Hornby Trading Statement showing growth

[Moccasin]

In contrast to the doom-laden media reports at the weekend, Hornby are reporting their 2023 Q3 to December was 5% ahead of the same period in 2022 and direct sales are 30% ahead. They also managed to reduce debt by £900k over the three months.

They expect year-on-year growth.

polaris.brighterir.com/public/hornby/news/rns/story/xe1qvnw

[SteveM6]

Maybe an early sign that the new regime is having a positive impact? Let’s hope it continues.

[ColinB]

Well I suspect one of the reasons was they released a significant number of locos before Christmas as compared with 2022. I think at least 5 of my preorders arrived during that period. In 2022 they released very few.

[Moccasin]

Well I suspect one of the reasons was they released a significant number of locos before Christmas as compared with 2022. I think at least 5 of my preorders arrived during that period. In 2022 they released very few.

Yes quite possibly, although this is the whole Group and not just Hornby Railways. They do also specifically mention Black Friday in November as being strong.

For Hornby itself, selling 000s of TT120 train sets won't have done any harm, nor will all of the OO P2s arriving. I imagine they'll get another boost in Q1 2024-25 when all the TT120 diesel electrics & Princess Coronations steam locos start bringing in revenue - with over 10 models and their HM7000 variants arriving in Q1 and Q2, that's a lot of pre-order cash swelling the coffers and start paying back tooling costs.

 

 

[LTSR_NSE]

Black Friday revenue should have been strong - Hornby offered double reward points on in stock purchases.

Also Christmas revenue should have been better (than last year) - since most of their TT:120 sets were stuck on a boat several weeks from landing, last year!

I very much hope Hornby continues to invest in their recent successes (era 1, TT:120, HM7k etc.) & continues to find new ways to innovate.

[Moccasin]

Black Friday revenue should have been strong - Hornby offered double reward points on in stock purchases.

Also Christmas revenue should have been better (than last year) - since most of their TT:120 sets were stuck on a boat several weeks from landing, last year!

I very much hope Hornby continues to invest in their recent successes (era 1, TT:120, HM7k etc.) & continues to find new ways to innovate.

I agree that after a relatively poor 2022-23 FY (particularly going up to Christmas), the expectation would be that performance should be better. The economy is struggling and people have little spare cash, while we're also told that model railways and model hobbies generally are declining, so Q3 2022 could have been start of a long term decline. As I said earlier though, this is the whole HH group and not just model railways. The point made in their statement was also that 50% of .their Black Friday purchases were first time purchasers, which is very positive

 

 

[Rallymatt]

Good solid development in the right direction. It’s not all down to new management but some of clearly is. Sitting on £24m reduced to £22m of inventory has made things tough and this is an area where I think the new management team have focussed their efforts. The new product coming through is a legacy of previous work and it’s great to see the bottlenecks in supply starting to ease. I can only imagine how frustrating it has been for a company that knows it has highly saleable product due but they can’t get the ROI working towards the next projects.

The annual statements will be interesting reading as we might get a bit more info on the individual brands in the group. I expect there will be a push to ensure TT:120 is very well resourced and possibly supporting developments from other brands in the group.

[Simon-372339]

'reducing the excessive, historical, inventory position through the remainder of the year.'

I look forward to more up to 50% off sales.

[ellocoloco]

I noticed recently one of the US model manufacturers, Scaletrains, has posted an 'Inventory reduction sale' on its FB page. Up to 50% off selected locomotives. This isn't just an issue affecting Hornby, and its good that it is recognised and being tackled. It may, however, lead to more accurate forecasting of production numbers and a shorter ordering window.

But if it means Hornby outlasts me I'll be happy.

[threelink]

Is "inventory" what accountants used to call "sound and saleable stock" or something else and does the figure of £22milion for that "inventory" represent the manufacturing cost to Hornby or the figure at which Hornby expect to sell it?

[ellocoloco]

Interesting thought, Threelink. I would take it as stock on hand at cost and potential sale price would be based on what margin Hornby will ask for or be prepared to accept.

[LTSR_NSE]

Inventory (warehousing definition) is stock sat in warehouse waiting to be sold/despatched - I don’t know if financial reports use same or different definition.

The value figure (for warehousing) is its retail value (not cost to manufacture) - again I don’t know if financial reports use same or different

[Moccasin]

Inventory (warehousing definition) is stock sat in warehouse waiting to be sold/despatched - I don’t know if financial reports use same or different definition.

The value figure (for warehousing) is its retail value (not cost to manufacture) - again I don’t know if financial reports use same or different.

I assumed the £22/£24m figure is the full retail value. Whether they can achieve that value or have to write it down due to discounting to clear the inventory is unclear.

 

 

[Rallymatt]

These are not full accounts so there is some scope for nuances in language.

Generally ‘stock’ (in hand) is product available for sale and the valuation is net cost price (ie unit cost with no development costs etc attached)

[moawkwrd]

Is "inventory" what accountants used to call "sound and saleable stock" or something else and does the figure of £22milion for that "inventory" represent the manufacturing cost to Hornby or the figure at which Hornby expect to sell it?

 

 

Generally inventory is valued at the lower of cost or net realisable value, so I would expect the £22m figure to be the cost to Hornby assuming they’re making margin on everything. Obviously it’ll depend on individual product SKUs.

 

 

[What About The Bee]

In the US, generally accepted accounting practices assigns the value of warehouse at cost. Otherwise, management could assign any value to inventory desired by simply assuming a profit margin. A profit margin which may or not be realized, but certainly would forestall investor ire.

Thus preventing the books from being properly cooked.

Bee

[Moccasin]

Hornby's share price this morning (1115, 22nd Jan ) is at 20.0p and is the highest it's been since last summer. While it's likely not completely due to last week's trading statement, it is a good sign of increased confidence in the group's performance. It was around 15p this time last week, although closer to 30p this time last year.

Hopefully a good set of results in the summer will see things improving further and climbing out of its recent doldrums.

[Tony57]

I wonder if the moulds used to make the items we buy are part of the inventory value, 22m is a lot of boxed items sitting of shelves

[Going Spare]

There are, very approximately, 600 product items (excluding individual track pieces, Humbrol, scenic materials, etc.) in the 2024 00 catalogue, some of which has yet to arrive but no doubt the warehouse shelves still contain product no longer in the catalogue to partially counteract that.

So, if the average cost price of 550 of those items is £50 and the average stockholding is 200 of each item (both guesses), the inventory figure for Hornby 00 alone is £5.5 million.

Then there is track, spares, TT120, Airfix, Corgi, Humbrol, Scalextric and possibly some if not all the International brands stock as the £22 million is a Hornby Group figure.

[What About The Bee]

Hello Tony

I would be astonished if the tooling was not a proprietary Hornby asset. Gobsmacked. And therefore, inventoried.

Those molds are literally Hornby's crown jewels. The CAD models are the intellectual property, but the tooling is the physical realization of that intellectual property.

I do suppose that the vendor could own the tooling, reserving it exclusively to Hornby, but that would be incredibly short sighted. The slightest hiccup would release the exclusion, permitting the vendor to undercut Hornby, using Hornby molds. They could not possibly consider this viable, could they?

Bee

[The son of Triangman]

A point missed, just because one manufacturer has seen a growth in sales does not mean the market is generally buoyant. £22 million at cost in at hand product stock is a lot of models to have laying around.

[moawkwrd]

A point missed, just because one manufacturer has seen a growth in sales does not mean the market is generally buoyant. £22 million at cost in at hand product stock is a lot of models to have laying around.

 

 

It’s all relative though, and isn’t particularly out of the ordinary for Hornby. Inventory in 2012’s accounts for example was just shy of £18m.

[Aussie Fred]

A lot of questions raised here, why doesn't someone attend the AGM and ask those questions, then you may get the right answers instead of conjecture?

[The son of Triangman]

I agree Moawkwrd. However if I was CEO I would want to clear that stock down to the barest minimum as soon as possible, it's dead money sitting around doing nothing, better to get it sold and out the door, if that meant discounting to encourage small retailers to buy more then so be it. Better to clear at cost plus a small margin that have it sitting around taking up space, a percentage of that £22 Million could be used for putting the company into really good shape.

The main range desperately needs a cull, it's far too big, too much to produce in a year, better to reduce the range of loco's and rolling stock, natural wastage is best letting the stock get down to a level where what's left can be discounted or discount heavily to small to medium retailers to clear the stocks.

A £1 Million to £2 Million stock holding is plenty.

[Rallymatt]

Inventory is classified as saleable products (finished and in production) and raw materials to make those products. it’s valued as an asset as it will ultimate generate turnover and hopefully profit. It doesn’t include things like toolings, they are listed elsewhere. Sitting on high levels of stock in proportion to annual turnover is not a good practice. Cost of storage is an accountable thing, and many companies will almost ‘get rid at any price’ that’s a key part of the ‘pound shop’ business model, TK Maxx etc. Taking a hit today is frequently preferable to having it sat on a shelf costing money for another year.

Fixed/Tangible Assets are items with a value but not readily realised in day to day running of the business. Machinery, vehicles, property, etc so Tooling would go here.

Intangible Assets are those things it’s hard to to put a definitive value on like Brand names, trade marks, IP and Goodwill (the clout a business brand carries)

Its a fine balancing act holding stock/inventory, you want enough to maximise profit potential and make cost of production runs efficient but not so much you end up with aging unsold stock, at least Hornby doesn’t have the challenge of its products ‘going off’ or becoming ‘unfashionable’ … with one glaring exception that was Steam Punk that was so left field it was out of sight! Although it wasn’t so much out of fashion as it never had been ‘in’. I’m sure the group will continue to work down its aging inventory and replace it with what sells fast-medium term