Hornby Trading Statement Published 22 April

[Michael Hodgson]

12 minutes ago, Legend said:

It would be interesting to find out exactly what this slow moving inventory is , remembering it could be Corgi/Airfix/Scalextric  as well as Hornby . 
 

We're not in a position to know which brand(s) are affected.  It could be any if them. 

Or it could be a case of systematically applying a poor corporate approach across all of them.

[Gridiron]

2 hours ago, Gallows-Bait said:

 
If they take control or responsibility of the stock either on leaving the factory (potentially an ex-works basis) or at some point en route to the UK (possibly a Free on Board or similar basis on loading on the ship) then yes this would need to be included in their stock valuation much earlier than terms based on arrival at the UK port or even delivery to their warehouse.  It will really depend on how their contract works.

 

 For the industry I’m in we don’t take control until the goods arrive at our warehouse, so wouldn’t include them until then, but the approach varies a lot depending on which party is willing to handle the shipping, insurance, import duties etc.  It all adds to the costs the same but often one party will have more experience in handling these things than the other.

 

This is a very valid point as I would suspect that Hornby is sourcing it's products from many suppliers in China rather than a single manufacturing facility and then having to combine them into full container loads to reduce the shipping costs. This would suggest the Hornby would be be buying on exworks or FAS their nominated warehouse.   Depending on how the shipping is then  organised it's likely that some sort of priority system would need to be in place so that higher valued items such as locomotives are loaded first whilst lower valued item might be held for the next container. Given the most economical shipping solution for these sort of products would be 40ft high cube containers it's then a question of how often they load bearing in mind that there are then about six sailing a week from Chinese main ports to the UK . Prior to the diversions via the Cape the fastest transit time port to port  would have been about 24/25 days which now would have increased to around to 36 days from Yantian to Felixstowe.  If you add on up to at least a  week at either end to allow for container to be loaded and delivered to the terminal prior to shipment, and then to be offloaded, cleared and delivered before the stock can be taken into the Hornby UK warehouse. Assuming Hornby would have to pay the supplier for the stock purchased on exworks terms prior to the pick up from the factory ,that would mean that those Hornby would potentially have to fund the purchase for the best part of eight weeks at least assuming every order was shipped out every week. All this assumes no delays, like blank sailings such as was the case prior to November 2023, space shortages leading to containers being rolled to a later vessel, or shipped on a slower service, and the effects of Chinese New Year which can lead to all the foregoing delays and significant increases in freight costs. 

 

All the above issues potentially require huge amounts of management time and/or expense unless the right systems are in place and the shipping from China is arranged with a trusted and reliable partner which may explain why Mike Ashley has been brought in as a consultant. The minimum seven or eight week lapse between taking charge or owning the stock and having it delivered into the UK warehouse stock records, also comes at a huge cost in interest costs, something which obviously is not incurred when the terms are DDP excluding VAT and the supplier becomes responsible for delivering the stock to the Hornby warehouse. 

[GordonC]

2 hours ago, Legend said:

It would be interesting to find out exactly what this slow moving inventory is , remembering it could be Corgi/Airfix/Scalextric  as well as Hornby . 
 

Standard accounting practice is that it should be valued at the lower of cost or Net Realisable Value (ie what you can get for it) - surely we must be on verge of some large write offs ? 
 

Agree with maximisation of tooling and getting as many liveries out as possible . The lack of blue/grey Mk1s this year  and more liveries on the 50 (eg Banger blue) is an example . Also by having blue/grey mk1s they could have stopped valuable tooling costs of mk2e/fs as there would be something for blue diesels to run with .Introduce mk2s later when scale has settled in . Also , while it is early days , according to their 2024 TT120 catalogue they only intend launching Class 37s initially as era 6 (green?) and era 9 (EWS) . Surely if you want to maximise cash flow you would also go for standard and large logo blue ones . TT120 needs critical mass .They seemed to have figured this into their tooling yet won’t get the benefit of it till later . This is a company that needs cash ! 
 

it looks like they’ve decided to make too much of the wrong stuff in the past . But I still think a significant issue is lack of manufacturing capacity which is stopping the maximisation of their tools . They just can’t get the manufacturing slots .

 

For any Class 37 model, I would have thought BR Blue and Large Logo Blue options would be right up there to produce straight away. If they want to encourage people to the scale then it needs to be things that people want and thats a huge gap between Era 6 and 9. Relatively speaking, it must be lower sums of money to offer more liveries rather than more tooling

[GordonC]

6 hours ago, Les1952 said:

 

That is answered pretty comprehensively by Hornby in Peachy120TT's video.  You do need to sit through three quarters of an hour or so to get the whole answer, but it is there.

 

Les

 

🤷‍♂️ I've got better things to do with my time than sit through 45 mins of video on a scale I'm not interested in. An answer wasn't obvious to a casual observer

[The Stationmaster]

8 hours ago, Gallows-Bait said:

 
If they take control or responsibility of the stock either on leaving the factory (potentially an ex-works basis) or at some point en route to the UK (possibly a Free on Board or similar basis on loading on the ship) then yes this would need to be included in their stock valuation much earlier than terms based on arrival at the UK port or even delivery to their warehouse.  It will really depend on how their contract works.

 

 For the industry I’m in we don’t take control until the goods arrive at our warehouse, so wouldn’t include them until then, but the approach varies a lot depending on which party is willing to handle the shipping, insurance, import duties etc.  It all adds to the costs the same but often one party will have more experience in handling these things than the other.

One thing which has changed over the years is the time of payment.  in many cases in the apast payment was not made ion Chinese produced model railway items until they had been received at the UK shipping agent's port premises.  But. certain behaviours by various -but particularly one person - in the UK market has meant that final payment is now often raised at factory gate.  Thus although the goods are not taken into stock at that point money is being paid out.  

 

However Hornby's mountain of unsold stuff has, I'm sure, very little to do with that change of payment arrangement and is largely, if not entirely, down to past mismanagement and very poor to non-existent marketing decisions.  For years a retailer friend f mine was loud in his complaint that if Hornby repeted a model in many cases they couldn't even be bothered to offer a different running number.  If you don't make what folk will buy then you aren't going to sell it.

 

Factory payment arrangements also vary with some folk repotedly still being able to get end-loaded payment where various stages of work aren't paid for until tooling starts or - I have heard in one case, -until end production starts.  The time of paying out during development thus varies although hopefully it will all be ciming out of a development budgeting process which takes account of the way payments are invoiced by the factory.

 

But whatever happens, and presumably exacerbated by the Red Sea shipping route debacle, money is now usually having to be paid out a much longer time before it can begin to be recovered as sales revenue.  But budgeting and cash flow management should, I hope, recognise that problem

[ColinB]

20 hours ago, Gallows-Bait said:

I found this topic so interesting I ended up registering so I can comment.

 

Warning: You can tell this is written by an accountant.  If you have a problem with beancounting you may want to skip this one... TL:DR version - main points are the sentences in bold.

 

Looking at both the recent stock market update and the previous financial statements, there are some pretty clear problems at Hornby, but comments such as those by Simon Kohler in Railway Modeller actually don't touch them, they focus on the wrong problem.  In fact the final Outlook section of the trading update Hornby issued does a much better job at actually telling us what the issues are - high stock and high overhead costs.

 

It's not about the competition or the innovation from smaller entrants or any of that.  It's not about firebox lighting or headlamps or detailed underframes.  Sure those drive up the cost of the product and the sales price, but they do that for all manufacturers equally.  They're not why Hornby is in trouble.

 

Yes, there are newer, smaller, entrants to the market.  Normally smaller entrants are more agile, but the larger incumbent players have a massive advantage, which is simply size.  Being larger simply allows Hornby to do everything more efficiently and therefore more profitably.  To blame new entrants into the market for changing the focus of the market, whether it's quality features, wider liveries or larger rakes of wagons, whatever, none of that is really the point.  Hornby can make the exact same moves and do it more cheaply due to their ability to scale up.

 

Ultimately all of the companies are playing the same game, there's no secret advantage, no technology that can't be copied, no significant exclusive product that makes them unique, no monopoly on the market.  They're not Microsoft or Apple with a product you can't live without.  Whether large or small, the products and the processes are pretty much identical.

 

Research -> Design -> Engineering Models -> Tooling -> Production -> Sales (and repeat).

 

With few exceptions (Dapol and PECO) that production is largely happening in India and China, so costs should be expected to be broadly similar regardless of which company is making the model.  The only advantage the smaller companies have that the market has different expectations, they can rely more heavily on a pre-order funding model that reduces their need for costly stock holdings.  That's their agility in play, and it's much needed as they simply don't have the cash that Hornby has to invest in production runs that clear the shelves more slowly.  Of course recently Hornby don't have they money either which is why they're struggling (it is happening somewhat though and I think the TT120 market is probably a good example of this shift happening with Hornby simply not having the excess stock on hand, though whether that's by design or by mistake is a matter of opinion).

 

So if all the players in the game are broadly selling the same goods for the same prices with the same underlying costs, how is it Hornby are struggling so much?  Hornby should have the advantage, they can make larger batches, more product, have more efficient distribution, wider marketing and other theoretically more efficient overheads, so they should be making more profit than the smaller competitors, not less.

 

Fundamentally Hornby are left with two problems then, which are exactly as Hornby have disclosed in their statement.

 

1. Their higher stock position is costing them money.  This one is all about cashflow.  When you have spent all your money buying stock that's sat in a warehouse, that money isn't doing anything useful, like buying more tooling or paying more designers.  Instead Hornby are borrowing more money to pay for that, and borrowing costs interest, so it's a double whammy, your own money is doing nothing and it's costing you to use someone else's.

 

In fact Hornby have a huge and persistent stock problem caused by what I can only assume are bad decisions in their past (railways or other brands, I don't know for sure).  The latest statement indicates their stock level is around £20m (down £3m from previous disclosure which was £23m).  Based on their 2023 account they had £21.3m of stock and turnover of £55.1m that means they have a stock ratio of about 39%.  That means they have effectively about 4 months worth of sales value held in stock doing nothing for the business, not generating a penny.  This is a level so bad that they have removed the Inventory graph from the 2023 annual accounts.  If you look back over past accounts this used to be reported with a pretty graph every year.  In fact between 2004 and 2018 the average stock level was closer to 22% of sales.  And this was with a business model that Hornby acknowledged was on the princple of selling things more slowly over time (the opposite of the current market trend).  So you'd expect Hornby to be reducing stock in line with market trends, not increasing it.  In fact Hornby have doubled their stock level since 2019.

 

To even get back to their previously levels of efficiency in stock, Hornby need to offload about £9m of stock.  It's no coincidence that the level of bank debt has increased by £14m in the same time period and it's clear that the naysayers can't just blame that on tooling up for TT120.  It's caused by stock not selling.  We've all seen the fly on the wall documentary with Simon K and Montana at a fete trying desperately to offload unwanted garbage steampunk sets and the like.  Think of this as at kind of problem but on a massive scale.  It's simply stuff no one wants.  Whether it's bad or just expensive I don't know.  But it's costing Hornby money in bank interest (nearly £700k in bank and loan interest in 2023 when that debt was less than half what it is now).

 

2. Their overheads are out of control.  Hornby should be making the most profit out of the players in the market because they can do things more cheaply when they do them on a larger scale. 

 

Partly this seems to be driven by the obession with online direct sales.  We know from the announcement that around 18% of all sales are online direct sales.  These should be making the most profit out of all sales because they're selling direct at RRP and not having to sell them at wholesale prices to retailers.  Even the points discount is barely a dent in their profitability here as it's only the same as Retailers discount at and those retailers must still make something out of the deal or they wouldn't buy the products.

 

On average Hornby have around a 48-49% profit margin on the actual cost of the product that covers these overheads.  In the 2023 accounts digital sales were £8.5m, which was 15% of total sales.  So those digital sales contributed about £4.3m of profit margin towards the overhead costs of the company.  At the same time the cost of winning those digital sales in overheads went up by £1.9m, so actually those digital sales only contributed £2.4m toward the rest of the overheads - a little over half what they would have done if those sales had simply come from retailers instead.

 

Yes, this is longer term investment for the future, but between 2023 and 2024 the digital sales share of the total has only moved from 15% to 18% of total sales.  That 3% is around £1.6m of extra sales.  Yet total sales are pretty flat at only 2% growth (around £1.1m), so quite a lot of those new digital sales have come from taking market share off of retailers, not from growing new sales/new customers.  And because of this massive investment in digital, they are actually making Hornby less money, not more.

 

Ignoring the one off exceptional costs (writing off bad investments and refurbishing the visitor centre) then these two things alone would have been the difference between turning a profit and the loss they actually made.

 

Also, for what it's worth, last year when Hornby lost all that money, their departing CEO's pay went up from £241k to £617k.  So that's a £375k pay off to someone they wanted out.  Who says you need to make a profit to get rewarded eh?

 

 

What a really interesting post. Thank you for putting all that effort in. It was really enlightening.

[adb968008]

10 hours ago, Michael Hodgson said:

This appears on another thread....

https://www.ebay.co.uk/itm/335356510561

 

Of course it would take more than 30 class 86s to get the stock figures down, but it may be an indication of the sort of thing that's needed.  This though is more likely to be a retailer who's in the same boat on a much smaller scale.

The worst part with those 86’s. Is none of them have cab doors handles as they omitted them in the tooling initially.

 

If that seller manages to palm that lot off, at £49 each, Hornby should offer him a job using this one as the trial period to get rid of…

https://uk.Hornby.com/products/br-departmental-exmk1-first-open-db977351-era-8-r40346

 

 

I wonder how many of these they have sold through the website ?

https://uk.Hornby.com/products/quarter-straight-r610

 

Going off the reviews, at least 13, last review being 18+ months ago.

 

For instance, Back in covid, in 2020, track suddenly became a rare commodity, and with no end in site reordering extra track supplies might seem prudent.. of course everyone went back to work… Maybe they have a lot of track, kits, scenics etc ? No point discounting the few aspects of modelling that are consumable and consistent… and if you only need an R610, the Hornby website is an expensive way to buy it.

Another possibility is if money was borrowed, usually theres collateral required, if thats the stock, then selling it off cheap maybe restricted.

 

Edited April 24 by adb968008

[Gridiron]

7 hours ago, The Stationmaster said:

One thing which has changed over the years is the time of payment.  in many cases in the apast payment was not made ion Chinese produced model railway items until they had been received at the UK shipping agent's port premises.  But. certain behaviours by various -but particularly one person - in the UK market has meant that final payment is now often raised at factory gate.  Thus although the goods are not taken into stock at that point money is being paid out.  

 

However Hornby's mountain of unsold stuff has, I'm sure, very little to do with that change of payment arrangement and is largely, if not entirely, down to past mismanagement and very poor to non-existent marketing decisions.  For years a retailer friend f mine was loud in his complaint that if Hornby repeted a model in many cases they couldn't even be bothered to offer a different running number.  If you don't make what folk will buy then you aren't going to sell it.

 

Factory payment arrangements also vary with some folk repotedly still being able to get end-loaded payment where various stages of work aren't paid for until tooling starts or - I have heard in one case, -until end production starts.  The time of paying out during development thus varies although hopefully it will all be ciming out of a development budgeting process which takes account of the way payments are invoiced by the factory.

 

But whatever happens, and presumably exacerbated by the Red Sea shipping route debacle, money is now usually having to be paid out a much longer time before it can begin to be recovered as sales revenue.  But budgeting and cash flow management should, I hope, recognise that problem

 

Up until about 35 years ago the Chinese industry would usually sell on CIF/Prepaid terms and buy on FOB/Collect terms so that they could dictate the routing and thus support the Chinese State carriers in a country were strict exchange control was enforced. This started to change when China opened up to foreign entities and containerisation which brought with it many foreign flag carriers and western companies wanting to control the shipping arrangements. Today there is a healthy mix of prepaid and collect business the latter of which can be controlled by foreign entities but all customs work usually has to be completed by an authorised Chinese entity. Manufacturers are not usually allowed to hold foreign exchange, ie strict exchange control remains, so this means that foreign currency must be converted by a local authorised bank before it appears on the manufacturers bank statement, a process which can be bureaucratic and take an extra few days. Generally speaking independent  Chinese manufacturers will negotiate deals which include a deposit portion with the balance being due on completion of delivery from their warehouse or from the port of shipment if shipping is being controlled by the overseas buyer. The deals for any tooling etc would likely be kept as separate transactions and again likely to include a prepayment element again with the balance being due once the customer is happy with finished samples and possibly payable prior to production commencing. It should also be noted that the overseas buyer will often employ a third party to physically inspect the manufacturing materials and site to ensure quality control is maintained during production, all of which adds more costs to the finished articles.    

[andyman7]

Some really interesting analysis here, especially by @Gallows-Bait.

 

I've always been wary of using personal preference as any kind of objective yardstick about what would sell but even a broad outlook at the general output across Hornby's brands suggests a mismatch between the market and their stock. On the railways side, blue period BR is a strong market now (it's where the BR era steam period was 20 years ago during the last 'golden period') yet as has been noted, there is a complete lack of coaches available even though Hornby have Mk1, Mk2 and Mk3 tooling. There is still a woeful inability to have all the components of a typical train on sale at the same time, and that is a big reason why dealers don't order - they're left with power cars but no coaches or brake ends but nothing else. Even the DRS Mk2s - initially released as two brake ends and single SO that sold out straight away; followed by 4 different SOs bit no Brake Ends as the remainder from the first batch had been flogged off at a discount, so that what should be a really good 'small train' opportunity becomes an ebay hunt at premium prices that accrue neither to dealers nor Hornby. This is the irony of the unsold stock is that there are a fair few items for which there is pent up demand, but no product with which to meet it.

I think that the Railroad range can potentially be a real winner for them because they can use that distribution muscle, brand recognition and serve a market/price point that the competition is not placed to serve - but if you wanted to create a working setup it's really quite difficult to assemble something coherent from available stock. 

However the stock backlog is disposed of, Hornby really needs to overcome making so many mis-steps with regards to future production range and quantities. 

[Les1952]

8 hours ago, andyman7 said:

Some really interesting analysis here, especially by @Gallows-Bait.

 

I've always been wary of using personal preference as any kind of objective yardstick about what would sell but even a broad outlook at the general output across Hornby's brands suggests a mismatch between the market and their stock. On the railways side, blue period BR is a strong market now (it's where the BR era steam period was 20 years ago during the last 'golden period') yet as has been noted, there is a complete lack of coaches available even though Hornby have Mk1, Mk2 and Mk3 tooling. There is still a woeful inability to have all the components of a typical train on sale at the same time, and that is a big reason why dealers don't order - they're left with power cars but no coaches or brake ends but nothing else. Even the DRS Mk2s - initially released as two brake ends and single SO that sold out straight away; followed by 4 different SOs bit no Brake Ends as the remainder from the first batch had been flogged off at a discount, so that what should be a really good 'small train' opportunity becomes an ebay hunt at premium prices that accrue neither to dealers nor Hornby. This is the irony of the unsold stock is that there are a fair few items for which there is pent up demand, but no product with which to meet it.

I think that the Railroad range can potentially be a real winner for them because they can use that distribution muscle, brand recognition and serve a market/price point that the competition is not placed to serve - but if you wanted to create a working setup it's really quite difficult to assemble something coherent from available stock. 

However the stock backlog is disposed of, Hornby really needs to overcome making so many mis-steps with regards to future production range and quantities. 

 

From the Peachy interview the mismatch between coaches and locos is something that Hornby are trying to address in TT:120, hence the Stanier coaches not appearing until after the Duchess and current lack of blue-and-grey Mark 1 stock (until the class 50 appears).

All of this of course helps the balance sheet, but Hornby are getting hammered by prospective punters for it as they can't yet have the stock they want....

 

Les

[AY Mod]

14 minutes ago, Les1952 said:

the mismatch between coaches and locos is something that Hornby are trying to address in TT:120, hence the Stanier coaches not appearing until after the Duchess

 

That's not looking like the way it will play out Les. I've just reviewed the Stanier BG, the passenger carrying stock looks as though it will follow soon and the Duchess after that.

 

 

[adb968008]

43 minutes ago, Les1952 said:

 

From the Peachy interview the mismatch between coaches and locos is something that Hornby are trying to address in TT:120, hence the Stanier coaches not appearing until after the Duchess and current lack of blue-and-grey Mark 1 stock (until the class 50 appears).

All of this of course helps the balance sheet, but Hornby are getting hammered by prospective punters for it as they can't yet have the stock they want....

 

Les

its no different in 00…

 

if you want to model passenger stock as maybe seen running today from Fenchurch st, Charing cross, Cannon st, liverpool st, London Bridge, waterloo, victoria, Blackfriars or Marylebone…

 

you just have 1 choice… a class 159.

After that its a second hand class 171/455… at a stretch you could repaint a class 165... all of them are Bachmann.

 

What makes it even more bizarre is 1 class of unit could be seen at 7 of the above 9 stations…. And at 2 of the other four London termini (but the mainlines of 3 within the zone too !) with at least 9 liveries.

 

And so instead Hornby picked an obscure unit that only runs in Anglia in 1 livery.

 

Its ok blaming the sales guy for sales, but he can only sell the product in front of him… if the product choices are restricted its no surprise that sales will be too.

 

 

 

Edited April 25 by adb968008

[Legend]

17 hours ago, The Stationmaster said:

One thing which has changed over the years is the time of payment.  in many cases in the apast payment was not made ion Chinese produced model railway items until they had been received at the UK shipping agent's port premises.  But. certain behaviours by various -but particularly one person - in the UK market has meant that final payment is now often raised at factory gate.  Thus although the goods are not taken into stock at that point money is being paid out.  

 

However Hornby's mountain of unsold stuff has, I'm sure, very little to do with that change of payment arrangement and is largely, if not entirely, down to past mismanagement and very poor to non-existent marketing decisions.  For years a retailer friend f mine was loud in his complaint that if Hornby repeted a model in many cases they couldn't even be bothered to offer a different running number.  If you don't make what folk will buy then you aren't going to sell it.

 

Factory payment arrangements also vary with some folk repotedly still being able to get end-loaded payment where various stages of work aren't paid for until tooling starts or - I have heard in one case, -until end production starts.  The time of paying out during development thus varies although hopefully it will all be ciming out of a development budgeting process which takes account of the way payments are invoiced by the factory.

 

But whatever happens, and presumably exacerbated by the Red Sea shipping route debacle, money is now usually having to be paid out a much longer time before it can begin to be recovered as sales revenue.  But budgeting and cash flow management should, I hope, recognise that problem

Just a bit of accounting here Mike . Goods can’t disappear between paying out money for it and receipt in stock . As soon as you pay for it it’s out of cash in your balance sheet , so the asset needs to be accounted for as “goods in transit” which will form part of their stock figure . 
 

 

[Gallows-Bait]

9 hours ago, andyman7 said:

I've always been wary of using personal preference as any kind of objective yardstick about what would sell but even a broad outlook at the general output across Hornby's brands suggests a mismatch between the market and their stock. On the railways side, blue period BR is a strong market now (it's where the BR era steam period was 20 years ago during the last 'golden period') yet as has been noted, there is a complete lack of coaches available even though Hornby have Mk1, Mk2 and Mk3 tooling. There is still a woeful inability to have all the components of a typical train on sale at the same time, and that is a big reason why dealers don't order - they're left with power cars but no coaches or brake ends but nothing else. Even the DRS Mk2s - initially released as two brake ends and single SO that sold out straight away; followed by 4 different SOs bit no Brake Ends as the remainder from the first batch had been flogged off at a discount, so that what should be a really good 'small train' opportunity becomes an ebay hunt at premium prices that accrue neither to dealers nor Hornby. This is the irony of the unsold stock is that there are a fair few items for which there is pent up demand, but no product with which to meet it.

I think that the Railroad range can potentially be a real winner for them because they can use that distribution muscle, brand recognition and serve a market/price point that the competition is not placed to serve - but if you wanted to create a working setup it's really quite difficult to assemble something coherent from available stock. 

However the stock backlog is disposed of, Hornby really needs to overcome making so many mis-steps with regards to future production range and quantities. 

 

This is something that as a recent newcomer to the hobby I've been frustrated by, and not just with Hornby.  When I decided to enter the hobby I initially thought to do a modern container freight layout and hoped to start out in TT120, but the length of time to have to wait before getting to the era of locomotives I was interested in was offputting.  Some of them were at least available for pre-order, but there was almost no suitable rolling stock to even pre-order alongside it.  This does somewhat seem to have been addressed in the April announcements, but even these will not be available until around 6 months after the locomotives become available and a full year after I made the decision to build a model railway.  Perhaps I'm in the minority as I wasn't interested in the various pacific steam train sets and they do seem to be continuing to sell strongly, but I'm willing to suggest people like me wanting to model what is the biggest single form of freight on the modern railway cannot be that uncommon.  Hornby has missed out anything modern from TT120 for the best part of 2 years, with the HST now the only real choice (Yes I know there's the 08, but I would be reluctant to pay what is almost the same price as any other loco for a smaller model with no lights and only a 6-pin DCC socket (for which no Hornby decoder is yet available) and that desperately needs a stay alive over points.

 

In the end I've chosen to go into N gauge rather than wait, but even here you can see manufacturers like Bachmann/Farish falling prey to the same issues.  It seemed easy enough with so many modern liveried freight haulier locos, but this has meant second hand container wagons that are available for at best only a fraction under their original retail prices, which indicates there simply aren't enough of them about.  I did subsquently discover Revolution's container wagons which look excellent and are actually cheaper new than the Farish ones are second hand, but this shouldn't be something that it needs a small entrant to fill the gap for, it's literally modelling one of the most common sights on the railway in the present day.

 

Also within N gauge, Rapido scored (from what I can see online and in forums), a big win with their decision to release Conflat P wagons alongside the Class 28 so that people could actually model the Condor freight trains of the past (QA issues aside, which it appears Rapido also dealt with in a prompt manner).  Yet even here the brake van that would have been part of this prototypical train is the Stove R, for which the only current offering is via the N Gauge Society (fair play to them, I have one now and it is lovely).

 

As a newcomer, both these poor ranging decisions by the perennial manufacturers and the limited runs of smaller pre-order focused entrants does make it much harder to get into the hobby when you realise that modelling even half of what you see on the railways around you in real life means months of scouring ebay for second hand products or waiting six months to a year for a pre-order.

[ruggedpeak]

32 minutes ago, Gallows-Bait said:

As a newcomer, both these poor ranging decisions by the perennial manufacturers and the limited runs of smaller pre-order focused entrants does make it much harder to get into the hobby when you realise that modelling even half of what you see on the railways around you in real life means months of scouring ebay for second hand products or waiting six months to a year for a pre-order.

That beautifully sums up the current dysfunctional nature of the UK outline model railway market, except for missing out the extensive duplication of a limited range of items whilst many others that have never been modelled remain unproduced.

 

Hornby and Bachmann should perhaps, if their business model remains limited batch production, focus some more effort on those prototypes that the newcomers will not attempt as they seek to cash in the high volume pre-order items (noting that not all new entrants are heavily into the duplication business).

[Michael Hodgson]

This never used to be a problem.  OK, so the range and the standards weren't what they are today, but a train set would consist of Flying Scotsman and a couple of carriages in a livery from the same era to match the loco - or the goods train equivalent.  And it you wanted a longer train, the coaches were also available separately.

[GordonC]

13 minutes ago, Michael Hodgson said:

This never used to be a problem.  OK, so the range and the standards weren't what they are today, but a train set would consist of Flying Scotsman and a couple of carriages in a livery from the same era to match the loco - or the goods train equivalent.  And it you wanted a longer train, the coaches were also available separately.

 

But no-one wants the cost of holding stock on shelves for any length of time now whether its retailers or manufacturers. Maybe in the past there was more of a steady trickle of purchases over a longer period of time but I get the impression of there being more purchases of train-loads when new tooling appears and probably far less sales in future years.

[ruggedpeak]

40 minutes ago, GordonC said:

 

But no-one wants the cost of holding stock on shelves for any length of time now whether its retailers or manufacturers. Maybe in the past there was more of a steady trickle of purchases over a longer period of time but I get the impression of there being more purchases of train-loads when new tooling appears and probably far less sales in future years.

Except that traditional physical retail (i.e. actual shops) requires stock sitting on shelves otherwise people won't come to the shop.

 

 

[Michael Hodgson]

3 minutes ago, ruggedpeak said:

Except that traditional physical retail (i.e. actual shops) requires stock sitting on shelves otherwise people won't come to the shop.

 

 

This was true in most industries producing things to sell to the general public.  Business did not generally work to Just-in-Time delivery.  Manufacturers would produce goods which they would sell to wholesalers who bought in bulk and broke down into smaller batches for selling on to retailers.  They also held stock so that retailers would know they could re-order as necessary to replenish their stocks.

 

When model manufacturing was UK based, they would produce a batch of items, then put that tooling back into store and start a batch of something else.  The assorted categories of office staff were needed to deal with retailers or wholesalers and work out what to produce next.  In the case of model railways it is not unusual for an item to be in the caatalogue, but your local retailer wouldn't have it.  In practice, unless you went to another town who did still hold one, it was probably still available on back order perhaps a few months later when the factory realised there was demand.  Most products ran for several years, rather than the current buy it now or miss out.

[adb968008]

4 hours ago, Gallows-Bait said:

 

This is something that as a recent newcomer to the hobby I've been frustrated by, and not just with Hornby.  When I decided to enter the hobby I initially thought to do a modern container freight layout and hoped to start out in TT120, but the length of time to have to wait before getting to the era of locomotives I was interested in was offputting.  Some of them were at least available for pre-order, but there was almost no suitable rolling stock to even pre-order alongside it.  This does somewhat seem to have been addressed in the April announcements, but even these will not be available until around 6 months after the locomotives become available and a full year after I made the decision to build a model railway.  Perhaps I'm in the minority as I wasn't interested in the various pacific steam train sets and they do seem to be continuing to sell strongly, but I'm willing to suggest people like me wanting to model what is the biggest single form of freight on the modern railway cannot be that uncommon.  Hornby has missed out anything modern from TT120 for the best part of 2 years, with the HST now the only real choice (Yes I know there's the 08, but I would be reluctant to pay what is almost the same price as any other loco for a smaller model with no lights and only a 6-pin DCC socket (for which no Hornby decoder is yet available) and that desperately needs a stay alive over points.

 

In the end I've chosen to go into N gauge rather than wait, but even here you can see manufacturers like Bachmann/Farish falling prey to the same issues.  It seemed easy enough with so many modern liveried freight haulier locos, but this has meant second hand container wagons that are available for at best only a fraction under their original retail prices, which indicates there simply aren't enough of them about.  I did subsquently discover Revolution's container wagons which look excellent and are actually cheaper new than the Farish ones are second hand, but this shouldn't be something that it needs a small entrant to fill the gap for, it's literally modelling one of the most common sights on the railway in the present day.

 

Also within N gauge, Rapido scored (from what I can see online and in forums), a big win with their decision to release Conflat P wagons alongside the Class 28 so that people could actually model the Condor freight trains of the past (QA issues aside, which it appears Rapido also dealt with in a prompt manner).  Yet even here the brake van that would have been part of this prototypical train is the Stove R, for which the only current offering is via the N Gauge Society (fair play to them, I have one now and it is lovely).

 

As a newcomer, both these poor ranging decisions by the perennial manufacturers and the limited runs of smaller pre-order focused entrants does make it much harder to get into the hobby when you realise that modelling even half of what you see on the railways around you in real life means months of scouring ebay for second hand products or waiting six months to a year for a pre-order.

Back in the early days of the TT thread I suggested Hornby would be better to stick to a theme, grow it and be good at it, instead of throwing seeds in the air and see what grows.

 

That thread got quite hostile to that idea, as everyone wanted their own preference over anyone elses.

 

That said, a year in, the LNER/ER theme seems to be gaining ground, as does the 1980’s theme.

 

The problem for launching a new mass market scale, is the subject matter is just way too big for anyone manufacturer. Everyone else was scared away.

 

So its a long hard decade for Hornby to grow it.

Trouble is on Hornbys current financial trajectory will they run out of runway before hand ?

 

The other risk is Hornby could do all the hard work, but pay the price of being first, if the others do to TT what they did to OO… because again, it could become too big for one to handle alone, and new comers will target upgrades of mass market prototypes, not the left over dregs.

it was never truly clear to me whom the TT target was, as what they said and what they did, didn't seem to match. A few years in, it feels like the TT customer is the same as a potential N or OO customer, thus cannibalising an existing market, rather than growing it.

To me growth in the hobby is by stretching the eras… post Privatisation and pre1923, as these are less catered for… Geographically the UK is covered, as is 1923-1994 saturated with not much room to grow.
Beyond that, start knocking on doors and convince Airplane enthusiasts, Military modellers and computer gamers to switch hobby…. Thats a hard ask imo… would you switch from Railways to Military modelling ?.. Steampunk gave us an idea how hard that is.

 

My personal feeling is Hornby needs to use its IP assets more, and its capex on tooling less… its strength isnt in super detail, but its name, yet it doesnt seem to play it as strongly as it could… whats more a big gap in that market has just been created and I dont even think theyve seen it.

Edited April 25 by adb968008

[The Stationmaster]

5 hours ago, Legend said:

Just a bit of accounting here Mike . Goods can’t disappear between paying out money for it and receipt in stock . As soon as you pay for it it’s out of cash in your balance sheet , so the asset needs to be accounted for as “goods in transit” which will form part of their stock figure . 
 

 

I'm pretty sure they have always doen exactly that by describing it as building up stock levels for ... etc.  But while I agree that it is accounted for it is clearly not part of a massive heap of stuff piled up on pallets or whatever at considerable warehousing and balance sheet expense and which showed   an almost continuous growth under the immediately previous management.  That is where there's the really serious problem - previously tackled by 'fire sales' - that they must deal with (as, I'm sure. we're all agreed).

[Gallows-Bait]

55 minutes ago, adb968008 said:

Back in the early days of the TT thread I suggested Hornby would be better to stick to a theme, grow it and be good at it, instead of throwing seeds in the air and see what grows.

 

That thread got quite hostile to that idea, as everyone wanted their own preference over anyone elses.

 

That said, a year in, the LNER/ER theme seems to be gaining ground, as does the 1980’s theme.

 

The problem for launching a new mass market scale, is the subject matter is just way too big for anyone manufacturer. Everyone else was scared away.

 

So its a long hard decade for Hornby to grow it.

Trouble is on Hornbys current financial trajectory will they run out of runway before hand ?

 

The other risk is Hornby could do all the hard work, but pay the price of being first, if the others do to TT what they did to OO… because again, it could become too big for one to handle alone, and new comers will target upgrades of mass market prototypes, not the left over dregs.

it was never truly clear to me whom the TT target was, as what they said and what they did, didn't seem to match. A few years in, it feels like the TT customer is the same as a potential N or OO customer, thus cannibalising an existing market, rather than growing it.

To me growth in the hobby is by stretching the eras… post Privatisation and pre1923, as these are less catered for… Geographically the UK is covered, as is 1923-1994 saturated with not much room to grow.
Beyond that, start knocking on doors and convince Airplane enthusiasts, Military modellers and computer gamers to switch hobby…. Thats a hard ask imo… would you switch from Railways to Military modelling ?.. Steampunk gave us an idea how hard that is.

 

My personal feeling is Hornby needs to use its IP assets more, and its capex on tooling less… its strength isnt in super detail, but its name, yet it doesnt seem to play it as strongly as it could… whats more a big gap in that market has just been created and I dont even think theyve seen it.

 

It's interesting, because in some ways I feel like I am part of that new market Hornby was attempting to tap into.  I only have the vaguest memories of model trains.  My dad had a model railway when I was very young, but I had limited interaction with it and never had my own model trains.  His layout was packed up in a house move before even my teenage years and I've not seen it in thirty plus years since.  My youth was instead lining up lego soldiers and the like before moving into wargames and other miniatures.  I literally chose to look into this hobby because I'd seen TT120 on Youtube and had a vague feeling of nostalgia for grubby BR blue diesels and naff catering sandwiches that kept it nagging in the back of my head for months.  Driving past the Doncaster show by random chance back in February and seeing hundreds of happy faces, mostly clutching bags of purchases, made me look into it properly.

 

As someone new to the hobby I also face challenges I'm sure many people have.  Mainly the big barriers to the hobby are time, money and space.  Luckily my kids are growing up fast, so I'm getting my free time back and my job is at least comfortable enough that I can at least start out bit by bit into the hobby.   So it's only really been space that's the major hurdle, which was why the idea of TT120 appealled at first, but then I realised that N gauge ticked that box as easily, if not better, so it really came down to what products were out there for me right now.  As such, yes potentially whilst a new customer drawn in, if I had gone into TT120 it would only really have been over N gauge, so there is that potential cannibalisation of the market.  But unlike some people, I suppose I knew that not everything in the hobby is Hornby, so I wasn't limited by that perception and gave the N gauge ranges a look over too.  It feels like Hornby could just as easily have given all the same reasons and justifications for tooling up and joining in a big push for N gauge as much as making TT120 as I really don't see that much difference between them. 

 

However I can appreciate for Hornby that an entirely fresh market would be more tempting if bold enough to try it.  On the positive side for Hornby, if customers come in to TT120, if they want almost anything, they're very likely to buy the Hornby version if it exists. Track, lineside, locomotives, rolling stock and so forth.  The only problem is, they can only do it if it exists.  I almost feel that Hornby have actually been too cautious.  They're released a lot, but, for me at least, not enough.  A bit more in the range at launch and I think they could have seen even more success.  But hindsight is 20:20 as they say.  They could just as easily have ended up having to write off millions in unused toolings if it had sunk without a trace.

[ruggedpeak]

12 minutes ago, Gallows-Bait said:

 

It's interesting, because in some ways I feel like I am part of that new market Hornby was attempting to tap into.  I only have the vaguest memories of model trains.  My dad had a model railway when I was very young, but I had limited interaction with it and never had my own model trains.  His layout was packed up in a house move before even my teenage years and I've not seen it in thirty plus years since.  My youth was instead lining up lego soldiers and the like before moving into wargames and other miniatures.  I literally chose to look into this hobby because I'd seen TT120 on Youtube and had a vague feeling of nostalgia for grubby BR blue diesels and naff catering sandwiches that kept it nagging in the back of my head for months.  Driving past the Doncaster show by random chance back in February and seeing hundreds of happy faces, mostly clutching bags of purchases, made me look into it properly.

 

As someone new to the hobby I also face challenges I'm sure many people have.  Mainly the big barriers to the hobby are time, money and space.  Luckily my kids are growing up fast, so I'm getting my free time back and my job is at least comfortable enough that I can at least start out bit by bit into the hobby.   So it's only really been space that's the major hurdle, which was why the idea of TT120 appealled at first, but then I realised that N gauge ticked that box as easily, if not better, so it really came down to what products were out there for me right now.  As such, yes potentially whilst a new customer drawn in, if I had gone into TT120 it would only really have been over N gauge, so there is that potential cannibalisation of the market.  But unlike some people, I suppose I knew that not everything in the hobby is Hornby, so I wasn't limited by that perception and gave the N gauge ranges a look over too.  It feels like Hornby could just as easily have given all the same reasons and justifications for tooling up and joining in a big push for N gauge as much as making TT120 as I really don't see that much difference between them. 

 

However I can appreciate for Hornby that an entirely fresh market would be more tempting if bold enough to try it.  On the positive side for Hornby, if customers come in to TT120, if they want almost anything, they're very likely to buy the Hornby version if it exists. Track, lineside, locomotives, rolling stock and so forth.  The only problem is, they can only do it if it exists.  I almost feel that Hornby have actually been too cautious.  They're released a lot, but, for me at least, not enough.  A bit more in the range at launch and I think they could have seen even more success.  But hindsight is 20:20 as they say.  They could just as easily have ended up having to write off millions in unused toolings if it had sunk without a trace.

I think you just returned to the hobby 2 or 3 years too early! In a couple of years it should be very different.

 

Personally as a piece of high risk NPD i think they have done an excellent job with TT and would guess sell through etc is probably noticeably better than OO. As they say, overnight success takes about 10 years!

[MidlandRed]

On 24/04/2024 at 15:42, The Stationmaster said:

  

However Hornby's mountain of unsold stuff has…..

 

But whatever happens, and presumably exacerbated by the Red Sea shipping route debacle, money is now usually having to be paid out a much longer time before it can begin to be recovered as sales revenue.  But budgeting and cash flow management should, I hope, recognise that problem

Are we sure they still have mountains of unsold stock or is this a presumption from a situation years ago?

 

Some firms ‘encourage’ payment in advance for pre orders in various forms, often on the pre-text of assisting purchasers to budget for their purchases  -  however the other sides to this are it enables the company to more accurately predict the order volumes but most importantly resolves their cash flow problem as they get a proportion of direct sales payments well in advance of delivery enabling interest to be earned until such time as they have to pay the factory. I’ve always wondered what proportion of their sales occur in this way - I guess we will never know but from posts on this site, it seems quite a few are happy to pay in advance. P
 

Hornby does not follow this business model - they don’t take your money (or offer to from what i can see) until the model is despatched. I suspect this is generally because they’re not aiming for the same market segment  except in the cases of some model locos. I could imagine the outcry if they did (though those companies that do this don’t seem to get negative publicity, surprisingly)!! 

Edited April 25 by MidlandRed

[spamcan61]

4 minutes ago, MidlandRed said:

Are we sure they still have mountains of unsold stock or is this a presumption from a situation years ago?

 

yes we're sure, their financial statement indicates they have about 20 million quid of stock on hand, which is a mountain.