rafiki_
Well-Known Member
Tesla makes booger all profit, yet is the most valuable car company. Investors value Elon over anything else.
New (majority) owners for Princess Yachts!
- Thread starter dustywings
- Start date
DAW
Well-Known Member
Obtaining financial information for boat builders outside the UK is challenging, but earlier this month Sanlorenzo published a strong set of results for 2022 and I thought it would be interesting to do a quick comparison of the headline numbers against those of Princess.
The latest published information for Princess relates to 2021, the year after Covid, so for comparability I've included the Sanlorenzo numbers for 2021.
Sanlorenzo:
Sales - EUR 741m (2021: EUR 586m)
EBITDA - EUR 130m (2021: EUR 96m)
EBITDA margin - 17.6% (2021: 16.3%)
Capital investment - EUR 59m (2021: EUR 49m)
Net cash - EUR 100m (2021: EUR 39m)
Princess:
Sales - £312m
EBITDA - £12m
EBITDA margin - 3.7%
Capital investment - £14m (including £12m capitalised R&D and only £2m on plant and equipment)
Net debt - £244m (including cash of only £1m)
The most striking differences are the EBITDA margin (16% v 4%), capital investment (EUR 49m v £2m) and net liquidity positions.
In terms of the Princess results ...
The cash on hand was only £1m, which means the group had £245m of debt. Of this, £53m was due to banks and the majority of the remaining £192m was owed to the shareholders as either unsecured loans or redeemable preference shares. The annual finance costs (including dividends on the preference shares) were quite high at £16m. From the directors report and notes, it looks as though covenants on bank facilities were breached and reset for 2022 and beyond based on a recovery plan and following an injection of funds by the shareholders.
The investment in Princess Yachts International (the manufacturing business) is recorded in the balance sheet of the holding company as £187m, so depending on how they've financed historical operating losses this might correspond to the price originally paid for the acquisition.
"Capital investment" of £14m includes £12m of capitalised R&D costs (basically money spent on building/developing new models) and so the real investment in new plant and equipment and facilities was only £2m.
The above is just a quick and dirty analysis done in less than 20 minutes, so I apologise in advance for any errors, omissions or misinterpretations.
I'm not knocking Princess, because as I've said elsewhere in the forum the results of the UK builders are all similar, and my guess is that most of the Ferretti group companies (and those of other builders) are comparable. However, it's interesting to compare and contrast the relative performance and think about what this means in terms of financial stability, ability to invest in new models and long-term value creation for shareholders.
The latest published information for Princess relates to 2021, the year after Covid, so for comparability I've included the Sanlorenzo numbers for 2021.
Sanlorenzo:
Sales - EUR 741m (2021: EUR 586m)
EBITDA - EUR 130m (2021: EUR 96m)
EBITDA margin - 17.6% (2021: 16.3%)
Capital investment - EUR 59m (2021: EUR 49m)
Net cash - EUR 100m (2021: EUR 39m)
Princess:
Sales - £312m
EBITDA - £12m
EBITDA margin - 3.7%
Capital investment - £14m (including £12m capitalised R&D and only £2m on plant and equipment)
Net debt - £244m (including cash of only £1m)
The most striking differences are the EBITDA margin (16% v 4%), capital investment (EUR 49m v £2m) and net liquidity positions.
In terms of the Princess results ...
The cash on hand was only £1m, which means the group had £245m of debt. Of this, £53m was due to banks and the majority of the remaining £192m was owed to the shareholders as either unsecured loans or redeemable preference shares. The annual finance costs (including dividends on the preference shares) were quite high at £16m. From the directors report and notes, it looks as though covenants on bank facilities were breached and reset for 2022 and beyond based on a recovery plan and following an injection of funds by the shareholders.
The investment in Princess Yachts International (the manufacturing business) is recorded in the balance sheet of the holding company as £187m, so depending on how they've financed historical operating losses this might correspond to the price originally paid for the acquisition.
"Capital investment" of £14m includes £12m of capitalised R&D costs (basically money spent on building/developing new models) and so the real investment in new plant and equipment and facilities was only £2m.
The above is just a quick and dirty analysis done in less than 20 minutes, so I apologise in advance for any errors, omissions or misinterpretations.
I'm not knocking Princess, because as I've said elsewhere in the forum the results of the UK builders are all similar, and my guess is that most of the Ferretti group companies (and those of other builders) are comparable. However, it's interesting to compare and contrast the relative performance and think about what this means in terms of financial stability, ability to invest in new models and long-term value creation for shareholders.
DavidJ
Well-Known Member
I’m sure everyone knew but me 
What is EBITDA Margin? EBITDA margin is a profitability ratio that measures how much in earnings a company is generating before interest, taxes, depreciation, and amortization, as a percentage of revenue.
I guess it’s the same as operating profit as a % of revenue???
What is EBITDA Margin? EBITDA margin is a profitability ratio that measures how much in earnings a company is generating before interest, taxes, depreciation, and amortization, as a percentage of revenue.
I guess it’s the same as operating profit as a % of revenue???
Portofino
Well-Known Member
The chronic lack of investment in new modals / materials/ technology , compared to competitors will eventually strangle them .
They are burden with too much debt .Servicing that , taking care of it is sucking the Co to death …….slowly.
They are burden with too much debt .Servicing that , taking care of it is sucking the Co to death …….slowly.
Portofino
Well-Known Member
It’s a barometer of financial health .But as DAW infers ( if I understood what he wrote ) you need to compare that figure with others in the industry particularly the other U.K. builders FWIW .It’s a global market so I would say all competitors Italian and others to get a handle where that 3.7 % sits .I’m sure everyone knew but me
What is EBITDA Margin? EBITDA margin is a profitability ratio that measures how much in earnings a company is generating before interest, taxes, depreciation, and amortization, as a percentage of revenue.
On saying that I have seen other business ( health care related *) running on low single digit EBITDA and servicing big debt .
The difference is with healthcare the market never dries up and is pretty immune to wider economic headwinds like rate hikes and recession. You always find patients with diseases .Unlike Princess looking to sell 250 - 300 boats .Boat building at Princess size sub 90 ft relies on such a small number of punters a significant number of which very exposed to financial headwinds .
Loose a few buyers and ………you know the rest .
DAW
Well-Known Member
I’m sure everyone knew but me
What is EBITDA Margin? EBITDA margin is a profitability ratio that measures how much in earnings a company is generating before interest, taxes, depreciation, and amortization, as a percentage of revenue.
I guess it’s the same as operating profit as a % of revenue???
EBITDA is not the same as operating profit. Its a measure of profit made before finance costs ("Interest"), taxes and most importantly the non-cash charges ('depreciation and amortisation") that appear in a company's profit and loss account and are included in its accounting profit.
EBITDA is usually the best number to look at if you're trying to understand the real cash profit generated by a company from its operating activities and from the things which are under the control of management. Even then it's open to manipulation (e.g. by the capitalisation of R&D costs).
In the case of Princess, the group generated EBIDTA from operating activities of £12m but spent £14m on investments. At this level of profitability, taxes are unlikely to be a major consideration. This suggests they generated little or no cash from their manufacturing/operating activities and that after deducting finance expenses they consumed cash on an underlying basis (assuming all the interest is paid and not just rolled-up into an increasing debt to shareholders).
The cash flow statement itself suggests a more rosy situation with cash generated from operations of £29m. However, this includes advances received for future orders. In the directors' report it states ...
"During 2021, the Group had a net cash increase of £28.7m driven primarily by customer advances on yachts ordered or in production offset by operating losses."
So the cash flow and liquidity position benefited from payments received for yachts they have not yet delivered, and in some cases may not have started to manufacture. According to the directors' report, at 31 December 2021 the Group had about £20m of unused bank facilities. However, the run-rate for operating expenses is about £20-25m per month, so there must be constant pressure to generate sales and cash flow.
A somewhat precarious position if you are a customer that has placed an order, paid a significant deposit and are waiting for your yacht.
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DAW
Well-Known Member
Most sectors have a typical EBITDA margin that the successful players aspire to achieve and maintain, and it varies significantly according to the nature of the activity,
As Porto says, business that have a long product life cycle (e.g. health care) or are not R&D or capital equipment intensive (e.g. food retail) can typically exist quite happily with EBITDA margins in the low single figures. However, capital intensive businesses (where equipment wears out and needs to be replaced or upgraded regularly), businesses with short product life cycles, more volatile markets and/or high wastage (e.g. fashion, clothing retail), or those with high R&D or marketing requirements (e.g. luxury goods) need to be generating much higher levels of EBITDA to finance their ongoing activities and future development.
I spent most of my working life in capital intensive businesses operating across a range of sectors including luxury goods, some publicly owned and most recently under private equity ownership. For us, around 20% EBITDA margin was the level required to generate enough cash to sustain the business, finance replacement/development capital investment, service debt and deliver an acceptable annual return on equity to shareholders. In the good years we would hope to achieve much more than this.
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DavidJ
Well-Known Member
How do these guys sleep at night with 20 times more debt than capital investment
jfm
Well-Known Member
Thanks for summarising the data DAW. All your comments agreed, and a few observations:
1. Just a caution that what you see in UK companies house won't reflect the numbers at the level of Princess's Luxembourg parent. That used to account for a lot of difference, but less so since a few years ago when they were forced to show the senior debt in the UK numbers
2. Important for folks to realise that the shareholder debt is really just equity, so the Princess business has been supporting about £50m of bank debt. That's still quite a lot against its poor cashflow, but it's important not to put the £`192m in the same bucket as bank debt. But anyway, now all that slate is wiped clean: I would guess that KPS paid a price for their share in Princess that reflected an enterprise value (of 100% of the business) of perhaps £40m-50m - that's a total guess and I don't know the actual number, but I do know what the selling banks were putting forward as Princess's profitability. Again as a guess, there might be new bank debt in the order of £20m.
3. The comparison you make against Sanlorenzo is interesting but there's perhaps an even more startling comparison: you can buy the whole of Princess, debt free, for £50m. To buy the whole of Sanlorenzo you need almost €2bn. Yes, the difference is that much. To buy Ferretti you'd need a bit over €1bn; Jeanneau a bit less than Sanlorenzo. Worlds apart in terms of how well these businesses have been run.
4. I think Princess now have a nice future in front of them. Debt slate is wiped clean. Just needs new management to fix the obvious errors of the past (oftentimes pointed out on here btw) and they should be fine. You've got to expect the new smart owners will deal with that. The product is decent and has a market, and the competitor comparison proves that the product can be made and sold profitably by others, if not (yet) by Princess.
DAW
Well-Known Member
Just for some balance, here is the same information for Sunseeker International group (the manufacturing company) for 2021 ...
Sales - £214m
EBITDA - £2m
EBITDA margin - 0.9%
Capital investment - £7m (£6m on moulds and £1m on plant and equipment)
Net debt - £176m (parent company loan of £189m, plus leasing of £24m, less cash of £36m)
During the same period Sunseeker London (the main distributor, but under separate ownership) reported sales of £173m, with cost of sales of £151m and EBITDA of about £6m.
Assuming most of the cost of sales in Sunseeker London relates to purchase of boats from Sunseeker International, you could say that in aggregate they generated external sales with a market value somewhere in the region of £240m and together earned EBITDA of about £8m. This would give an EBITDA margin of about 3.5%, similar to the 3.7% of Princess.
Both Princess and Sunseeker recently announced significant improvements for 2022, but we are unlikely to see financial statements for this period until late 2023 or early 2024.
Sales - £214m
EBITDA - £2m
EBITDA margin - 0.9%
Capital investment - £7m (£6m on moulds and £1m on plant and equipment)
Net debt - £176m (parent company loan of £189m, plus leasing of £24m, less cash of £36m)
During the same period Sunseeker London (the main distributor, but under separate ownership) reported sales of £173m, with cost of sales of £151m and EBITDA of about £6m.
Assuming most of the cost of sales in Sunseeker London relates to purchase of boats from Sunseeker International, you could say that in aggregate they generated external sales with a market value somewhere in the region of £240m and together earned EBITDA of about £8m. This would give an EBITDA margin of about 3.5%, similar to the 3.7% of Princess.
Both Princess and Sunseeker recently announced significant improvements for 2022, but we are unlikely to see financial statements for this period until late 2023 or early 2024.
jfm
Well-Known Member
No, you can be pretty sure it rolled up. It served as a hurdle for the management equity, which looks like it was well out of the money at all times.
jfm
Well-Known Member
No big deal
but not sure I totally get why you're aggregating the dealer and manufacturer earnings for Sunseeker - surely that blurs things rather than sheds light. And your numbers for Princess/Sanlorenzo/whoever are manufacturer only, with no dealer inclusion.dunedin
Well-Known Member
Are you sure about your facts ?
From what I can see Tesla's strategy of just 2 models and 12 variants in total (vs over 1,000 variants for VAG for example) they have one of the highest profitabilities amongst car manufacturers -
- Gross margin - 28.5%
- EBITDA of 2022 - $19bn
Tesla Investor Relations
benjenbav
Well-Known Member
That all suggests that the previous owners must’ve lost boatloads of money over their 15 year tenure.
DAW
Well-Known Member
No big deal
Only because its relatively straightforward with Sunseeker because such a high proportion of sales are handled by a single distributor which is also UK-based and so information is publicly available. It's more challenging/not possible to do this with Princess and Sanlorenzo because there are more distributors and intermediaries involved, and many are based outside the UK. However, I fully agree it's perhaps not a direct/fair comparison.
jfm
Well-Known Member
Yes and no. Absolutely they did, on Princess alone. But Princess was but one investment within a single fund that held perhaps 20 investments in total, and overall the fund did ok afaik. It's the nature of this form of investment that some investments within a single fund are winners, some losers, and at the fund management and investor level you care only about the net overall position of the whole fund.
In contrast, at the level of the managers in the 20 or so individual investee companies within the fund, Princess in this case, you care of course about the success of the single company, and in this buyout (the 2007 L Capital/L Catterton buyout, I mean) the management team working at Princess will not have made meaningful money on their equity in Princess.
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jfm
Well-Known Member
Yup, no big deal. IIRC, and BTW, sunseeker London "group" avoid consolidation by using a ton of separate companies owned by the same individuals, with no parent entity so no consolidation. Nothing wrong with that, but it means you need to be careful with numbers. I think that the total sunseeker sales made through the "notionally consolidated" sunseeker London group is even higher than the numbers you have quoted. Again, nothing at all wrong with this - "just saying".
kashurst
Well-Known Member
Why are/have Princess performed so poorly compared to say San Lorenzo?
The difference is startling.
The difference is startling.
rafiki_
Well-Known Member
Yep very sure. They have made the odd quarterly operating profit, but are yet to make a full year profit.
henryf
Well-Known Member
I always find this stuff slightly alien when reading it through. I can understand the finances surrounding the build of a single boat but I struggle when it comes to corporate structure and so on. There always seem to be a load of armchair experts who use numbers to prove their particular point until someone else comes along and proves them wrong.
The payment structure of 20% deposit on order, a further 30% on completion of the hull and then the balance once Princess the factory hands over to the dealer means the factory have to fund a good chunk of the build at various stages.
@jfm always seems to offer a balanced perspective, particularly for someone who spends his life designing boats….
I never felt nervous or that money was an issue during our build, maybe I had the wool pulled but I don’t think so.
Ultimately a healthy order book approaching £1 billion must be a good thing as must continued investment in new design. Given the time lag before any published numbers coming out these figures surely reflect Covid problems still rather than business as usual. Given fair winds in the supply chain I hope Princess can make a few quid to keep everyone happy.
The payment structure of 20% deposit on order, a further 30% on completion of the hull and then the balance once Princess the factory hands over to the dealer means the factory have to fund a good chunk of the build at various stages.
@jfm always seems to offer a balanced perspective, particularly for someone who spends his life designing boats….
I never felt nervous or that money was an issue during our build, maybe I had the wool pulled but I don’t think so.Ultimately a healthy order book approaching £1 billion must be a good thing as must continued investment in new design. Given the time lag before any published numbers coming out these figures surely reflect Covid problems still rather than business as usual. Given fair winds in the supply chain I hope Princess can make a few quid to keep everyone happy.