Does British boat building have a future?

[henryf]

Seems to me that this thread is conflating two issues.

First, do Princess make nice 50-60 foot boats. Pretty sure the answer to that is ‘yes’.

Second, as a company, the principal objective for Princess must be to make a profit. This they don’t do; nor have they for years. The last owners sold the company to the current ones at a massive loss (judged against their investment in the company).

Presumably, the new owners think that they can turn things around, make a profit and sell in a few years for more than they paid.

Maybe they’re right. But, to do that there are going to have to be big changes in how they make the product. Because if they keep on doing the same thing, they’re going to get the same outcome; that is to say, poor financials.

The new owners specifically buy manufacturing businesses and turn them round. They aren’t a luxury retailer or a wealthy individual on an ego trip. They have a track record of success so it will be really interesting to see if and how they succeed.

I’m tempted to to say if they can’t do it no one can but with the caveat of not having the level of corporate and accounting knowledge enjoyed by many on this parish.

 

[MapisM]

So Princess are targeting the less wealthy millionaires and when you do get into the 80-90 foot range they are surprisingly affordable in relative terms. A result of working on smaller sized boats.

We must agree to disagree on that, because the way I see it, the most remarkable result of working on smaller boats is that their larger ones (where price matters less) are not competitive quality-wise.

 

[benjenbav]

The new owners specifically buy manufacturing businesses and turn them round. They aren’t a luxury retailer or a wealthy individual on an ego trip. They have a track record of success so it will be really interesting to see if and how they succeed.

I’m tempted to to say if they can’t do it no one can but with the caveat of not having the level of corporate and accounting knowledge enjoyed by many on this parish.

KPS is a private equity investor that will look for investments it can improve within a finite period of 3-5 years, perhaps, in order to return a profit to their clients.

They’ve owned Princess for 2 years (Feb 2023) and have just published accounts for the year ended 31 December 2023 - which are lamentable.

What the unpublished accounts for the calendar year just ended look like will be anybody’s guess.

I’m glad there’s optimism that these are the folk to fix the finances.

 

[henryf]

We must agree to disagree on that, because the way I see it, the most remarkable result of working on smaller boats is that their larger ones (where price matters less) are not competitive quality-wise.

I think we may be cross threaded here. I thought you were saying that the UK builders were struggling to find a market for their products. The people buying would look elsewhere.

As I said elsewhere the boats are selling with healthy order books. The issue seems to be making money whilst building them.

 

[MapisM]

I’m tempted to to say if they can’t do it no one can but with the caveat of not having the level of corporate and accounting knowledge enjoyed by many on this parish.

Two words about that: good luck.

History is there to prove that the most successful boatbuilders were owned and managed directly (often starting from scratch), by someone for whom boatbuilding was a passion-triggered lifelong mission.
Cue Braithwaite (RIP), among Brit builders.
Or the most remarkable example of all (Vitelli - also RIP), who built the largest group of the planet starting from a tiny business of sailboats charter more than half a century ago (no less!), and never stopped being involved till a silly accident took his life a month ago, aged 77.
And you'd be surprised by how many similar stories of other Italian boatbuilders I could list, if it weren't that I'd bore everyone to death.

Now, I know nothing about the new Prin owners - and I couldn't care less, frankly.
But unless among them there's someone that on top of being very clever is also obsessed with boats, willing to move to Plymouth and spend there his foreseeable future, being the first to arrive and the last to leave every given day, well, a generic experience in turning around manufacturing business with a financially triggered mindset will not cut the mustard, imho.
Then again, time will tell I guess.
Time being, as I said, good luck, because they will need it - BADLY.

 

[henryf]

KPS is a private equity investor that will look for investments it can improve within a finite period of 3-5 years, perhaps, in order to return a profit to their clients.

They’ve owned Princess for 2 years (Feb 2023) and have just published accounts for the year ended 31 December 2023 - which are lamentable.

What the unpublished accounts for the calendar year just ended look like will be anybody’s guess.

I’m glad there’s optimism that these are the folk to fix the finances.

Buy the company. Spend 6 - 12 months understanding the business, evaluating production methods. Implement your changes.

With the best will in the world you will be looking at 2 years before you start to see results and the accounts are essentially a year behind by the time they get published. Some of the changes may take time to implement if it involves infrastructure modification. Planning can easily take 6 - 12 months.

 

[henryf]

Two words about that: good luck.

History is there to prove that the most successful boatbuilders were owned and managed directly (often starting from scratch), by someone for whom boatbuilding was a passion-triggered lifelong mission.
Cue Braithwaite (RIP), among Brit builders.
Or the most remarkable example of all (Vitelli - also RIP), who built the largest group of the planet starting from a tiny business of sailboats charter more than half a century ago (no less!), and never stopped being involved till a silly accident took his life a month ago, aged 77.
And you'd be surprised by how many similar stories of other Italian boatbuilders I could list, if it weren't that I'd bore everyone to death.

Now, I know nothing about the new Prin owners - and I couldn't care less, frankly.
But unless among them there's someone that on top of being very clever is also obsessed with boats, willing to move to Plymouth and spend there his foreseeable future, being the first to arrive and the last to leave every given day, well, a generic experience in turning around manufacturing business with a financially triggered mindset will not cut the mustard, imho.
Then again, time will tell I guess.
Time being, as I said, good luck, because they will need it - BADLY.

Fortunately at the core of the Princess family is a man called David King who is passionate about everything that makes them special.

 

[benjenbav]

Buy the company. Spend 6 - 12 months understanding the business, evaluating production methods. Implement your changes.

With the best will in the world you will be looking at 2 years before you start to see results and the accounts are essentially a year behind by the time they get published. Some of the changes may take time to implement if it involves infrastructure modification. Planning can easily take 6 - 12 months.

Of course. That’s why I said that the accounts for 2024 will be anybody’s guess.

What I can’t figure is why you’re so sure 2024 (or 2025) will be golden?

You’ve said you don’t know much about KPS. Nor do I. And their website is hardly likely to list any shipwrecks.

 

[MapisM]

I think we may be cross threaded here. I thought you were saying that the UK builders were struggling to find a market for their products. The people buying would look elsewhere.
As I said elsewhere the boats are selling with healthy order books. The issue seems to be making money whilst building them.

Actually, I said they don't even have products that buyers would consider.
Remember, we are talking of the "one percenters" akin to those willing to waste half a million on a RR, which is the concept you introduced in your OP.
Though, as I believe Jrudge already pointed out, the UHNWIs who in your opinion Prin should and could target are way less than 1%.
But the principle still stands.

 

[MapisM]

Fortunately at the core of the Princess family is a man called David King who is passionate about everything that makes them special.

Two things spring to mind here:

First, at risk of being called pedantic, I consider myself as someone whose knowledge of the boating industry is above average.
In spite of that, I had to google for David King to find out that he's Princess founder.
But fairenuff, every day is a school day. I'll add him to the dozens (note the plural) of boatbuilders names who made the history of pleasure boat industry as we know it, and which I could name by heart.

Second, and this is the real problem, if this guy isn't in the driver's seat anymore, I struggle to understand the relevance of your "fortunately".
OTOH, if he is, judging by the results, maybe he should have considered retiring long ago.
I mean, after 56 years since its foundation, AziBen group is where it is.
Which of the two founders would you rather trust to run the company, if you were the shareholder?!?

 

[rafiki_]

I don’t think this thread is about the Princess product. You either like them or don’t. The issue is that Princess has failed to make a profit for many years, despite healthy order books. Sunseeker and Fairline the same. The issue is manufacturing and other costs which are swallowing the revenues.

 

[benjenbav]

Two things spring to mind here:

First, at risk of being called pedantic, I consider myself as someone whose knowledge of the boating industry is above average.
In spite of that, I had to google for David King to find out that he's Princess founder.
But fairenuff, every day is a school day. I'll add him to the dozens (note the plural) of boatbuilders names who made the history of pleasure boat industry as we know it, and which I could name by heart.

Second, and this is the real problem, if this guy isn't in the driver's seat anymore, I struggle to understand the relevance of your "fortunately".
OTOH, if he is, judging by the results, maybe he should have considered retiring long ago.
I mean, after 56 years since its foundation, AziBen group is where it is.
Which of the two founders would you rather trust to run the company, if you were the shareholder?!?

According to UK Companies House, David King - who’s now well into his 80s - stepped down as a director of Princess Yachts Limited in 2015.

 

[MapisM]

I don’t think this thread is about the Princess product.

Yes and no, P.
When you say, as HF did, that "like Rolls Royce, it [Princess] has an exciting future", and for similar reasons, that doesn't hold water from a product viewpoint, first and foremost.
I mean, which is the Princess' Phantom? The X95?
You're having a laugh...!

 

[MapisM]

According to UK Companies House, David King - who’s now well into his 80s - stepped down as a director of Princess Yachts Limited in 2015.

Aha, I see. Not sure of what HF's post #47 practically means, then.

 

[rafiki_]

Yes and no, P.
When you say, as HF did, that "like Rolls Royce, it [Princess] has an exciting future", and for similar reason, that doesn't hold water from a product viewpoint, first and foremost.
I mean, which is the Princess' Phantom? The X95?
You're having a laugh...!

P, my take on the thread is that despite healthy order books and building some lovely craft, I exclude the Prinny X boats, which were designed for Stevie Wonder, none of the UK big 3, and I include Fairline for historical reasons, make a profit. So the thread is about this situation. We all have personal preferences including boat design. You know where my preferences lie. However I want the UK to have a healthy industry, including boat building.

 

[henryf]

I’ll reply to a few of the comments:

MapisM. Ultra high net worth individuals will surely be off buying huge boats way beyond the scope of the UK builders. The fact that order books are full or nearly full through to next year now shows the product is in demand despite your telling us that no one will buy them. So respectfully I’ll say you’re wrong there.

David King stepped down some years ago from day to day runnng of the business but when we had our boat built during 2022 I saw him at the factory and everyone you speak to still holds him in high regard. His principles regarding boat design still form the core ethos of a Princess boat and are what, in my humble opinion makes them so appealing.

Benjenbav - I haven’t put a timeframe on the Princess route to profitability, I was merely saying it’s too early to see results in current figures.

British boat building has evolved over many years and has bettered it’s self thanks to strong competition. The home market buyer is a tough act to please and I think that also stands to improve the gene pool. Clearly the missing link is turning a profit and that’s my question. Can it be done profitably allowing the industry to prosper?

Oh, and on the subject of the X boats, funds permitting I would have an X80 in a heartbeat. The X95 is, I grant you more of a visual challenge but they’ve sold well so clearly what do I know…..

 

[MapisM]

MapisM. Ultra high net worth individuals will surely be off buying huge boats way beyond the scope of the UK builders. The fact that order books are full or nearly full through to next year now shows the product is in demand despite your telling us that no one will buy them. So respectfully I’ll say you’re wrong there.

Agreed, I would.
If that were what I said, that is - I already debunked what you said I said in post #49, so I'm not rewriting it.
And anyhow, it wasn't me who suggested in the OP of this thread that Princess could and should target UHNWI clients!
But since you're now saying that's beyond their scope, I couldn't agree more.

David King stepped down some years ago from day to day runnng of the business but when we had our boat built during 2022 I saw him at the factory and everyone you speak to still holds him in high regard. His principles regarding boat design still form the core ethos of a Princess boat and are what, in my humble opinion makes them so appealing.

Let's KISS, H: either he is in the driver's seat, or he isn't.
If he isn't, his principles and ethos don't matter anymore, in practice.
If he is, he's doing a poor job.

At the end of the day, it's down to the very simple question I already made and you didn't answer:
If you were a shareholder, would you rather have Vitelli or King running your company?

 

[benjenbav]

@Henry - re Princess profitability, the only point of my comments was that you seemed confident that Princess would become a profitable company. I’m very much in the dark as to why you think this.

You’ve suggested several reasons on this thread, as I understand it: first that the Rolls Royce quality of the product makes it inevitable; second, that KPS have only invested because they can make the company profitable; third, that Princess retain the founder’s impetus.

The first and third of these seem unlikely to me and the second is an unknown.

What are KPS actually doing? I think there have been some redundancies recently, but perhaps only enough to offset the higher employment costs resulting from the employer’s NI increase. Also Will Green has been appointed as CEO.

Perhaps there’s plenty of change that’s not yet visible to the lay public?

That’s the thing. I don’t know.

But you are a successful businessman and a bright guy so perhaps you can explain the underlying reasons for your optimism?

Unless it’s just that you want it to be so?

 

[jfm]

Henry, I agree with very many of the replies that your OP has attracted, so I'll try not to repeat those. A few thoughts in no particular order, and very much imho:

1.UK boat builders should in general stop at the 70/80 foot mark. None of them has a brand that stretches significantly into the world of UHNWI (=$30m net worth) owners, which is where a Princess x95 or y95 sits (those being c£10m boats). Harsh reality is you walk into Yacht Club of Monaco - your mates say what's your new boat? - you say "Princess" - everyone sniggers. The very opposite of Sanlorenzo, Riva, Customline, Canados and many others. Princess got this all wrong when they launched their first big boat, the 32M which sold a tiny number (6?). From then on under Chris Gates leadership they just kept on digging that particular hole ( alongside some other holes) until they finally cancelled their M series but by then all shareholder value was destroyed in a 10 year slow motion car crash that was called out in real time on here many many times.

2. Sunseeker is a struggling slight exception. Their brand is such that they got some meaningful level of market penetration among the limited subset of UHNWIs who are ok with their brand positioning. But still destroyed a monumental amount of shareholder value.

3. UK boat builders make nice craft in the 40-70 foot zone where their brands work. But they need to build them VERY differently. It's all been covered before so I won't repeat. The recent Aquaholic series of videos showing 3000 people building Princesses and making plywood models and hand making wiring looms made me and everyone with a shareholder-brain just weep. So many people standing around doing nothing.

4. Jrudge has the demand/sales right in his post 12. The gradient of the "can't afford it" curve is far steeper than the UK builders ever realised. Assume you make a product people want and you price it at £0.5m. X people can afford it. Price it at £1m and perhaps 0.2X can afford it. Price it at £3m and some tiny fraction of X can afford it. Now that can be ok if your production is limited anyway, and Princess have full order books, but in order to do that they are selling at a loss, such is the awfulness of their production methods.

5. Henry I don't share your faith in KPS as a manufacturing turn-arounder. The management teams they hire do that, not KPS themselves, and no shareholder can get decent management teams into UK boat builders. The succession of Messrs Gates, Sherriff and now Green at Princess are all incapable of doing what is needed. The conundrum here is that these turnarounds need really great and brave managers, and those folks are in such demand from other financial owners that the rewards from 5 years of your life in Plymouth (or Oundle) simply aren't enough, and KPS won't/can't afford to pay any more (even in the form of dilution). By the way, your timelines in post 46 are sleepy - things need to happen much faster than that.

6. People talk of Fairline's "failure" in the sense they were in administration. Essentially the same happened at Princess - they were sold for nominal sum. It is a mere technicality, not a difference in substance, that one was in administration and the other sold for £1 or whatever. My guess is that KPS are now profoundly worried. After they acquired Princess for ~nothing in Q1 of 2023 they put £50m in, and most of that has been burnt. Latest accounts (2023) show the business burning cash at a rate in the order of 15-20m pa. That is shocking. KPS will struggle to find the money or the belief to put another £50m of good money after (imho) bad. We have nearly a year to wait before we can see how 2024 turned out.

7. Rachel Reeves isn't helping. Business owners or bonus receivers - the customers of bigger boats - are worried. Her new Employer flat tax rise (where national insurance included a £615 flat charge per employee) costs Princess is £2m pa next year.

8. So it all comes down to production for the UK builders. Their product is very good, and looks just right, and they can sell enough units even at today's sky-high prices, but they lose money on each boat. Get rid of the stand-around-do-nothing employees. Do not make your wiring looms and a million other things in-house. Do not make plywood replicas in a massive building. Get components from other places. Get rid of all those marketing folks and YouTube creators, abandon the massive stand at Dusseldorf. Break up some parts of your production by giving the businesses to new owners so they become independent suppliers and make their activity profitable. Stick at the size zone where your designs are good and your brand works. Copy the Italians. Do all this fast, literally in the next 6 months. Unless these nettles are grasped, Princess's £500m+ forward order book is nothing to be happy about - it is like 500 opportunities to sell a £1m boat at a £150,000 loss.

9. Lastly, I don't much buy any comparison with cars. I bet that most of those Rolls Royces mentioned are ordered by the owner's PA by email, with 10-15 mins input into the purchase process by an owner whose passion or care for the product is pretty limited and whose time budget for talking to a sales rep is 3 minutes - it's a tin box that fulfils a practical need for a couple of years. Boats are not like that.

 

[henryf]

@jfm Thanks for that and your valuable insight. You’ve mentioned the maximum length thing before and from what I understand Princess don’t disagree. There may be some debate as to whether the range stops at 80ft or 95ft but its an extension of what leads up to that point rather than trying to come in with a new model that starts at 95ft. In the X range my own thoughts are that the X80 scratches all the itches so there’s no need to go to the X95 but I’m not in the market for a boat of that size. In the Y class the Y95 offers a main deck master which the Y85 doesn’t so maybe more of a benefit but either way these are all natural progressions of the smaller boats in the range.

My mentioning Rolls Royce was to say there is a market for a luxury product made and designed in the UK on the world stage and despite being told otherwise the order book is healthy so I’m not wrong. As you rightly point out that could just mean loads of opportunities to lose money unless something is done.

You’ve offered a round up of what needs to be done in order to turn a profit and I don’t disagree with most of your points. The one area I would question is the wooden full size mock ups during design. My single biggest criticism when trying not to buy a Princess were the number of problem spaces encountered on boats when touring the likes of Cannes. These would all have been spotted and resolved at the mock up stage. It’s what makes Princess so good in my opinion and it comes back to David King’s DNA. I know boats are always a compromise but I struggle with bad design which could have been avoided. That said in the general scheme of things I suspect we’re talking about a rounding error in your recovery plan if we keep the wooden mock ups.

I have no issue with ditching Dusseldorf and Southampton. The most intimate Dusseldorf we ever attended was in Plymouth when Dusseldorf cancelled and Princess put on a private show in Royal William yard. The April show in Swanwick costs a fraction of Southampton yet affords great access to boats. Someone even suggested San Pellegrino were showing a new superyacht tender there this year…..

As for promotion, again you’re not wrong. The lumbering corporate machine fails to compete with some bloke with a go-pro opening cupboards or the very slick newcomer Yacht Buyer who are becoming a go to resource. The “meet an owner” video the video they made of us has been seen a staggering 136k times, we both know I’m a handsome chap but even so! Meanwhile the factory videos seem to come in at under 5,000 views.

You will know KPS, I don’t. I felt they were a bit more than just a luxury brand house, more focussed on manufacturing. Ultimately it isn’t my world.