Northshore creditors meeting

[Tranona]

Not contradictory - just pointing out that there are many different ways of structuring the finances of the business but that the business needs to earn economic rent in the broadest sense to survive. Can't understand your comment about "middle men" in this context. The business needs premises to operate and it is irrelevant from a cost point of view who owns the premises if the economic cost is included in the price of the output. You can put forward arguments that the owner is not charging an economic rent, which I suspect may be the case here - that is the owner is subsidising the business, but it could equally be a third party owner prepared to accept a lower rent rather than nothing as many owners of retail property are doing just now.

The real danger in this case is that the land and buildings have a completely different value if put to a different use. This has happened with many similar waterfront properties that are no longer viable as bases for manufacturing businesses and are now used for housing, leisure or multi use distribution activities.

Not sure about customers suffering from "ring fencing" - it is usually unsecured creditors that bear the brunt of the downsides of company failures, particularly suppliers - like one of Northshores who will have to sell an extra £50k worth of goods to recover their losses - big money for a family business that employs only 4 people. The only customers that lose directly are those who have paid for goods or services that have yet to be delivered. We know in this case there are probably few, if any, because their contracts protect their payments through either a client account or through transfer of title of work in progress. This is very different from failures in the retail trade where it is common to pay unsecured deposits for some goods or buy vouchers for exchange for goods in the future. It is much more difficult to avoid some of these - for example, try and buy furniture of your choice without paying out 20% deposit with no security.

If you really want to know what "sucks value" out have a look at the price that Southerly charge for fitting extras compared with even the retail cost of the components used, ignoring any discount they might get. In conceptual terms the added value of the boatbuilding process is less than the costs of achieving it. So the products are too expensive, but it is not the rent for the premises (whoever owns them) that is the cause of the high costs. If you have ever been to the factory you will understand where the money went and perhaps why the volume sales achieved was insufficient to support the fixed cost base.

 

[maby]

Having a limited range of products that are all expensive probably didn't help. The Beneteaus, Bavarias and Hanses of this world have products that span a large part of the boat buyer spectrum - if a difficult economy hits the sales of half million pound boats, they just ramp down production and build more eighty thousand pound boats. The Southerlies and Najads of this world sell small numbers of high value boats - their quantum of turnover reduction will be much higher as sales drop off.

 

[Twister_Ken]

Always wondered...

Southerlies are in many ways attractive boats, even if you don't need the variable draft. Why didn't they build versions with a standard keel and single rudder? Could have shaved many thousands off the price and given them a much expanded target market and a lower entry price to the 'Southerly Experience'.

 

[Sailfree]

Property v Production

If you want to own the property you should be in the property market. If you want to make your moneybuilding boats or say Pharmaceuticals the it is into those industries you invest all your money and not property.

 

[sailorman]

Property v Production

If you want to own the property you should be in the property market. If you want to make your moneybuilding boats or say Pharmaceuticals the it is into those industries you invest all your money and not property.

Northshore Parent Co did both but ring fenced their assets or had you missed that subtle point

 

[rwoofer]

Northshore Parent Co did both but ring fenced their assets or had you missed that subtle point

Exactly.

Now the interesting bit comes - when the phoenix arises who will do business with the new company knowing that most of it's assets belong to another entity.

 

[Tranona]

Northshore Parent Co did both but ring fenced their assets or had you missed that subtle point

Can't see why it is "subtle" as it is a pretty common arrangement. It is naive to think that ownership of property per se makes a business more viable - often exactly the opposite. Too much of the firms resources tied up in property is not a good thing when what it needs is cash. The basic problem with Northshore (and most trading businesses that fail) is that its normal activities did not generate enough cash and profit to survive.

Many reasons for this which have been mentioned here and might include lack of orders, poor cost control and over investment in new models and processes which have not translated into increased business and lower costs.

 

[prv]

It is naive to think that ownership of property per se makes a business more viable

The point isn't that it's more viable, but that if it does go bust then there is something tangible for the creditors to share out.

Pete

 

[Sans Bateau]

Always wondered...

Southerlies are in many ways attractive boats, even if you don't need the variable draft. Why didn't they build versions with a standard keel and single rudder? Could have shaved many thousands off the price and given them a much expanded target market and a lower entry price to the 'Southerly Experience'.

They would then loose their USP.

 

[Tranona]

The point isn't that it's more viable, but that if it does go bust then there is something tangible for the creditors to share out.

Pete

Not necessarily. If the assets are in the company it would not be bankrupt - that is the assets would exceed the liabilities. Rarely is there enough in a liquidation to meet the secure creditors, never mind the unsecured.

 

[Seven Spades]

Interesting move. I'll take them off my list of yards I'll be looking at when I buy a new boat.

Holding all the assets in one company and all the debts in another is not illegal but I would imagine that the new Southerly company will find that some creditors will not supply them on principal. As a potential purchaser of a new yacht, customers seem to have been protected and in some strange way you ought to have more confidence placing a new order with them. In the past people who have ordered new boats have not been so well protected.

I have mixed feelings about this because as a yachtsman it is better that the company continues to trade rather than being broken up and asset stripped, but on the other hand if I was a creditor I would have precisely the opposite view.

 

[sailorman]

Can't see why it is "subtle" as it is a pretty common arrangement. It is naive to think that ownership of property per se makes a business more viable - often exactly the opposite. Too much of the firms resources tied up in property is not a good thing when what it needs is cash. The basic problem with Northshore (and most trading businesses that fail) is that its normal activities did not generate enough cash and profit to survive.

Many reasons for this which have been mentioned here and might include lack of orders, poor cost control and over investment in new models and processes which have not translated into increased business and lower costs.

The point is as was being pointed out to Sailfree
the parent Co were into property, IP assets & in fact boat building as well

 

[Twister_Ken]

They would then loose their USP.

No. They'd retain their USP – variable draft — but would have a parallel product line, produced from the same moulds and tooling (sweating the assets), appealing to a different and much bigger market, and a fair whack cheaper. Must say, I was somewhat astonished to hear that only three boats were in build. Anything to increase the volumes would be (have been) worth considering.

Other builders have offered fin, twin and lift keels and some of them are even still in business!

 

[rwoofer]

I seem to remember seeing a pricelist for a fixed keel version and it wasn't that much cheaper in comparison. Maybe they were building the exact same boat and then modifying to offer a fixed keel?

 

[Tranona]

Think it would be pretty difficult to use the same designs with a fixed keel. Unlike other designs the ballast plate keel arrangement is an integral part of the hull design. Other builders like Ovni manage with just lift keel designs and the market is full of conventional fixed keel boats of similar price/quality.

Think there are more than 3 boats in build, that was the number of deposits - but still reflective of the lack of orders compared with 4 or 5 years ago when the new designs were introduced and the waiting list for a slot was over a year. But then the 32 was around £120k and there is one built available now which I understand can be had for a bargain £180k!

They used to have a portfolio of brands but decided to ditch all the others and go down the current route and all the new machinery etc is dedicated to this type of boat.

Not saying developing another line might not be an option, but would be a brave person to invest in that strategy in this economic climate - never mind the difficulties others have mentioned of getting support from suppliers and finding new customers.

 

[savageseadog]

The one thing that I can see that might be doubtful legally is that the parent company / landlord is not a creditor for the £20,000 monthly rent, which was evidently paid. It used to be the case that an insolvent debtor who "preferred" one creditor over others could have committed what was known as a fraudulent preference.............

A landlord is the most preferential creditor because he can simply lock the doors and seize everything that belongs to the company (and probably everything else too) in lieu of rent. The relationship between landlord and tenant is irrelevant it can be part of the same group, directors personal property, pension fund or whatever.

 

[toad]

Don't Southerly have two factory's, one for fitting out and one for building the hull and deck. If so what's happened to the other factory.

 

[jamesjermain]

A fixed keel version of the Southerly would need a much modified mould for the hull to remove the large recess for the grounding plpate. The internal mouldings would also need to be redesigned to reinforce the hull in the absence of the grounding plate, and accessories, which provided a lot of stifness. The interior would need to be redesigned to allow for the absence of a karge keel box and associated hydraulics. This all adds up to a lot of expensive new tooling. Running parallel production lines adds complexity and cost and clouds the message for the sales and marketting team. It is possible that neither line would achieve sufficient sales to be sustainable.

 

[sailorman]

A fixed keel version of the Southerly would need a much modified mould for the hull to remove the large recess for the grounding plpate. The internal mouldings would also need to be redesigned to reinforce the hull in the absence of the grounding plate, and accessories, which provided a lot of stifness. The interior would need to be redesigned to allow for the absence of a karge keel box and associated hydraulics. This all adds up to a lot of expensive new tooling. Running parallel production lines adds complexity and cost and clouds the message for the sales and marketting team. It is possible that neither line would achieve sufficient sales to be sustainable.

As it happens James even running the one line failed

 

[Teetime]

Really sad about Northshore.

I have read all the postings about the demise of Northshore. The more I read about it the harder I find it to understand. The whole set up of the company and it's staff seemed so professional. Before ordering a new 38 at the 2010 Southampton Boat show I did a check on the company for it's credit worthiness. This came out fine with apparently nothing to be worried about at all. From start to finish the building of the boat,hand over and commissioning of the boat was all that one hoped it would be. After sales service has been prompt and rectification of the few niggles a credit due to the company and it's staff. In 2010 it seemed to be all systems go at Northshore. Delivery on my boat took 8 months and they appeared to have numerous boats under build. The pricing structure was aimed at the top end of the market and one really had to bite the bullet with regard to cost. Particularly for the extras on the boat which were an arm and a leg and a bit off putting. They would not fit any extra not supplied by themselves so you were caught in a trap. One would have thought that this attitude would have led to a certain amount of financial success. I have not met any Southerly owner who has been dissatisfied with their boat. You get what you pay for and most would consider it worthwhile to buy the best even if it seemed a bit on the dear side. I have bought two boats from the budget end of the market and was satisfied with both of them. But I got what I paid for and in both cases it was certainly not a Southerly. Having extolled the vertue of Northshore what on earth went wrong. It must have been the cost of developing the new large range of boats and presumably a lack of thir sales. But who knows. All I know is that the loss of such a fine firm of boatbuilders like Northshore is tragic. Both to the staff and buyers of the boats. It's a crying shame.