Pendraken Future Plans - Please Read!

[Leon]

As most of us will be aware (especially those in the UK!), the world has been a crazy place over the past few years and all of our lives have been impacted in various ways.  Whether it's pandemics, wars, politics or economics, things haven't been easy for quite some time.

Sadly, businesses don't escape these factors either and Pendraken has also been facing its fair share of issues for some time now.  Sales peaked for us during the initial months of the Covid pandemic (as they did for many hobby businesses) and have reduced since then as you'd expect.  But when you combine that turnover drop with the huge increases in costs that we've seen in the past 2-3 years, it doesn't make for good reading.  As a result, for the first time in our history, Pendraken ran at a loss during the 22-23 tax year, by a considerable margin.

To quickly summarise everything that follows, we're going to be fine but we need to make some changes to our pricing and future plans.  If you're interested in the details, read on...

Some of you will remember that we last put the prices up in January 2021 due to the exceptional cost increases that we'd seen due to the pandemic.  We took a bit of a gamble there and only raised our prices by 9%, generating somewhere around £18,000 extra income per year, even though we'd seen costs go up by £35,000.  We'd hoped that we'd see some of the materials costs come back down to somewhere sensible and things would balance back out again but unfortunately things haven't worked out that way.

So what's happened?

Materials
The metal prices came back down late last year but are now increasing again.  Both metal and MDF are now approximately 50% higher than the pre-pandemic levels, adding somewhere around £15k-£18k to the annual materials bill.  Things like acrylic have more than doubled, and mould rubbers are up 30%-40%.

Brexit
Without getting into a political debate on this, Brexit and the UK's withdrawal from the EU single market has been a big hit.  The fees and handling charges that now apply for our European customers are very high, especially on a regular sized order.  Nobody wants to order £40 worth of wargames figures and then have to pay another £25-£30 in fees just to receive your package, so it's completely understandable why those customers are going elsewhere for their goodies.

Prior to the July '21 deadline, our EU sales were around 19%-20% of our turnover.  Now we're at 8%-9%, so we've lost over half of our EU customers, which in monetary terms is something like £30,000 per year of lost sales.  The only way to get this back is to try and access the EU's IOSS VAT system but this comes with an annual cost of £2000-£3000 to the business.  We'll come back to this below.

New Building
Firstly with this, the move to the new building is a real positive for our business and will prove a sensible move in the long-term.  Unfortunately the short-term is a bumpy road and there's been a lot of unexpected extra bills as a result of our new home. 

Many of you will remember the saga of our storm-damaged roof, which resulted in the insurance company refusing to pay for all of it and we had to find £13,000 ourselves to get the roof fixed.  We've also had to put £1000's into other repair work on the heating system, a new roller shutter motor, etc, that would usually be the responsibility of the landlord in a rental unit.

We also didn't expect our business insurance to double overnight (circa £2000 increase), due to there now being a 'rebuild' cost in the event the building falls down.  A £400,000 rebuild valuation on a £150,000 building doesn't make sense to me, but that's insurance companies I guess.

And my favourite random increase was our water bills.  As the owners of the building we now have to pay a drainage charge for water that simply lands on our property, so there's an extra £600 per year for the privilege of being rained on.

Business Rates (Property Tax in the US I think?)
You probably won't have seen this mentioned in the news but the UK government decided to revalue all commercial property earlier this year, pushing 1000s of businesses into new taxes.  For those unfamiliar with commercial rates, your business premises are rated by footprint and usage and then a Rateable Value is assigned to it.  Businesses below a 12000 rating can get rate-relief from the government, businesses over 15000 can't get support, and everything in-between is pro-rata'd. 

One of the reasons we chose this building was that its Rateable Value was 11750, meaning that it was exempt from business rates.  The new valuation this year jumped us up to 14750 which we felt was incorrect, so the Valuation Office came out and measured everything for us... and decided that we should be 16000 instead.  Furthermore, they backdated this to when we moved into the building and sent us a bill for £5000. 

Long story short, we believe that a mistake has been made and we need to appeal it.  Until then though, we're on the hook for the full payment and it's likely going to cost us more money to challenge the valuation.

Shipping
Before the pandemic I'd be surprised if we lost more than 5 or 6 packages per year.  Things would get delayed here and there but your orders would almost always turn up eventually.  Over the past 6-9 months though, it feels like the various postal systems have crumbled and just since the start of the year we've had almost 30 packages confirmed as lost, totalling over £2000 of goods.  We've had to replace all of those missing packages at our own expense, and as anyone who's used the Royal Mail claims system will tell you, we're not getting that money back.  I'll be surprised if they reimburse us more than £300 for the whole lot.
 

With the increases to UK minimum wages adding another £10k+ to the wage bill, it's a tricky time right now and we need to tread carefully to make sure that we get through it OK.  We've not spent 30+ years building our business just to get scuppered at this point, especially when we've got so many plans for the future. 


So the question now is what are we going to do about it?

New ranges / Design work
The most immediate change we'll need to make is to pause all new design work for the rest of this year.  In reality this won't make much difference from a customer perspective as we've got piles of things that have been sitting at Pendraken HQ for months (and years in some cases!) so we'll be able to prioritise getting those released.  Once we've cleared the decks and the finances have improved, we can then get the sculptors back to work and make some progress on our plans.

This change won't affect the first batch of six Sci-Fi ranges, as those are already in-hand and almost sculpted.  It also won't affect things like the Dungeon relaunch or upcoming British modern vehicles, as those have already been designed too.

It'll just mean that things like our Crimean range revamp, ACW additions, or a potential Nap Russian range, will need to wait until next year before we can start scheduling them.

New Website
The second priority is going to be moving to a new website, with full IOSS functionality, so that we can start to win back some of those EU customers.  Our current website platform (EKM) promised us an IOSS feature in order to get us onboard, which was 2 years ago.  They've broken every promise since then and are now telling us that it'll be another 2-3 years for it, which is frankly ludicrous.  We've actually explored our legal options on this, but they've been too careful in their wording to us and we don't have enough for a case.

So we'll need to get a new website online and ready for the autumn hopefully.  We're going to do everything we can to minimise the impact to our customers but there will be some things that we're not able to do seamlessly.  The major pain is that we're not sure if we'll be able to bring your order history over to the new website accounts, so we need to look into that.  You'll probably have to create new passwords to activate your website accounts, as those are encrypted and we can't export/import them into the new site.

The new website is going to be a ton of work and another £2k-£3k of costs, so we'll do our best to get it up and running as soon as possible.  The new platform should allow us access to a lot of new features though, so we've got some plans for that.

Price Increase
Sadly there will have to be a price increase across the majority of our products, but we're not going to do this until January 1st 2024, so you've got 5 months advance warning!  The changes above should steady things enough for the next few months and then we can prepare the price increase ready for the new year.  As a rough estimate on the new pricing, standard packs will go from £6.00 to £6.50, army packs from £36 to £40, MDF bases from £1.30 to £1.40, that sort of level.

We'll let people know more info on this as we get closer to the time.

Books
All of the books that are in our physical shop have now been added to the website for you to browse the selection: https://www.pendraken.co.uk/books-1114-c.asp  There are a couple missing images but we'll get those sorted asap.  Shipping will only be available within the UK as standard, but we can get quotes for anyone overseas.  The books are very reasonably priced so this should make it a lot easier for folks to have a look and grab some reading material.

Stock Levels
We've always tried our best to keep as much as possible in stock at all times, but we might have to run down some of the less popular lines rather than restocking as soon as a couple of items go out of stock.  We'll monitor this one though and make sure to minimise the impact on availability.

New Product Lines
We've got some plans for new product lines that don't require much buy-in so we're going to explore those and we'll have more news for you soon.

Staff Hours
Our last option but something I'm reluctant to do is to cut our staff hours.  Many of our employees are reliant on their Pendraken wages for their households, so it's not a preferred option.  There may be areas where we can save a few hours though, such as quiet times when there's no orders to cast up, or by removing Friday's post collection and only doing Mon-Thurs post.  We'll monitor this and see what can be done.


And that's everything I think!  Apologies for the long post here but we've always tried to be as open and honest as we can, especially when it comes to having to raise our prices.  As mentioned above, the long-term viability of the business looks fine but there's some short-term hurdles that we need to get over first.  We've always had the most incredible group of supportive and loyal customers, so I want to thank you for that on behalf of everyone at Pendraken HQ.

[Orcs]

As always Leon you have been up front and honest with us.- Thank you

You seem to have been hit with a number of things you had no very little idea they were coming. The measures you are putting in place, seem completely logical to me.

As to the price rises, my personal opinion as I have stated previously is that there are two things that I am concerned about
1.  That you and your employees get a reasonable living wage
2.  That you are still here in 10,15,20 years time when I want to fill out an army or pick up a new period.

To that end I feel that you should charge what you need to. This is a relatively cheap hobby, and you are certainly not the most expensive for 10mm anyway.  If you were, I would still buy your stuff, as your ethics and customer support are second to none.

Hopefully the sculptors will be able to find work elsewhere while you are having a pause.

I hope these changes help you out of the difficult times you are having.

[whubble]

Thank you for the update, wishing you and yours all the very best for the future in these difficult times. Take care.

[FierceKitty]

You've been unfailingly decent down the years. Nobody wants to see you go under; do what you must to stay afloat.

[Ithoriel]

Completely agree with the previous posters.

Nobody wants to see prices increase but it is the way of the world. In comparison with the percentage rise in the cost of some of my groceries your proposed increases seem more than reasonable!

As Orcs says, here's to Pendraken being around in 20 years, or more, time.

[Steve J]

As always we completely appreciate your honesty and transparency in all matters relating to the company. The most important thing as others have already said is that you continue to trade now and for many years to come and that all staff make a decent living from it. To be honest I was expecting you to have already put up prices due to all the factors mentioned. Your planned prices increases are fine and I con't think anyone could object to them. Fingers crossed this financial year will be better for you all.

[mmcv]

I echo the thoughts of the others, do what you need to keep going and a price rise is hardly unexpected given everything else going on. Sorry to hear about all the unexpected bills, good luck with sorting them!

[Lord Kermit of Birkenhead]

Likewise do what you have to...

[fred.]

Appreciate the update Leon - feels you are having a number of unexpected issues following the move. Feels particularly galling to have an increase in your insurance costs, whilst they fail to pay out on a storm damage claim. 

As the others say the long-term existence of Pendraken is what matters - and with overall increasing costs then putting up prices is hardly unexpected. At least you are giving good notice unlike supermarkets and the like who constantly push their prices up.

[Duke Speedy of Leighton]

You'll still get my money, it's the quality of product and service that I love.

Can we set up a standing order?

[John Cook]

The price increases are not an issue as far as I'm concerned.  It just reflects what is happening everywhere.  They will put you where Magister Militum have been for a long time - approximately 21p per figure.  I wouldn't baulk at another price increase in the not too distant future.  I'd also get a different insurer.  I don't know what it's like in other countries but it seems to me that central and local government in UK just sees businesses as a cash cow to be milked for all they are worth.

[Ben Waterhouse]

Sobering news, thank you for sharing it Leon. Echoing the other chaps you must charge what you need to keep afloat and provide decent wages for your staff. I'll still be buying.

[TheLimey]

Being upfront like this is such a rare thing in any industry. Do whatever you need to Leon, we'll all understand.

[GrahamC]

Leon,
As always you've been transparent in outlining the current situation and the problems you are facing. The price increases to be honest I think are at the low end and the figures still work out incredibly cheap. I'd be more than happy to see them increase slightly more if necessary especially with a five month notice!!
As to everything else it also makes sense especially reviewing stock levels etc. it may add slightly to some return times but casting certain items/ ranges to order may make some modest savings. A lot of the other issues are out of your control and without getting embroiled in the Brexit debate like you when I had Crann Tara 40% of my business was from Europe that dropped to 10%! Any way good luck and I'm sure the vast majority of your customers will support your decisions.

[Lord Kermit of Birkenhead]

As that is your 1st post welcome Graham....