rafiki_
Well-Known Member
Unlikely, as they have a growing relationship with Honda.
Does British boat building have a future?
- Thread starter henryf
- Start date
SC35
Well-Known Member
Sticky Fingers
Well-Known Member
They bailed out merger talks a couple of data ago @rafiki_
potentillaCO32
Well-Known Member
Bouba
Well-Known Member
I was about to say that.talks between them have collapsed.
Honda realized that Nissan’s multi billion dollar debt would sink them as well
potentillaCO32
Well-Known Member
BUilding cars inthe uk has been fraught with challenges since brexit. Can't see this continuing...
henryf
Well-Known Member
I don’t know if this forum does reflect the UK boat market. It used to but I think a lot of the people on here bought their boats quite some time ago. The person who’s going to buy one of the British boats probably sold their business or has managed to find a niche somewhere that pays well. They may even be buying their first boat.
I’d consider us “old school” for the most part and somewhat refreshingly it seems I’m a relative youngster
Dogone
Well-Known Member
‘Does British boat building have a future?’ A great question, but really like asking: ‘ Does British manufacturing have a future?’ A question that troubles me, being an owner of a medium sized UK manufacturer. We have given up half of our production to Asian factories. The determining factors and obstacles are similar with boats. Once you have a product that sells you have overcome a huge hurdle. Then can it be sold profitably? The biggest obstacle that cannot be overcome is UK labour costs, which are hugely higher than in competing countries like Turkey or China. That means those countries have maybe a 20% price advantage from this element alone in making boats. This is less than with many industries because many boat parts are sourced from developed countries, so boat builders in low cost countries have equal costs for those items. Overhead cost pressures are higher in the UK too: rent, taxes, energy etc. That’s 7%-10% approximately. So up to a 30% cost disadvantage. In some commodity industries like making nails or t-shirts the cost disadvantage is insurmountable, but with boats, where there is a hugely important design, quality, branding and service element it can be overcome with a price premium. The existence of many 1st world successful boat builders proves that.
Of course all this assumes that labour efficiency is equal and an optimal mix of in-house and outsourcing is achieved. UK labour efficiency in factories needs to be world class and I suspect it is a bit behind. This is not hard to achieve, but it does take time and money to fix. If the troubled UK builders can achieve this fast enough to overcome the generosity of shareholders is very uncertain.
I suspect the UK builders can get a higher price premium also. That would be fast and easy to implement.
So the answer is yes, but only if they make the required changes quickly.
Of course all this assumes that labour efficiency is equal and an optimal mix of in-house and outsourcing is achieved. UK labour efficiency in factories needs to be world class and I suspect it is a bit behind. This is not hard to achieve, but it does take time and money to fix. If the troubled UK builders can achieve this fast enough to overcome the generosity of shareholders is very uncertain.
I suspect the UK builders can get a higher price premium also. That would be fast and easy to implement.
So the answer is yes, but only if they make the required changes quickly.
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Hooligan
Well-Known Member
With £2-5m to spend you are looking in a very crowded market with some equally strong offerings from competing brands in the same category ... Alongside Princess you have Sunseeker, Ferretti, Riva, Itama, Azimut, Cranchi, Pearl, Prestige, Absolute, Pershing, and several others. If you want San Lorenzo quality and innovative use of space for less than £10m, then look at a Bluegame. If you're looking at the lower end of the price range, then you can add larger boats from Pardo and many other makers of open boats and sports cruisers. My point is not to rundown Princess or the quality of its boats, but in this price range there are lots of comparable alternatives and what is "best" depends on what you are looking for, what's important to you ... and in some cases where you are from
One of the challenges faced by all these manufacturers is that they have relentlessly pushed their products upmarket and into a price range which attracts a more limited number and a different type of buyer. If you look at the evolution of the tax paid price of a typical 55-60ft sports cruiser/flybridge it went from perhaps £0.5-0.7m in the early noughties, to £1m in 2010, £2m in 2020, and somewhere close to £3m today. Income and wealth has not increased in the same way, so you have a growing number of producers chasing a decreasing number of buyers, competing with each other on the basis of delivering ever increasing quality, more complex interior design, brand appeal and competitive pricing. Twenty five years ago, the typical purchaser might have been a knowlegable owner-operator boating enthusiast who had achieved some success in his or her business life and wanted to spend time on the water. Today, the target customer is just as likely to be multi-millionaire looking for a lifestyle purchase, often with little or no boating experience and dependent on a captain or maintenance company to look after the boat.
I don't really buy into the argument that the UK is somehow burdened by a cost disadvantage or the aftermath of Brexit. The competitors to Princess, Sunseeker and Fairline are predominantly in Italy and France, not the Far East. These countries are not renowned for their low cost manufacturing, flexible working practices, absence of bureaucracy or inherent efficiency. I know from personal experience. that the cost of shipment from the UK to the Med on a new boat is irrelevant ... less than 0.5% of the price ... and that the administrative hurdles are easily overcome. They're all buying the same components from Volvo Penta, MAN, etc. Currency can be an issue, but it is easily managed.
If you want to understand why the Italian and French builders of directly competing products make good money and those in the UK don't, you need look internally at their approach, working practices, investment in technology and the adoption of modern production methodologies. Unfortunately, while we posses the skills to make products as good as anyone in the world, too often the UK has a history of following rather than leading in these
Unfortunately as you have said, the only thing that doesn’t cost money to do is cutting out the > than 80 ft line (saves money). The cost of the changes needed to get costs under control ie change the manufacturing process are likely to be huge and in so doing may well piss off the “Princess” buyer ie the diehard P fans because you will simply lose some of the things that for example Henry likes, which creates a double blow until you rebuild sales. Personally I would never invest in certain industries - airplane manufacturing and boat manufacturing being top of that list. Huge consumers of cash and unless you mass manufacture or focus on billionaires the returns on capital invested are probably simply not worth it.
Fire99
Well-Known Member
Answering the OP's question.... I don't know. Not because of the boat manufacturers themselves, rather than the turbulent situation Britain currently sits in on every level. I would be having the same concerns with any manufacturing outfit..
On brand specific issues, I would be tempted to say they could become far more efficient. And despite me being very much a patriot at heart, from a purely business perspective, I wouldn't rule out manufacturing abroad.
I think the British big three's biggest issue is that in their market sector, other brands have really upped their game and maybe don't have the same slightly archaic history that they're dragging along behind them.
I'm not sure Sunseeker, Princess or Fairline hold the same brand appeal that they did in the past and I don't think somewhat radical x80 / x95 yachts are necessarily the answer. More sales, more production, and lower manufacturing costs would be my target area..
On brand specific issues, I would be tempted to say they could become far more efficient. And despite me being very much a patriot at heart, from a purely business perspective, I wouldn't rule out manufacturing abroad.
I think the British big three's biggest issue is that in their market sector, other brands have really upped their game and maybe don't have the same slightly archaic history that they're dragging along behind them.
I'm not sure Sunseeker, Princess or Fairline hold the same brand appeal that they did in the past and I don't think somewhat radical x80 / x95 yachts are necessarily the answer. More sales, more production, and lower manufacturing costs would be my target area..
DAW
Well-Known Member
Sanlorenzo group announced its financial results for 2024 at the end of last week, commenting that despite turbulent market conditions sales increased to €930m (+10% on PY) with healthy growth across all sectors and brands. More importantly, EBITDA increased by 12% to €176m, an operating margin of 19%. From this, they invested almost €50m in capital expenditure to expand capacity and develop new products. For those that don't know, EBITDA is generally regarded as the best measure of profit and gives a good approximation of free cash flow before investment and debt service.
In contrast to this, the most recent results I can find for Sunseeker and Princess are for 2023. Neither company has announced anything for 2024. In a press statement last year, Sunseeker said revenues for 2023 were £326m (+6% on PY) and EBITDA increased to £20m (margin of 6%). For the same period, Princess reported sales of £310m (+7%) and an adjusted (i.e. management's best case) EBITDA loss of £25m ... £45m worse than Sunseeker on similar sales. Both companies have guided towards similar levels of sales growth for 2024, but made no comment on profitability.
At first glance, this would seem to provide yet more evidence that the problem for the UK builders is not demand, the attractiveness of their products in the market, the ability to sell them, or the scale of their operations. Both are achieving reasonable sales growth with a competitively priced product offering and in terms of size are on a par with each of the individual brands/divisions of competitors like Ferretti, Sanlorenzo, etc.. However, there just seems to be something fundamentally wrong with the approach to manufacturing and the cost structure.
In contrast to this, the most recent results I can find for Sunseeker and Princess are for 2023. Neither company has announced anything for 2024. In a press statement last year, Sunseeker said revenues for 2023 were £326m (+6% on PY) and EBITDA increased to £20m (margin of 6%). For the same period, Princess reported sales of £310m (+7%) and an adjusted (i.e. management's best case) EBITDA loss of £25m ... £45m worse than Sunseeker on similar sales. Both companies have guided towards similar levels of sales growth for 2024, but made no comment on profitability.
At first glance, this would seem to provide yet more evidence that the problem for the UK builders is not demand, the attractiveness of their products in the market, the ability to sell them, or the scale of their operations. Both are achieving reasonable sales growth with a competitively priced product offering and in terms of size are on a par with each of the individual brands/divisions of competitors like Ferretti, Sanlorenzo, etc.. However, there just seems to be something fundamentally wrong with the approach to manufacturing and the cost structure.
henryf
Well-Known Member
I think @jfm has summed up the situation within this thread quite clearly and in an easy to digest format. Essentially don't try and do everything yourself, stick at what you're good at - ie. the design, all be it with a scaled down and more affordable budget. Allow suppliers to be experts in their field and deliver quality components on time for an affordable price. Vastly scale down your fixed costs and concentrate on key processes / assembly focusing on quality and component policing which is much easier when any issues don't cost you money. Finally stick to your core market. Don't try and sell stuff where others have a significant lead.
To answer my own question I'm going to say yes it does have a future, but it needs some fundamental changes. Can those changes take place without a significant event that re-sets things? I don't know. I certainly don't share the view that GB PLC is fundamentally broken. It occupies a good world wide marketing space, has the necessary technical infrastructure and is no more expensive than somewhere like Italy or France to operate from.
To answer my own question I'm going to say yes it does have a future, but it needs some fundamental changes. Can those changes take place without a significant event that re-sets things? I don't know. I certainly don't share the view that GB PLC is fundamentally broken. It occupies a good world wide marketing space, has the necessary technical infrastructure and is no more expensive than somewhere like Italy or France to operate from.
jfm
Well-Known Member
100% agree your whole post DAW, especially the bit above. Princess have got it all wrong with in-house parts manufacture, plywood models, ill-thought out model overlaps, etc etc.
Notice in the Sanlorenzo info that you refer to, they have ballpark 900 employees and 1500 dedicated contractors. Incredible efficiency, and therefore a solid cash generative business. Princess -3000 employees and undisclosed contractor supply chain- haven't reliably generated cash in over a decade.
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henryf
Well-Known Member
The interesting thing is that if you outsource I can see a raft of new businesses being created, probably by current employees, who end up being more efficient and potentially even export their skills beyond a single brand. A bit like the F1 motorsport model, we could even attract other brands into the UK. Initially people would see the change as negative but long term it might be a win win all round.
rafiki_
Well-Known Member
Henry, this is exact what I proposed to Sunseeker 10 years ago. Unfortunately they were unwilling to change at that point. The burning platform had not arisen. Maybe it will soon?
PowerYachtBlog
Well-Known Member
Sanlorenzo have got it easy were they are, something which has been growing in Viareggio and surround areas (today it is from Pisa to Spezia) since the eighties.
The sub-contractors serving yachting and supply chain in the area is mind blowing.
But they also do this, because in Italy doing redundancies to a down turn or slowing market is very difficult, so you end up having to close shop even if the market slows down.
westernman
Well-Known Member
ari
Well-Known Member
I smiled at 'EBITDA is generally regarded as the best measure of profit and gives a good approximation of free cash flow before investment and debt service.' also.
ari
Well-Known Member
Sounds like you need to get your bid in for Fairline, you've got it all worked out!
DAW
Well-Known Member
Not exactly an apples with apples comparison
... Berkshire Hathaway is a value investor targeting large, long-established companies with good management, robust manufacturing capabilities, stable earnings and strong brands, but seriously undervalued by the stock markets or their current owners, and they typically invest with a time horizon of decades. They're not trying to turn around small, cash-strapped, broken businesses with weak management working with limited time and resources,Of course, if you would prefer to make your decisions based on a true "net profit" number stated after dubious capitalisation and amortisation of R&D costs, depreciation of redundant assets over unrealistically long useful lives, long-term contract accounting which shifts revenues and profits somewhat arbitrarily from one period to another, amortisation of intangibles which are the legacy of previous acquisitions and have no current or future cash impact, and finance costs which are out of your control in the short term ... all present to varying degrees in the accounting of both Sunseeker and Princess ... then good luck with that
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