Oyster Yachts gone into administration

ip485 said:
That is me out of business as well then. :) Times have been very good in the past.



I guess we have taken some time exploring why this may or may not be the case regardless of underlying profitability. You may well disagree.



I have to say that is a very cynical opinion, but may well be true in some sectors. It is not my experience at all, nor has it every been the approach I would be prepared to adopt. I think there are plenty of stock market punters that follow that particular road, but then they are a breed to themselves, and fortunately not influencial in the take over market at least in my experience.

Anyway enough said. It has been a very interesting debate. I hope Oyster prosper and I dont wish to get overly involved in technical matters as I am sure it detracts from the general discussion.
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Suspect you are little bit out of date on valuation methods. While a profit related valuation is common in small businesses in stable situations - that is where profits are fairly predictable in the future AND are a reasonable proxy for cash flows it is inappropriate in this situation, and indeed in any M&A decision of any substance. This particular company does not have a sustainable profit record so any calculation based on profit is meaningless. The only thing that matters is what new owners can see as future cash flows they could generate from owning both the tangible and intangible assets on offer.

I was teaching the method described by dom 30 years ago, as were all my colleagues in every university and business school in the country, so it would not be a surprise if all the graduates that now populate corporate finance departments, venture capitalists, merchant banks etc were familiar with and used the technique in advising their bosses and clients.
 
I don't know much about finance. A ship yard or boat manufacturer going bust is hardly a surprise. nasty shock for 160 people. How do they fit in the pecking order for payout. Back pay and severance.
I wonder if it would be possible for the 160 to take the operation over and keep going. They appear to have a year or twos worth of work.

Even so a boat yard with a full order book going bust does seam rather odd. Unless they were going to be building the boats at a loss.
The decline of the pound? Cost of materials? Brexit?

The story of legal liabilities due to the loss of a boat they built. Speculation.

Not sure how the law works. But if a company facing law suits and liabilities goes bust. There is not much chance of getting a big payout from the company.

Would it be possible for the name, plans, moulds, to be "sold' as part of the liquidation and a "New" company emerge from the ashes without those liabilities.

Do liquidators try and keep a company going or is it just automatically would up and assets sold off?
 
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Tranona -
The only thing that matters is what new owners can see as future cash flows they could generate from owning both the tangible and intangible assets on offer.
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Broady I dont disagree with you or Dom, and I dont think I have suggested otherwise. In the detail, it is not my experience that any one model is a perfect fit and that is why I have argued that just one approach would be incorrect. I dont think the profit history or the business of a yacht builder is that complex. That said, I havent looked at the accounts in detail and only for the last couple of years. Perhaps the accounting history is more complex. Anyway, I wish Oyster well and doubtless as interesting a discussion as this is, more will surface as their current difficulties unfold.
 
Uricanejack said:
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Even so a boat yard with a full order book going bust does seam rather odd. Unless they were going to be building the boats at a loss.
The decline of the pound? Cost of materials? Brexit?

The story of legal liabilities due to the loss of a boat they built. Speculation.

Not sure how the law works. But if a company facing law suits and liabilities goes bust. There is not much chance of getting a big payout from the company.

Would it be possible for the name, plans, moulds, to be "sold' as part of the liquidation and a "New" company emerge from the ashes without those liabilities.

Do liquidators try and keep a company going or is it just automatically would up and assets sold off?
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You profess little knowledge of finance, but may have nailed it nevertheless! There are many steps an insolvent company can take: liquidation, administration, and as you suggest a pre-pack deal where the company is liquidated, but the 'business' is phoenixed through the sale of the business (intellectual and physical assets) by prior negotiation before the appointment of administrators. The directors of the old business may be the directors of the old one, although many UK banks will not consent to this this particular structure on ethical grounds. A pre-pack may therefore see a 'company' closed by court application on a Friday night and the 'business' rise as your "NewCo" on Monday morning.

As for Oyster, my impression is we have collectively jumped the gun here big time; possibly following the "liquidation" word used by our esteemed YM journalists. Oyster may be simply suffering from a liquidity crisis, or may be deeply insolvent. We do not know. The statutory accounts deal with an historic snapshot in time; they are prepared under the required accounting standards and are specifically not designed to provide a mark-to-market valuation of current assets.

The next thing to consider is that PE outfits will rarely finance purely through equity, preferring a combination of equity and debt, some of it senior-secured. This lifts the claims of the PE Co above normal trade creditors and moreover may allow for the payment of tax efficient 'interest' payments to offshore entities. It is in these legal commercial/weeds that Oysters future will most likely be decided.

And finally, it is highly unlikely that the PE Co in question awoke one morning and thought, "Dang this boatbuilding industry is tough!!" More likely Oyster's current crisis (whatever it is) follows a strategic covenant breach, or failure to rollover/extend funding to the Company and that the next step is fully planned and ready to roll. There may even be a game of chicken here.

We'll just have to wait and see. :ambivalence:
 
Tranona said:
I was teaching the method described by dom 30 years ago, as were all my colleagues in every university and business school in the country, so it would not be a surprise if all the graduates that now populate corporate finance departments, venture capitalists, merchant banks etc were familiar with and used the technique in advising their bosses and clients.
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Golly 30 years ago I would indeed have been in one of those classes :rolleyes:

Seriously though, while not British myself, you and your colleagues can clearly take credit for knocking the then motley band of new recruits into sufficient shape to go out there and drive the City of London onward to international success.

And as all threads these days include some Brexit jibe; I personally voted remain, but can now scarcely believe how many people have fallen for the notion that the UK's major success stories owe their future existence to some posturing pen pushers in Brussels.
 
KellysEye said:
I met Mathews at Antigua Sailing Week and he was one of the most unpleasant people I've had the misfortune to meet, I'm surprised anybody would want to deal with him.
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In my experiance the most sucessful businessmen are very single minded, it seems to go with the territory. It seems that he was made an offer he could not refuse and didn't, but he had not lost his passion for boat building hence Gunfleet. I don't know him, but I woud not be suprised to see him pick up the business free of encoumberances.
 
As for Oyster, my impression is we have collectively jumped the gun here big time; possibly following the "liquidation" word used by our esteemed YM journalists. Oyster may be simply suffering from a liquidity crisis, or may be deeply insolvent. We do not know. The statutory accounts deal with an historic snapshot in time; they are prepared under the required accounting standards and are specifically not designed to provide a mark-to-market valuation of current assets.
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I said earlier that I think Oyster is fundamentally a sound company. I have seen nothing in the accounts to suggest otherwise. Although as you correctly point out the accounts are historical, they are perhaps more than a snapshot. While I havent looked beyond the immediate two years on record, it seems to me there is a solid enough track record, now tarnished by some "exceptional" events. Are the fundamentals that poor? Management come and go, but in the yachting business other elements perhaps come and go a little less quickly, reputations take longer to build, and, it would seem, orders have not gone away. From my own perspective neither has the quality left Oyster - I was as impressed by the build standard of their current yachts, as I was ten years ago.

Someone said earlier that they didnt need a sugar daddy if they were doing that well. I have little doubt that Dom is very accurate in his analysis of their future, and I still supsect that curent events are more strategic, than having a direct relationship on a business that is considered to be fundamentally unsound. However, if I have a concern, the current model is to drive companies like Oyster along the lines that have been outlined, and perhaps that is the only basis on which they can secure finance. Sadly, I cant help feeling the outcome of that approach with a company like Oyster is never good based on other examples, ultimately the integrity of the product is diminished, and rightly or wrongly, that is not Oyster's proud heritage. The investors may not get as rich as quickly, but equally they will not see the eventual demise of the company as quickly either.
 
ip485 said:
I said earlier that I think Oyster is fundamentally a sound company. I have seen nothing in the accounts to suggest otherwise.
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It's hard to square your view with a company that has just served notice to the majority of its staff! An objective assessment of Oyster's future perspective requires one to distinguish between the 'business' and the "company".

It is not possible to determine the latter without a ton more granularity than the accounts can, or indeed were designed, to provide. One would need the books and corporate records to be opened to a due diligence team: what's going on with Polina Star III? Any other owners pursuing legals? Are any of the inbuild yachts in trouble? What's the status on loan maturities, covenants, interest cover? ...and so on.

Separate from this is the question of the underlying "business" viability. To determine this we need to start with a specific type of post-restructuring clean gross margin, perhaps the the Ebitda margin: i.e. earnings before tax, depreciation replaced by the required capex-ladder, ex interest (that can be sorted later), ex goodwill amortisation and so on. This will swiftly reveal if the business is fundamentally a goer.

If yes, one next determines how much capital and other financing will be required. One then deducts from the prospective gross profits all the admin and other costs of running the business, add back any disposals and cost savings which can be made.

One can now finally determine if one can achieve the required post-tax risk-adjusted return on the finance provided.

Apologies to forum and OP if this is all utterly boring, but as this topic often comes up, it just might be of some interest. .................OK i'll get my hat :rolleyes:
 
dom said:
It's hard to square your view with a company that has just served notice to the majority of its staff! An objective assessment of Oyster's future perspective requires one to distinguish between the 'business' and the "company". ......:
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That is the key.
To be more exact, it is the 'companies' plural.
We know little to nothing of the interaction between the various Oyster group companies and the Dutch fund which ultimately (as far as we know) owns them.
All we know is that, at ths point in time, the bit(s?) of Oyster which employs people to build yachts (etc) do not have access to sufficient working capital to carry on.

That would seem to be a short term issue, the long-term viability is a separate question. If you're going to make moey at the end of the year, you have to survive this month and the one after.....
 
dom said:
The next thing to consider is that PE outfits will rarely finance purely through equity, preferring a combination of equity and debt, some of it senior-secured. This lifts the claims of the PE Co above normal trade creditors and moreover may allow for the payment of tax efficient 'interest' payments to offshore entities. It is in these legal commercial/weeds that Oysters future will most likely be decided.

And finally, it is highly unlikely that the PE Co in question awoke one morning and thought, "Dang this boatbuilding industry is tough!!" More likely Oyster's current crisis (whatever it is) follows a strategic covenant breach, or failure to rollover/extend funding to the Company and that the next step is fully planned and ready to roll. There may even be a game of chicken here.
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An interesting little snippet is that the third Oyster 825 (Polina Star III was the second) is owned by Wim de Pundert, the majority owner of HTP Investments, the private equity company which owns Oyster. His boat was apparently treated to extensive remedial work to strengthen the keel attachment area before the date of Polina Star's loss. This apparently followed concerns expressed previously about Polina Star's keel security when it was lifted out in the Caribbean. It may be that facts are emerging now about the design and construction of the 825s which annoyed Mr Pundert sufficiently to pull the plug on what was, after all, a very small company in his terms.
 
lw395 said:
That would seem to be a short term issue, the long-term viability is a separate question. If you're going to make moey at the end of the year, you have to survive this month and the one after.....
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The future cash flow model that dom describes is mechanistic, but economically sound. The big challenge in using it to establish the long term viability (ie providing an economic return for the capital invested) is identifying realistically future cash flows. These will mainly flow from designing, making and selling the boats so predictions of the key variables of volumes, prices, costs are needed together with how the business will be structured to achieve these.

In this volatile business the favourite investment phrase "past performance is not a guide to the future" is particularly apt. No doubt the current management has a strategy and a plan that relies on the strategy, but seemingly the owners do not have the confidence to commit to it (for whatever reason). So, I expect management will be seeking to persuade other sources of finance - just hope they do not fall into the trap of manipulating the data to achieve their desired outcome!
 
Tranona said:
.....

In this volatile business the favourite investment phrase "past performance is not a guide to the future" is particularly apt. No doubt the current management has a strategy and a plan that relies on the strategy, but seemingly the owners do not have the confidence to commit to it (for whatever reason). So, I expect management will be seeking to persuade other sources of finance - just hope they do not fall into the trap of manipulating the data to achieve their desired outcome!
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I strongly suspect that the strategy and plan has been overtaken by events.
If they'd been planning this, they'd not have hnadled it quite how they have?
All sorts of things could be behind the scenes, maybe the operation was to be sold and it fell through? Maybe events at the parent fund company? Maybe half their build queue customers have lost their cash on bitcoin.
It would not be the first fundamentally sound business to fail from short term funding issues, neither would it be the first British boatyard to become unviable in a changing market.

I just like many of their boats and wish the staff good luck.
I wonder if they've still got a Lightwave395 mould out the back somewhere?
 
lw395 said:
I strongly suspect that the strategy and plan has been overtaken by events.
If they'd been planning this, they'd not have hnadled it quite how they have?
All sorts of things could be behind the scenes, maybe the operation was to be sold and it fell through? Maybe events at the parent fund company? Maybe half their build queue customers have lost their cash on bitcoin.
It would not be the first fundamentally sound business to fail from short term funding issues, neither would it be the first British boatyard to become unviable in a changing market.

I just like many of their boats and wish the staff good luck.
I wonder if they've still got a Lightwave395 mould out the back somewhere?
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I agree ....I think when the story comes to light there will be a sudden and unexpected call for cash....whether it is conncted with the Polina matter itself, or associated with remedial work or other liabilities, or failure of the counter claim. It could be the failure of the buyer of one or more yachts in build. Or whether it is connected with its Dutch investor having its own liquidity/solvency issues and calling in or not renewing funding loans

Seems To me only certainty is that it's nothing to do with Brexit!!

We can speculate but we're wasting our time...hang on, that's what most forum users are doing anyway isn't it?
 
lw395 said:
I strongly suspect that the strategy and plan has been overtaken by events.
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Don't think so. A strategy is about the future and that will change little as a result of past actions and whatever brought the funding issue to a head. There may be some impact on future demand as a result of this crisis, but given they have a 2 year order book suggests there is still future demand.

Not necessarily saying the strategy is any good as don't know what it is, but the combination of the brand, the current product, facilities and potentially staff to produce product and a healthy order book minus whatever sins of the past that will be left behind has got to be attractive. As I suggested above, the challenge is to put together a quantified strategy that shows it can be successful in meeting an investor's requirements. Equally the potential investor will crawl all over what is on offer to satisfy themselves that there is potential.
 
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