A poor year financially

[VESPA]

Reading today's finacial section of my paper Hornby has had a bad year with sales. Perhaps it is not just the current general financial climate but a combination of prices being far too high as well. New products look good but to introduce yet another range in 00 with locos at £370 is suicide. Shares are massively down and investors will pull out furthur if they think they will lose their money. New makers are making similar scale products at lower prices so maybe it's time for a management rethink.

[Rallymatt]

A slightly flawed argument against high value products. Model Railways would certainly occupy the niche market sector and the most successful generally look to produce high quality, low volume products that command higher prices with better margins. However to grow the market you also need to have entry level products. One of the best pieces of business advice I ever heard was, “in hard times, put prices up”

[dBerriff]

Did you read the bit about 3rd quarter group sales being up 6% and direct to customer sales being up 44%? Without doubt the overall picture is disappointing and a 20% drop in share price is worrying, but it needs to be taken in context. Rather than roll over and die Hornby has invested in TT:120 and now HM7000. Any business investment is a risk otherwise we would all be doing it. My hunch is that these technologies will be a success. Time alone will tell, as they say.

[Bulleidboy]

Share price has been pretty static over the last twelve months - the odd dip here and there. The same could be said for most companies. Usual media garbage. So much is written nowadays to alarm you.

[DarkRedCape]

Things are likely to pick up a little for Hornby now too. I’ve had several pre-orders come in in the last few weeks. An influx of cash is always helpful.

I’ve no doubt that the long drag from covid and production issues from China hurt them financially, but I remember reading that the early stages of Covid were very kind to Hornby because people couldn’t go out and as a result, inside hobbies boomed.

[Peter-771975]

Yes, I agree with you. Hornby is being forward thinking and risk taking and should be applauded for it. Price points are now a big issue I think. The drive for more detail/separate parts etc inevitably will take their toll on pricing but many other factors too are in play, such as raw materials and shipping.

[Bulleidboy]

Hornby shares price is measured in pence. They dropped to 24.5p but they have not been above 27p for months. That is about a 14% drop - they are, as I type this 26.8p that's almost a 14% increase since the article was written.

[VESPA]

check out the drop in share price over 12 months

https://www.hornby.plc.uk/

[james_nelmes]

Ive read some of their financials and they are undoubtedly in an improving performance including growing gross margin which is a good indicator of many issues like cost control. It has the appearance of a business that is recovering well. The investment company that owns them has let them invest in TT and HM7000 to name a couple of fairly expensive developments. That is not the sign of a ‘fire sale’ mentality. I think we will see some good progress this year.

[Bulleidboy]

I think the share price closed today at just over 26p. Twelve months ago things were good as it was coming to the end of the pandemic/lockdown - and during that time things were good for Hornby, so I would see this as a short peak. Before that the share price fell off a cliff at the beginning of 2016 and has really never recovered to the same level or anywhere near it. It just goes along between mid/high 20's and low 30's (pence that is). Back in October 2010 it hit £1.51

It happens everywhere - I have just read that if you bought £5K's worth of Rolls Royce shares five years ago, they would now be worth £1700.

[Aussie Fred]

I always look at it as share values are only on paper. I never deal with them because they can be so fickle - it is dividends that count.

[Rallymatt]

@ Vespa, I recommend you read the book ‘Thinking, Fast and Slow’ the authors won a Nobel Prize for their work in Economics. Amongst many things it highlights how Stock Market valuations generally have very little to do with reality but a perceived opportunity by either seller or purchaser of stock. These are short term actions where as business is based on long term actions. Businesses tend to out perform speculators by quite a margin.

[VESPA]

@ Vespa, I recommend you read the book ‘Thinking, Fast and Slow’ the authors won a Nobel Prize for their work in Economics. Amongst many things it highlights how Stock Market valuations generally have very little to do with reality but a perceived opportunity by either seller or purchaser of stock. These are short term actions where as business is based on long term actions. Businesses tend to out perform speculators by quite a margin.

 

 

No thank you. Why would I want to waste time on that when I mention on a webpage a comment made in a newspaper. I would rather read War and Peace. I also wish I hadn't bothered wasting my time on this website again.

[threelink]

@Vespa

Please do not stop posting - it's not a waste of time. I have always found your posts interesting and informative.

[Topcat2018]

On a personal note, whilst I quite understand that Hornby are making products that probably don't sell in millions, there is no way that I can afford to buy a new loco costing £370. That's about two and a half times my weekly state pension.

I will continue to buy second hand model railway stuff and do my bit for recycling.

[sir john]

Mods Think this is way off topic now needs locking

[RB51]

Chat removed. R-

[dh2807]

I too am shocked at the steep rise in prices. Being retired I find it difficult finding a large lump sum to pay for a loco when it is released. I have recently decided to buy some Accurascale loco's using their 'lay away' scheme whereby I pay a relatively small fixed amount for a set number of months until the loco is paid. It becomes a fully paid up pre-order. This is not a credit scheme nor does it attract interest. Also every birthday, anniversary, christmas etc I receive R of S vouchers. Unfortunately as Hornby are no longer sold by R of S, my choice is restricted. Hornby should consider both these schemes as a way of increasing sales.

[Fazy]

The poor year financially? The years not over till April I believe. Anyway Hornby has invested a large sum into the TT120 which is going to have a negative effect on books until the revenue starts rolling in hopefully soon as the stock is due over the coming year.

price rises well it’s not just Hornby is it. Everything is going mad, milk bread gas petroleum etc.

now we’re out of the EU the pound has been struggling , but even before that toy trains are bought in US dollars, so the 20% fall off the Uk pound towards the dollar has added 20% on model railway goods over the last few years.

[Edvard4]

I would normally have spent at least £3k per year with Hornby, Online, HVC and the odd retail unit. As prices have risen I have made the choice to down size my purchasing on my hobby. This of course impacts Hornby and their sales if lots of people take the same view. But at the same time the cost of loco's etc have risen, Hornby have generally raised their prices by 10% year on year as a flat line increase, but of late there appear to have been some exceptional prices applied to some new locos, reaching over £500.00 a go!

[ColinB]

The Hornby group does not only consist of railways although the only part of their group I deal with is the railways part. I think their last round of price rises had a bit of a negative effect, I don't know if other people do as I do but I compare their product with other makes that are available. So some of their locos are similar prices to Bachmann, but like in the case of the Bachmann class 90, they add extra features (electrically operated pantographs) for the money, so effectively they are cheaper. Both Hornby and Bachmann are guilty of "hiking" up the price of old models, you can justify over £200 for a new tooled model but you cannot do the same with a model design that is basically 20 years. Sam whether you like him or not, frequently highlights this. Then of course you have Dapol and Accurascale that are producing decent models at affordable prices, although Accurascale rolling stock is quite expensive compared to Hornby's, but there again it is in a different league for detail. I bought the Hornby latest version of Evening Star and I must admit I cannot fault it, it runs well is reliable and probably worth the money I paid for it, but then I have bought other Hornby new locos and have been not so impressed.

[SteveM6]

Colin, you seem to be suggesting model manufacturers should only sell their products at cost price and that older models, with little or no development costs should be cheaper.

That sounds like a good way of crippling a business.

Let me give you an example from the food retail business. A supermarket gets a pallet of biscuits from the supplier for a fixed price. That cost is recouped from the sale of 50% of the goods. The income from the remaining 50% covers the running costs of the business plus profit and its that profit that allows for future investment.

In Hornby’s case, it’s the higher profit margins on older models that allow the company to continue and develop new products and of course provide a financial buffer for the bad years.

Remember also that the price tag is an invitation to buy at that price, it’s not compulsory to make the purchase if you think the value isn’t there.

[ColinB]

You have got to be kidding SteveM6, I spent many years in the motor industry and product design I probably know more than most people about cost price and retail price. So when Ford produces a new model, generally it is more expensive than the old model to cover the cost of new tooling and design effort but they don't increase the price of the older model. Now if they decide to do a global price rise then it applies to all models, but they definitely don't expect the customer to pay the same price for the retooled model as the old one. If you price your older stock too high you don't sell it as it is no different to the older stuff that is available second hand or "new old stock" and it appears I am probably right as the older models generally have decent discounts. At the end of the day the Customer decides whether your price is right. Just go and count the parts on a Dapol steam loco like the Manor and then go do the same on a Hornby Patriot/Royal Scot. Then compare the retail prices.

[SteveM6]

I fear any reply would quickly be moderated.

[96RAF]

Going off topic a bit…

Many industries seem to work on pricing their products on the basis of what the punters will stump up for it, not on the true value derived from development, production and marketing costs. Any £x.99 price screams at me as false value.

One way to make money is the canny way my old boss used. He would sell a new product at marketing’s perceived value plus development costs to the launch customer, then charge subsequent customers the same basic plus development costs price as before thus making his development money over and over.

Another trick of the trade was to get a water-tight agreed cost to spec from the customer then charge heavily for every change to the spec thereafter.

MoD contracts always had an officially agreed %profit mark up over the price.

Another money spinner was what we called a price for a price. Customer would ask for a quote for a job and we would say that will take xx many hours to put a firm binding quote together so please pay us £s to produce it.