI

 

As Hornby has a tie in for the 2012 Olympics, will we see the stuff it in second quarter of 1213?

[The Stationmaster]

HI

 

As Hornby has a tie in for the 2012 Olympics, will we see the stuff it in second quarter of 1213?

 

Dunno about that Darren but they're probably planning to sell it by lottery in order to create a bit of interest in some of it

[bmg]

This is how it should be done. Disney stores have most of the main characters in stock. Could my wife resist the pleadings of my son? No

 

Could she buy anything similar from Hornby? No

 

Why?