[Doug]

photo: RichG

Hornby posted today a 33 percent drop in half-year profit, hitting its shares. Hornby said it made pretax profit of 1.8 million pounds ($2.9 million) in the six months to Sept. 30, down from 2.7 million pounds in the same period last year.

The group blamed tough trading conditions and a 1.3 million-pound increase in overheads following its recent purchase of model car maker Corgi for 8.3 million pounds in May 2008.

"The retail markets are undoubtedly more challenging. However the hobby sector has distinctive defensive characteristics, which will help us in a more difficult economic environment," said Frank Martin, Hornby's chief executive.

According to industry analysts, Europe's toymakers should buck the economic downturn better than many other retailers.

'Typically if you look at history, the toy industry has weathered the recessions and financial pressures very well in the past, ' said Bryan Ellis, chairman of Toy Industries Europe earlier this week.

Hornby hopes to drive its Christmas sales with a set of James Bond Scalextric cars, including the Aston Martin DBS and Alfa Romeo 159 as seen in the latest film in the long-running franchise, 'Quantum of Solace'.

"The strength of the Bond franchise and the Scalextric brand name should override difficult economic conditions," said Paul Chandler, Scalextric marketing manager.

---

Thankfully, Hornby are not blaming any losses on the financial crisis and the current economic downturn. That may change is the profits continue to fall.

Is it all doom and gloom though? I think that the hobby market will survive the financial crisis without much loss. I think that in these sort of times we buy less new cars, go on fewer exotic holidays, perhaps eat out less and stay at home and get on with homely activities that may include your hobby if you have one. It is a good time to start a model railway layout or a Scalextric track if you have been always thinking of doing it.

On Model Rail Forum, we have seen a rise in visitors since June with a marked rise in visitors and forum activity since the beginning of September (when the world economy seemed to do down the toilet) bucking the seasonal statistics and proving that perhaps there are other factors at play affecting the figures. I see this on SlotForum too and I'm sure that more people are taking cover from the downturn and spending more time on their hobbies. It follows on that they spend more too on their hobbies. Perhaps not large amounts - like brand new expensive trains, but definitely more on other items: expanding their existing collection or doing a bit of scenery...

What do you think about this?

 

[61215 billy carver]

the way i read it still posts a profit . if they do a simple blue & grey paint job on the dmu 101 that has been promised all year it must be a good seller for a small outlay , profits up from molds otherwise gathering dust .thats just one instance of broken promises from hornby . im getting more disillusioned with hornby and i wager a lot of others are the same as me.if they dont keep promises they could post a loss .billy

 

[7113]

I think it is fair to say that the purchase of the Corgi brand for 8.3 million must have had a serious effect on profits. I also believe that some additional outlay has been invested in restructuring Corgi.

Hopefully the company will post improved figures in the next six months.

Regards

 

[pepe007]

QUOTE (61215 billy carver @ 7 Nov 2008, 15:56) <{POST_SNAPBACK}>the way i read it still posts a profit . if they do a simple blue & grey paint job on the dmu 101 that has been promised all year it must be a good seller for a small outlay , profits up from molds otherwise gathering dust .thats just one instance of broken promises from hornby . im getting more disillusioned with hornby and i wager a lot of others are the same as me.if they dont keep promises they could post a loss .billy

is that like the HST which most models shops were told would be out by the end of oct, still waiting for the train. very british.

. and i cant even get a picture of it just some paint shop pro picture on there web site

 

[rahewitt]

QUOTE (pepe007 @ 7 Nov 2008, 16:53) <{POST_SNAPBACK}>is that like the HST which most models shops were told would be out by the end of oct, still waiting for the train. very british.

. and i cant even get a picture of it just some paint shop pro picture on there web site

From the investor relations link on the Hornby website:

http://www.hemscott.com/ir/hrn/ir.jsp?page...=70342974375226

Supply arrangements

In our AGM announcement, we indicated that our principal supplier in China had been experiencing some difficulties as a result of raw material and other input costs and this had led to some disruption in our supply chain. As a result, we agreed price rises and have since been working closely with our supplier. We are pleased with the results of these initiatives and are now seeing a marked improvement in availability of supply and expect a significant improvement in performance in the second half.

...

It almost sounds like 'give us more money or you don't get your models' from the supplier? Perhaps this goes to explain the lack of product at the moment? Or they are holding it back for Warley??

 

[Doug]

Hi 87004, welcome to the forum.

I think that dealing with China must be tricky at the best of times. In an economic down turn when the Chinese themselves must be on edge, it may be worse. There have been many models delayed on the train side and slotcar side of the business. The Christmas container ship sails soon so there had better to be a resolution to these problems.

 

[Brian Considine]

Well, they are still showing a profit. whereas some multinationals are show a loss or even worse going out of business.

Business's have good years & bad years.

 

[dwb]

The truth is out; I've been buying Bachmann over the last 12 months.

But seriously, I don't have any large capital expenditure planned for the foreseeable future but I am sure my hobby spending will continue at about the same level as before.

David

 

[rb277170]

I think hobbies are resilient during depressions. Could not , Hornbys lower profits be down to the fact they haven't managed to release any new product during that period. T9s, HSTs all due but no sign of them!

Only other issue is if they have borrowed heavily to invest in Airfix, Corgi etc. Lines of finance are drying up, so that could be a problem going forward.

Russell

 

[neil_s_wood]

QUOTE (rb277170 @ 8 Nov 2008, 08:42) <{POST_SNAPBACK}>I think hobbies are resilient during depressions. Could not , Hornbys lower profits be down to the fact they haven't managed to release any new product during that period. T9s, HSTs all due but no sign of them!

Only other issue is if they have borrowed heavily to invest in Airfix, Corgi etc. Lines of finance are drying up, so that could be a problem going forward.

Russell
Yes, everything seems to be timed to come out around christmas.

 

[Dave Kent]

I think the price increases from Hornby will have some impact in less sales. The RRP for rebuilt WC Padstow is £123.10 compared to £105 for a WC/BB a few months ago.

The late arrival of new models is not always the fault of Hornby. I have read that China is being dragged into the real world with minimum wages, maximum working hours and the implementation of health and welfare obligations. This apparently has caused factories to close while others have reduced the workforce even with full order works which in turn has increased delivery times. If this hasn't affected the Hornby factory directly, they must be looking over their shoulders. When Hornby announced its programme of railway releases I am sure the 'Credit Crunch' was not an issue.

We will have the T9 by the end of the month so it is not all bad news.

Dave

 

[rahewitt]

QUOTE (Doug @ 7 Nov 2008, 19:09) <{POST_SNAPBACK}>Hi 87004, welcome to the forum.

Thanks, I have lurked here for a while, but this is the first time I've wanted to post. More of a virtual railway modeller at the moment, I just haven't the space.

 

[pedromorgan]

it willl be interesting to see how it pans out.

i have cancelled my T9 order. its £100 that i might need at some point soon.

i think prices are starting to get a bit crazy. i think the manufacturers have forgotten that £100 is actually allot of money. yes they are good models but a hundred quid? thats a serious chunk of my income.

i really see the comodities increases as a bit of an excuse. yes they have gone up but the prices of the materials within a 4mm loco are minimal.

i wonder if we are heading for another era of kits and actually building and kitbashing because ordinary modellers simply cannot afford to spend the priced demanded for a modern RTR loco. perhaps its time for 'back to basics'?

Peter

p.s. 87004 welcome to the forum.

 

[34C]

QUOTE (Doug @ 7 Nov 2008, 19:09) <{POST_SNAPBACK}>..I think that dealing with China must be tricky at the best of times. In an economic down turn when the Chinese themselves must be on edge, it may be worse. There have been many models delayed on the train side and slotcar side of the business. ..
Having been involved in manufacturing offshoring, (very different industry) unless the guys at Margate are very phlegmatic, I bet there is some twitchiness. It's not a good feeling not being the master of your fate: and the model industry which is so dependent for revenue stream on new model introductions makes this even more critical. Hornby have so much of their 2008 loco programme delayed, and some of that will be money they already intended to have in the bank, which must be hitting cashflow. Sad to say, this is how successful businesses can get mauled...

 

[dwb]

QUOTE i think prices are starting to get a bit crazy. i think the manufacturers have forgotten that £100 is actually allot of money.

A bit of context; it was mentioned on the radio during the week that an ordinary ticket to see a football match at Peter's local Premiership football club - it's just a few stops up the Piccadilly line - is £70. Now whatever you think of 22 blokes chasing a small ball around a park for entertainment, it does put things in perspective.

David

 

[Martin71]

You are right, their will be some sort of downturn in the hobby and you might find a lot more "kit bashing" in the future.. But in some ways thats a good thing in some respects. You can really enjoy building a kit or even scratch building.

Hornby will be fine and I think they will weather it well. We all know there is a downturn in the economy but I feel too much has being whipped up by the media. Sure we got to tighten our belts and it may be a bit harder in the future. I think we need to be more positive at the same time. I don't watch the news anymore its just so gloomy and the media have nothing better to do than to panic Joe next door because xx dropped another 40 points and bank y is..........

People still got money out there I know. I just sold 2 Brits and ended up with 640 GBP including postage. Mind you they had sound smoke and lights. They sold in less than 24 hours.

Heres hoping people start spending again to kick start the process and put a little confidence into our ecomonies again.

m

 

[rossi]

Its certainly true that model railways tend to survive recessions or even thrive .After all the huge take off of Model Railroads in the US started in the great depression when some locomotives were a huge price ,more than a car at the time .I think the collectors may feel less inclined to buy everything in sight ,with a consequent drop in total sales,and perhaps focus more but many are in an age group, from what I see at exhibitions ,where the first port of call for their money is a not a mortgage.Its an aging industry ,and while it may bring problems from a diminishing customer base ,it will ensure some stability in the eye of the storm .Some of Hornbys other acquisitions may well prove less fruitful .Corgi seems a bit of a damp sqib to me though Airfix and Scalextric are still capable of going strong .Good luck to Hornby ,.While they may annoy a few stalwarts ,they make some good products worth buying .

 

[dwb]

QUOTE perhaps focus more but many are in an age group, from what I see at exhibitions ,where the first port of call for their money is a not a mortgage.Its an aging industry ,and while it may bring problems from a diminishing customer base ,it will ensure some stability in the eye of the storm .Some of Hornbys other acquisitions may well prove less fruitful .Corgi seems a bit of a damp sqib to me

Whilst I agree about the age of attendees at exhibitions, (it makes me feel young so long as I don't bump into Peter

, I disagree that this is an ageing industry. Many members introducing themselves here say they are returning to the hobby of their youth having had a long break whilst they brought up their family, concentrated on their careers or whatever. I was in that category but having had a family younger than most, I was able to get back to the hobby sooner too. So, yes people are older but the ranks at the younger end are continuously replenished by the returnees.

As for Corgi being a damp squib, I disagree there too. Collecting model cars is big business in some markets. My experience of travelling in eastern France is that model car shops are plentiful and model railway shops are thin on the ground. Even the large model shop I found in Reims devoted more space to model cars than trains. The portfolio of products that Hornby has put together should allow them to cross sell widely in continental Europe - so they can reintroduce the French to model railways whilst selling Corgi and introduce Corgi via Electrotren in Spain.

David

 

[rb277170]

QUOTE Hornby will be fine and I think they will weather it well. We all know there is a downturn in the economy but I feel too much has being whipped up by the media.

Working in manufacturing , I can tell you the downturn is not "whipped up". Suspect the major effects have still to hit Joe Public

Agree £100 is expensive for a loco and £70 expensive to watch a game of foootie. We will get to the stage where people have to justify spending that amount of money on themselves. Here Hornby is perhaps better placed with some of its Railroad range.

Russell

 

[bluey robinson]

As far as Hornby's profitability goes, two things spring to mind.

Firstly I suspect the average modeller is more discerning these days in regards to what constitutes a prototypical model. It is now common place for everybody to spend time researching on the web and with so many posts of what can be acheived I think our standards of modelling have risen sharply! I'm not sure if our hobby manufacturers are keeping up. (And as someone who has been investigating bridges I am dismayed at what the offerings are, tunnel portals ain't much better. I'll be casting my own!)

Secondly I suspect a lot more second hand goods are being circulated on Ebay, and this is dampening new product sales. The "buzz" of a new locomotive is just the same, whether it is via Postman Pat, or Mr Retailer. And to be honest if I don't like my new Ebay purchase, or I get bored with it, back it can go with little depreciation. Not so easy to have an attitude of easy come, easy go when you've stumped up big money at the store!

As an aside but in the same "doom and gloom" vein which these posts have, I was astounded (still am) to learn this week from a mate who is a steel manufacturer that there is NO market in waste steel here in Victoria (and I think Australia). A few months ago they were getting $400 per tonne, now the recyclers wont even take it away for nothing! This is because many of the smelters in China have been turned off! (He wanted to use my backyard as a dump

)

Still can't get too bothered with it all. My motto is enjoy today and don't lament what isn't! (and keep the purchases off the credit cards)(It's mine, I paid cash and I mayn't be able to afford to replace it any time soon)

Cheers, Bluey