Fairline - any news?

pan said:
Unfortunately the the accounts I was looking at did not overlap into the following year showing the capitalisation into shares of that corporate debt. I do realise it is dangerous to read too much into historical financials, however it did (appear) that there was a very large debt over-hang in the company in 2013. Seems the previous owners have already taken the haircut!
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Not sure which accounts you looked at - the published 2013 show the Q1 2014 transactions that eliminated the £60m debt. No haircut was taken; it was entirely a paper transaction with no material economic effect for the then owners.

If you call that 31/12/13 position a large debt overhang then browse the Princess financials, but buckle up first!
 
jfm said:
It's hard to see the point you're making but to try to respond:
1. Can we keep the goalposts still on MDs? You originally referred to the MD in this case, not MDs in general. but in the quote above you switch to MDs in general. I was very clear that I was referring to the MDs of the big 3/4 uk boatbuilders when I said they are/were heavily equity incentivised; not MDs in general. I'm happy to discuss either the 3-4 UK boatbuilders, or MDs in general, but not randomly shift from one to the other
2. No-one is saying making losses is good business, but I'm not sure what your point is.
3. You seem to be saying the new owner WB shouldn't have bought Fairline if it didn't see a way of making money and saving the creditors/employees etc. If you posted a big sign at Fairline's HQ saying "Only people who DO see a way of making profit and protecting all the suppliers and workers should apply to buy this company" then feel free but the queue of bidders would be short. And hang onto the sign, because you can use it again. It is conceivable that as Deleted User says WB contemplate a prepacked administration, and an administration (though not necess a prepacked one) asap might be the best answer for everyone other than the landlord of the factory space that I guess they no longer need. The harsh fact is that when a business fails it isn't just the shareholders who suffer.
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I think I may have missed interpreted your post I thought you were talking about the whole post having now read it again, I see that you were on about the MDS and I take your point to that not all MDs are as I described a bad generalisation on my behalf. However unfortunately as is often the case the few tarnish the many
 
jfm said:
Pete:
1. You're not bonkers!
2. People talk of "asset stripping" and you're right to dismiss it. Look, there aren't many assets to strip in the financial engineering sense so that cannot plausibly have been WB's plan. What there is is a bunch of liabilities to shed. That's what administration does. I don't have data beyond published accounts but it is conceivable that the best thing for the brand/jobs/suppliers/dealers, etc is to go thru administration (not necess pp), shed the liabilities (eg rent ) and come out the other side leaner, operating profitable again, etc. I don't know at all if that is the right medicine, its just an apparent possibility that the doctors will wish to consider, unlike asset stripping which is Daily Mail nonsense.
3. FLIBS - if I told you I'd have to shoot you.
4. Get back on feet - looks to me like it is possible, after admin, but will need working capital (cash) to make some stock boats and repair the brand and customer confidence. Perhaps a few £m, which prima facie looks a lot for current owners but other owners can make that investment, hence my comment that a non pp admin might be a good result.

Going back to Princess, apropos other ramblings, the total failure of F would of course be a good thing. Fairline's normal run rate pre troubles was say 50-100 or whatever boats pa, and those customers still exist, so many will migrate to P. And with only the big 2 there will be a slight oligopoly/supply curve shift in margins/pricing
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Thanks for the reassurance!

With regard to your last para, I thought that Sealine's failure might have worked in Fairline's favour but I've seen no evidence of Sealine buyers moving to Fairline or Princess for that matter. Where did Sealine buyers go - JeanBeneBav? Or did the market just contract and more buyers stayed 'on the beach'.

Perhaps there's more similarity between Fairline => Princess than there was Sealine => Fairline / Princess so you might be right.
 
jfm said:
Going back to Princess, apropos other ramblings, the total failure of F would of course be a good thing. Fairline's normal run rate pre troubles was say 50-100 or whatever boats pa, and those customers still exist, so many will migrate to P. And with only the big 2 there will be a slight oligopoly/supply curve shift in margins/pricing
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Naive question maybe, but based on what you're saying, why didn't P shareholders buy FL and call it a day?
Hard to think of a better moment in terms of price to be paid, I guess...
 
petem said:
more similarity between Fairline => Princess
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Of course it all depends. If F customers buy Ps and P make incremental boats at a loss then P's losses (see below) will get bigger! But if P have spare production capacity so the margin on boats sold to F customers drops to bottom line then that will help P - that seems more likely outcome. Still, the sort of incremental sales we are talking about here isn't itself going to change P from loss to profit. That will take something much bigger

Anyway, P's 2014 accounts are online-reachable, officially filed 26-10-2015 = 3+ weeks late. Remember 2013 when they reported 17m ish profit but burnt cash, and the profit was made possible by an accounting policy not adopted by others (eg F) where they took profit on boats still in build? Well of course you cannot do that for ever - that music stops quickly

In 2014 that music stopped. There is no growth in that element of profit. The 2014 profit is therefore more of a steady state trading profit, and at an operating level (ie before the pension cost of £10m which has nothing to do with current trading performance) the operating profit was £1.3m, compared with £17-18m last year. Sales were flat at 240m, so margin = <1%, gweep. Cash fell by 27m but nearly 10 was intra group balance shifts so the real cash burnt at the trading level was more like 17m, but sheesh that's a heck of a burn and continues their poor performance in turning profit into cash. The cash burn seems to have gone on (a) increased raw materials on hand (b) slowdown in customer stage payment rate and (c) other smaller things. Anyway, however you cut it, you have a great product line up and a heck of new model development and Fendi napkins and all that, yet you have almost no operating profit and you have cash burn like last year of more than a million a month. What hope is there for those with weaker model line ups?

Something has to change, but what?

As for the talk of making too many models of boats, they booked £10m expense on new model development and if that categorisation is correct then if they had a tighter model line it would be say 5m. They still wouldn't generate cash. Hence there is something more fiundamental: the margin on the boats isn't supporting the overheads. It's possible they have too much factory capacity (I cant tell from accounts) in which case gross margin on further boat sales would go to bottom line, but they'd need to find those sales in today's world. Otherwise they have to sell boats for more £££ (not going to happen) or strip out significant build cost (qv)

The accounts mention a refi in summer 2015 but without enough detail to see what they did. Given there's no external debt I expect this was an internal capital restructure, which wouldn't address the trading profit problem. Will have to see next year accounts

It's very tough out there for this industry
 
MapisM said:
Naive question maybe, but based on what you're saying, why didn't P shareholders buy FL and call it a day?
Hard to think of a better moment in terms of price to be paid, I guess...
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I see your point but there is a whole load of image/reputation to manage for both Better Cap and Princess, and such a shut-down plan would I reckon have backfired, including in the eyes of ex-F customers they want to woo. All that is just my guess of course

You could ask why not buy F and not call it a day but get some more volume. The price on day one might be £1, but I guess problem is the cash burn needed would be a risky say £10m before the thing slowly starts to pay that 10m back, and I cannot imagine L Capital's managers would fancy pressing "send" on the email drawing down that much from their fund investors to spend on another boat building firm when the one they're already invested in is imho looking financially like a train crash (despite the beauty of the product, its market positioning, the fendi gear, etc). Nope, they got problems closer to home and they need a plan, plus a CEO not distracted by F to execute it
 
jfm said:
You could ask why not buy F and not call it a day but get some more volume.
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Actually that's what I meant, though I can see why you understood from my wording that I was suggesting to kill FL completely.
My thought was instead that they could have kept the FL brand, but just the brand (and possibly the best moulds, or whatever valuable), optimizing/merging design, production lines, dealers, etc. - hence keeping the volume, and absorbing some of their own overheads in the process.
Easier said than done maybe, and I see your point re. asking the investors to fork out a bit more money upfront, but according to what I'm reading, also at P they must invent some hat trick.
Btw, coming to think of it, P could still do that (even more effectively) at the end of the administration, after the in-house cleaning...
 
Deleted User said:
Er thats not how I read it, Pete. What they are going to do is pull the plug on the existing company and set up a new phoenix company to buy the assets from the receiver and start trading again under the Fairline brand name, whats called a prepack administration. The problem with that of course is that most of their suppliers will get burnt and will refuse to supply the new phoenix company and few if any of the existing staff will be taken on. My guess is that the only purpose of the phoenix company is to hold the few remaining assets of the company like hull moulds and of course the copyright to the brand name and sell it on
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<cough>Northshore<cough>
 
Just caught an item on the local news over breakfast, which was talking about redundancies. Never good but always seems worse when Crimbo is on the horizon :(
 
If I was an institutional investor, let's call me WhiteStone, owning a site zoned for employment use and let for another few years to a failing industrial concern, but in a part of the country crying out for more housing than there is capability to build, I think I would be ordering trebles all round.
 
WM doing the dirty work for a third party who will pay WM handsomely when the buy the FL brand from WM and the third party is hailed the saviour as they resurrect FL leaner and meaner?
 
benjenbav said:
If I was an institutional investor, let's call me WhiteStone, owning a site zoned for employment use and let for another few years to a failing industrial concern, but in a part of the country crying out for more housing than there is capability to build, I think I would be ordering trebles all round.
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Haha! The sale leaseback was indeed with ColouredStone. You worked on it? Interesting observation anyway
 
petem said:
...Perhaps they're even more bonkers than me! Perhaps they genuinely reckon they can get it back on their feet (did they not do that to a much smaller scale with Fletcher)?...
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Pete, WB have only just acquired Fletcher too - although the process has been ongoing since the Spring. I can't see a link, but can't help wondering if there is one somewhere? Fletcher has been owned by SBS Trailers since around 2003. From talking to Fletcher at SBS, there are lots of plans and a proposed cash injection to expand the range. They have a lease on existing facilities owned by SBS and have retained the workforce - although I'm not sure about the overlap with SBS as the staffing an site appeared 'shared' when I last visited. They had talked in recent years about resuming production of larger sports boats in the 22/24' and 28' space, so perhaps there is some synergy?

The cash remains an interesting one however unless WB have a funding path in place and are just keeping powder dry until after a restructuring at Fairline. Although funding new model line up at Fletcher wouldn't be a fraction of that required for Fairline, I can't imagine it would be cheap.

I would add however that like your own comments, all the vibes from the team at Fletcher were of excitement and positivity... :)
 
Does no one else see the link between the successful, luxury, british furniture manufacturer 'buying' the struggling luxury british boat manufacturer with lots of shiny CNC machines and lacquering machines.......?perhaps that was the catalyst for losing interest in the Fort Lauderdale show at the last minute..........

Maybe I'm reading too much into it but its also strange that WB haven't bothered to add Fairline to their list of current brands and companies on their website. If they are THAT keen to shout about what a great addition to their portfolio it is then they would surely shout about it, wouldn't they?

Just saying.
 
diligaf said:
Does no one else see the link between the successful, luxury, british furniture manufacturer 'buying' the struggling luxury british boat manufacturer with lots of shiny CNC machines and lacquering machines.......?perhaps that was the catalyst for losing interest in the Fort Lauderdale show at the last minute..........

Maybe I'm reading too much into it but its also strange that WB haven't bothered to add Fairline to their list of current brands and companies on their website. If they are THAT keen to shout about what a great addition to their portfolio it is then they would surely shout about it, wouldn't they?

Just saying.
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And Fletcher? I wouldn't have seen that as a part of their profile either - much more traditional/lower tech too... ;-)

Agree that they're not shouting about Fairline yet, but if they intend to turn around then they'd probably want to do that first wouldn't they?
 
I don't know much about CVA etc. Never had to look into it. But imho, you need cash and lots of it to make this work at F. I just don't know if there is anyone out there willing to chuck a good few million (circa 12) into a business that to be honest, is losing money. Of course there is upside to a engineered transaction, but it can't last long... IMHO!
 
Cheery said:
We are in the business of building the best hand-made, custom built British boats in the world and sincerely believe in our plans to ensure the long-term success of Fairline.

Does that mean they could be built in the Far East or is it just poor grammar?
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Fleming, Nordhaven, Outreefer all built in Taiwan the Far East!
 
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