Dark news for Hornby rival

[Rallymatt]

As this is a Hornby forum it’s obvious that most discussion is around Hornby but in the wider world relevant events to our hobby are going on. Hornby’s main rival in UK market appears to be having a rough time. Kader Holdings, owner of Bachman brands are reporting another slump in sales for Model Railways and the group as a whole. Further operating losses (approx £8m in ‘22 increasing to £10m in ‘23, turnover dropping a further 11.4% in ‘23) Financial statement is not released for ‘23 on company website so data is from FT report. An additional worry is that Kader has a substantial property sector that it has used to support other parts of the business and enable acquisitions, however the Chinese property market is in a death spiral that seems to be accelerating.

The loss of Bachmann would be a blow, I think they have been key in Hornby and others upping their game in past 20-30 years.

[LTSR_NSE]

Hopefully (for model enthusiasts) if Kader are in difficulties, an investment/asset management firm might be willing to take over financial liability of the model railway brands - like Phoenix have with Hornby.

[Rallymatt]

Bizarre as it sounds but would be ripe for Hornby to buy out at the right price

[Tony57]

It is concerning news its the number of brands that will be lost if they do go into receivership. EFE Diecast and Graham Farish are two that spring to mind.

[Bulleidboy]

It is concerning news and hopefully they will survive - which I am sure they will. What I find amazing, is that on RMweb, which spouts pages on the future of Hornby, and how it is badly run etc., there is no mention of Bachmann's possible problems - not a wordface_with_rolling_eyes.

[ellocoloco]

Bachmann Branchline, ETE and GF are bit players. Bachmann is the big player in the US market providing entry level sets and 'Railroad' standard models as well as high end models such as the SC44 Charger - much in the way Hornby do here. Kader also act as a contract manufacturers so their failure may cause serious disruption to other UK brands.

Lets hope they manage to keep things together.

[VESPA]

This is what happens when you price your product far too high and that includes 99% of model railway makers. How can a loco be £250 on release and then end up at £110 to. shift them. The same thing happens every year. I bought 10 Bogie Bolsters from Hornby a few years back at about £3 in a mad sale to generate money. Now I think I would just manage to get One for the same outlay. Trying to up the price to absorb losses doesn'twork, it kills off your regular followers. I wonder who will be next?

[What About The Bee]

Hello Vespa,

You asked: "How can a loco be £250 on release and then end up at £110 to shift them?"

There is a difference between retail price and wholesale price. Typically keystone, or 2x markup.

So a £250 retail MSRP costs a retailer £125.

But the cost to manufacture that unit CANNOT be £125. The manufacturer must also make a profit. Perhaps 10%. Making the cost basis ~£112.50

I'd rather sell remainders at a loss, than to have dead stock sitting on my shelf.

Voila. £110

Bee

[Rallymatt]

Many manufacturers look at a projected sales volume and calculate costs and RRP, wholesales etc based on that, then over run on the production taking advantage of economies of scale so the cost per unit drops significantly, you get into ROI way quicker and when the bell rings, blow the remaining stock out the door as fast as possible. Everyone from Auto makers to clothing companies apply these principles if they can.

[96RAF]

Marketing (any provider business) always will set a price that they think they can get for a product or service, that is not based on the production cost of such an article. It has ever been so and ever will be.

Anytime I see a price of £xx.99 then I know its artificial, to falsely present the next price bracket below.

Of course a manufacturer has to do a proper costing for any product taking account of all factors such as development, design, materials, production, packaging, retailers margin, etc but this is a rock bottom price, not a recommended retail price.

I know of very few businesses that say I want to sell 'this' for 'that' price, can you make it happen. It is generally the other way round - what will it cost to make, so what can I sell it for, but I will never undersell it.

[ColinB]

Lets hope Hornby don't take over Bachmann. Yesterday I noticed my Caledonian 812s drawbar was damaged so I mailed Bachmann for a replacement and a buffer for my class 90 at about 6.00 pm last night. Remember the 812 was a Rails special product. This morning I got a really pleasant reply giving me the part numbers and how to order them. With Hornby replies are generally counted in days rather than hours and usually they don't hold many spare parts. The World is in near recession so many businesses will be loosing money, so Bachmann has lost £18m, I think Hornby's is a lot more even with their slight profit last year. As to the price of locos, well normally you charge what the market can stand, it looks like in several cases both Hornby and Bachmann got that calculation quite wrong.

[Rallymatt]

Positive and accurate as ever Colin 🤣

[ColinB]

I know, what I didn't add was a Hornby drawbar probably wouldn't have broken although I am not so sure about the new ones they are fitting. As to the profit and losses trouble is it very difficult to work out what is going on. The firm I used to work for was always yoyoing from profit to loss, when we made a loss, travel was stopped as was overtime, generally we spent more saving money. I think Bachmann is the same as Hornby in that they have fingers in many pies, plus China has taken a lot longer to come out of Covid so who knows.

Hornby on the other hand seems to have gone flat out getting models released, in the last 3 months I have been deluged by pre ordered items whereas previously they only released very few.

[Rallymatt]

Bachmann Europe is showing a modest but genuine profit, it’s important to be accurate on these things. Kader Holdings the parent company however are not looking stable, it’s not about couplings or a particular model it’s about an entire business. They are losing huge volumes of turnover year after year (average 11%) losing huge sums v turnover, share value has dropped to 3.5p and trading is now stagnant. The cash cow in the business was its property investment sector but that is collapsing at a dramatic rate in China. The manufacturing arm of Kader enable Bachmann Europe to exist and make the modest profit they do, as well as providing manufacturing capacity to a wide range of model companies (excluding Hornby). If a well performing company in UK say, was using a Kader facility and Kader Holdings go south, it will take the essentially viable UK company down.

[LTSR_NSE]

@Colin don’t forget that since Bachmann have been owned by Kader for many years, they have had direct access to parts & manufacturing & therefore are comparable to when Hornby Margate was able to offer a similar level of after-sales service.

[ColinB]

It may well be that Bachmann has easy access to spare parts because they make them but at the end of the day that has to be one of your business decisions. Hornby doesn't see this as a required service, otherwise they would source them. There is a post on RMWeb of someone that bought a HD Sir Nigel Gresley where that new drawbar is broken, he is being told that it will take a while for Hornby to source a replacement drawbar part. We are talking about a £300 plus loco, if it was a £20 special I could understand.

If Kader were to fold the profitable parts of the business would be sold off.

[Rallymatt]

Liquidating a Chinese parent company and selling off overseas (to China) assets is nothing like the same process in the USA or Europe. It could potentially get wound in red tape for years. Worth remembering it is not permitted for a non Chinese company to own a Chinese company. That’s why the best you can ever get is a form of JV but it’s always very one sided in favour of the Chinese side.

This isn’t about a few spare parts or who answers the phone.

[Aussie Fred]

@ Rallymatt, I worked for a pressure guage manufacturer here in Aussie many many moons ago who were owned by a now long defunkt airline. We were operating at a constant loss, but survived because the airline boss was able to write off the losses against his airline profit. Then the government change the rules, in that the airline could not write off the losses (tax wise) and we were closed down. The airline (Ansett) followed some time after.

[VESPA]

Off topic but it could happen. If you want a part that is part of a unit as such, then the part may end up as that unit uping the price up to 10 fold and making more profits.

Instance of a Porsche Boxster inlet at nearly £2000 because a broken plastic part isn't available new at what could be £5 (that is excessive for what it is) Trawll ing the internet for days and obtained for £30 secondhand. That would be a way if carefully done to get extra profits. Costings are always carried out with products in the making and suitably priced against similar competitors. There are many makers out there that are making tender locos for £149 and not £249 so that money is made in the initial rush to be first. Under production with a bad decision on initial quantities forcing a second run could be a flop. Far too much NEW models in a year are also crippling with say 7 or 8 items for new release. I think that the big makers are making far too much new design product for the market to cope with. I am at present looking at making up a 1960's Anglo Scottish Car Carrier" train. I have an ER restaurant car with 3 Newton Chambers vans on order but trying to find ER Mk1 coaches is proving impossible either new or secondhand. Why don't those making models have suitable other models ready to go or in production for the correct period?

[LTSR_NSE]

…far too much new design product for the market to cope with…

…Why don't those making models have suitable other models…

 

 

I accept the point you are actually making Vespa, but please do also see that if taken out of context, your post could be answering itself. The reason that manufacturers aren’t making what you want, is because they are making what others want.

All manufacturers have to balance the differing wants of: collectors, magpies, prototypical modellers & those that like playing trains. They naturally choose what (they think) will be most popular & result in the most income.

[What About The Bee]

Hi LT&SR_NSE

You wrote: "....result in the most income."

Bing! Good answer.

This is a business. A business' first priority is to break even / turn a profit. To continue in business, to preserve the revenue stream.

+++

Vespa,

There are specific carriages and wagons that I want too. Hornby may make them. I'm not waiting around for that. I'm making them myself. If Hornby surprises me, that's okay, Hornby will probably do a better job of it.

Several others here are making the choice to make their own, as well. Dip your toes, the water is fine

Bee

[Rallymatt]

Back to Kader Holdings…. Over past 5 years revenues have collapsed by 67%, to approx £35m in ‘23. Bachmann Industries Inc (USA last posted) total revenue $5.9m (£4.7m) no indications on profitability, Bachmann Europe (‘22) £17m with profit of £.5m. Investor advice is not positive.

[Generic Hornby Username]

Fascinating, RM. This is the first I've heard of all this. Do we know which firms rely on Kader for manufacturing? If Kader were to collapse, it could result in significant disruption across the industry as various firms look to find new manufacturing partners. I could easily see it taking 2-3 years before you could reenter the market after losing your main manufacturer. And that's only if you survive the financial shortfall of not releasing new models.

In order to restart production, you'd have to fly out to China and spend a significant amount of time finding a reputable factory that can create the highly detailed models we enjoy. Then you'd have to establish a rapport with the factory and sign on. Then you have to adapt your workflows and have your teams work with the new Chinese firm. Only then can you enter production. And even after all that you'd still be low on the priority list for them. Like any other business, the factory will prioritize their existing and longstanding customers over a new one. You'd go straight to the back of a one to two year queue. All the while your business is losing more and more money waiting for production to start up. And did I mention that initially you can expect higher than normal warranty claims and product faults as the factory gains familiarity with your toolings and design processes?

It would take a robust business to survive a series of shocks like that.

I do agree that Hornby would be the obvious candidate to buy some of Bachmann's OO toolings. They could also buy some of Bachmann's HO toolings from Europe and America for Hornby International. Part of Hornby's success over the years has been to opportunistically purchase the toolings of distressed firms. Lima and Dapol toolings have served Hornby faithfully for decades. That Lima Class 66 is the gift that keeps on giving (even if it is not up to the quality Hatton's version)!

I don't think we'd see them pick up any of the Graham Farish stuff. If there was no TT120, I would be urging them to buy it and enter that market. But TT120 is now firmly going with millions of dollars invested. I doubt they'd want to jump into another market. But who knows?

All interesting to think about. These are turbulent times.

[What About The Bee]

Hi RallyMatt

While you have told us the revenue for the US and EU divisions, I think that perhaps the more important figure is for the fab.

The fabrication facility, fab for short, is the source of models for the US and EU sales divisions. That is also the fab for all the "other players". It would be natural for the US & EU divisions to purchase from the fab division, keeping each division's books somewhat separate. What do the financial reports say about the fab division.

Now if demand from the EU & US divisions goes down, then the fab will have excess capacity, which can be allocated to the other players. This has the knock on effect of reducing prices at the fab, as they are more eager to utilize the excess capacity. Additionally, projects for the other players may be finished faster.

So while the EU and US revenues may be declining, the important figure is really the fab revenue. Even if the EU & US divisions collapse, the fab can remain vital and strong.

In my view, the fab is main role, the other divisions are really just bit players.

Bee

[Moccasin]

I had assumed that recent slow recovery in Hornby’s share price was down to their trading statement last week, however maybe it’s also influenced by this news. With Hornby increasing their revenues by 5% of so while Kader’s are falling in the same markets, investors will likely be further reassured.

With Hattons closing and Kader struggling, the hobby is clearly going through some turmoil.