Princess Factory visit by Aquaholic

[petem]

Surely infusion moulding is a huge difference.
Boat lighter - hence smaller engines - hence lighter engines - etc...

That is a difference. Also, I believe that the moulds are made by massive CNC machines now instead of by hand.

 

[47GC]

Great video, reminded me of our visit to see our P43 being built. Was a great experience & I’m looking forward to another in the not to distant future. Great boats, at my level I can’t see past the quality. Old sheds maybe, but tidy & well organised IMHO.

 

[ari]

When you stand back the most striking thing is that so much is going on - far too much is going on. Princess's "make it in house" approach is the opposite of what many others do, and Princess has made no money for years and has a value close to zero, while others who do it differently make a lot of money (market caps of €1b and €1.5bn for Ferretti and Sanlorenzo respectively, for example). I'm constantly amazed by how both sets of Princess shareholders have let the management keep doing the same thing and hoping it will produce profits, while the outturn year after year has been zero or close to zero value and cash generation. I wish them well but it could be so much better if someone with a new vision set out on a 3 year turnaround of the business.

I'm not disagreeing with you at all as my knowledge of manufacturing is zero, but surely outsourcing simply adds an additional layer of cost? Obviously it makes sense for things like engines and electronics to access economies of scale (which Princess already does), but away from those components, and given how specialised boat building is, surely outsourcing still means paying workers to create something, paying for a building in which it can be done, electric to light it, gas to heat it, etc. But then you have to layer on a profit for that outsourced company plus an additional administrative layer (from book keeping to insurance). As I say, not disagreeing, just not understanding - very happy to be educated.

 

[roa312]

Second episode of the four part series is out:

 

[DAW]

When you stand back the most striking thing is that so much is going on - far too much is going on. Princess's "make it in house" approach is the opposite of what many others do, and Princess has made no money for years and has a value close to zero, while others who do it differently make a lot of money (market caps of €1b and €1.5bn for Ferretti and Sanlorenzo respectively, for example). I'm constantly amazed by how both sets of Princess shareholders have let the management keep doing the same thing and hoping it will produce profits, while the outturn year after year has been zero or close to zero value and cash generation. I wish them well but it could be so much better if someone with a new vision set out on a 3 year turnaround of the business.

As someone who spent over 30 years working in manufacturing businesses that produce things, I am always slightly disappointed by videos like this. A place being clean and tidy, full of partially completed inventory and with everyone looking happy and busy for the cameras, does not mean it's operating efficiently or in a way likely to make money for its owners and create a stable future for its employees in a very competitive industry. As you say, the Italian manufacturers (and others) do it differently and Ferretti Group and San Lorenzo in particular have for years fully embraced modern manufacturing concepts such as selective outsourcing and Lean Manufacturing, modifying their approach with a positive impact on productivity, financial performance, and ultimately product quality and customer satisfaction. Today this is reflected in their performance and market caps.

The financial results of Princess make scary reading, particularly from an investor perspective. They have fluctuated between profit and loss for years without generating any real value and have steadily consumed cash on a series of strategic initiatives which did not deliver the expected returns. Prior to the recent investment by KPS, accumulated debts of £260m included £200m from shareholder loans. The announcements made around the time of the KPS investment suggest the existing owners were diluted to become a minority and the shareholder loans were fully written off ... so they effectively lost the majority of their investment in exchange for a relatively modest cash injection by KPS to keep everything afloat.

Let's hope KPS has a long-term vision and is able to develop a better plan for the future. Princess is a great brand and the current range of boats is very strong ... but it could and should be so much better!

 

[jbweston]

I'm fascinated by the above discussion.

I've started watching the video but I can't handle how many times the guy keeps saying WOW! . . WOW! I can't imagine what he'd say if he went to the average car factory. So I've stopped watching and will come back later when I'm feeling stronger.

I remember going to Northshore Yachts at Itchenor in the early 2000s and was interested, but not surprised, at how much of a cottage industry it seemed. I remember the joiners working inside a hull and they seemed rather like jobbing builders constructing a garden shed ('Get me another piece 1.2 metres long, Harry') - not much advanced from the 60s and 70s. If I remember rightly they went bust soon afterwards and I can't say I didn't expect it.

I can remember visiting boatyards in the 1960s and early 70s and seeing how they built boats, often one or two at a time - Rampart at Bitterne, Elkins at Christchurch, Randall and McGregor at Sandbanks, Moody's on the Hamble, Clare Lallow and Souters in Cowes and so many others. It was a craft activity then and some lovely boats came out of those yards. In good times most likely they made some modest money, more or less getting paid fair value for the work they did, but they weren't 'businesses' or an 'industry' as we understnd that word today. Nearly all of them are gone now and it's not hard to see why.

The few operations that tried to grow seemed to build bigger and bigger boats until they went bust.

 

[P4Paul]

On some detailed points, I wondered at 20:00 onwards whether the 80 hull is cored below the waterline. It certainly looks that way, and also it looks like the stringers (that are added after the infusion) are on top of cored sections of hull. Hard to tell from the pics, but a bit worrying.

I must admit I asumed that it was a Coremat/woven combination as part of the structural layup, as opposed to a core material such as balsa, plywood or foam. Personally wouldn't be concerned about coremat/woven where the stringers attach provided the stringers are face bonded and then laminated. The only caveat would be to erase any coremat from the layup in the location of any thro-hull.

 

[MapisM]

I've started watching the video but I can't handle how many times the guy keeps saying WOW! . . WOW!
I can't imagine what he'd say if he went to the average car factory.

Agreed wholeheartedly - as I already mentioned in a previous post, also the term "amazing" was reiterated ad nauseam.
Though one could say that some parts of the first video (couldn't be @rsed to watch the 2nd) were indeed amazing, but not in the way Nick meant it...

BTW, while comparing the automotive and boatbuilding industry is generally (and to a great extent obviously) akin to astronauts vs. the Flintstones, also DAW's comparison with FG and SL isn't the more appropriate I can think of.
I mean, yes, both are surely way ahead of Prin manufacturing efficiency in all relevant ways, as their results prove.
But in Prin shareholders' boots, I would target neither FG nor SL as champions, because their strengths rely also (if not mostly, particularly for SL) on factors very different from sheer efficiency, and which would be out of reach for Princess as a brand.
IMHO, it's rather from AziBen that they should learn, first and foremost.
Or also MCY, whose Monfalcone factory could put to shame everything I saw in the previous video - at least, while it was under the direction of the iron lady who created the brand from scratch, before she left due to conflicts with the French owners.
And who, unsurprisingly, learned all the tricks of the trade as top manager of AziBen, before joining Beneteau to establish MCY...

 

[Dogone]

I enjoyed those two videos. It looks a reasonably modern set up. They are doing infusion, modular furniture construction, lots of CNC woodwork. These are hand built semi-custom boats and I didn't expect automation or production line efficiency at the level of vehicle manufacturing.

Maybe there could be a bit more of a flow, but would much be saved: 35,000 hours labour quoted as used to build the €10m S80 yacht doesn't seem excessive. Also the factory floor space others thought excessive at 3,8000 sq ft per boat is not really a high cost burden relative to the average yacht sale value.

They clearly buy in componenents where it makes sense. I saw a delivery of stainless rails installed. All the big and expensive boat parts from engines down are bought in.

Wiring looked old fashioned, but that old school wiring just works. I have a distributed network controlled wiring system from Mastervolt/CZone in my boat and I hate it with a passion.

I don't know why they are not making bucket loads of money. They have a good product and I can't see huge waste. Maybe they are underpriced. Maybe big money was wasted elsewhere, maybe the wages are excessive, but in Plymouth I doubt it very much, perhaps on product development, perhaps massive lease back costs on the property. Certainly financing costs are going to be an awful burden. That and maybe wasted costs from bad property deals needs to be eliminated. A bankrupcy could do much of that. Oh dear. I hope it's just pricing - that's an easy fix.

 

[mil1194]

Lighthearted post - reminded me of Howard’s Way

 

[Bouba]

What most surprised me about the video tour was just how many eighty foot boats they had in production….do the other manufacturers build and sell that many big boats ?

 

[PowerYachtBlog]

I enjoyed those two videos. It looks a reasonably modern set up. They are doing infusion, modular furniture construction, lots of CNC woodwork. These are hand built semi-custom boats and I didn't expect automation or production line efficiency at the level of vehicle manufacturing.

Maybe there could be a bit more of a flow, but would much be saved: 35,000 hours labour quoted as used to build the €10m S80 yacht doesn't seem excessive. Also the factory floor space others thought excessive at 3,8000 sq ft per boat is not really a high cost burden relative to the average yacht sale value.

They clearly buy in componenents where it makes sense. I saw a delivery of stainless rails installed. All the big and expensive boat parts from engines down are bought in.

Wiring looked old fashioned, but that old school wiring just works. I have a distributed network controlled wiring system from Mastervolt/CZone in my boat and I hate it with a passion.

I don't know why they are not making bucket loads of money. They have a good product and I can't see huge waste. Maybe they are underpriced. Maybe big money was wasted elsewhere, maybe the wages are excessive, but in Plymouth I doubt it very much, perhaps on product development, perhaps massive lease back costs on the property. Certainly financing costs are going to be an awful burden. That and maybe wasted costs from bad property deals needs to be eliminated. A bankrupcy could do much of that. Oh dear. I hope it's just pricing - that's an easy fix.

They are far from a semi-custom product, to what semi-custom in reality is. Offering four woods and maybe twenty type of leathers and same for upholstery plus changing a table from round to square is not semi-custom. The S80 offers just one galley layout option, the new Sunseeker Ocean 156 (80ft) for example has three galley layout choices on the main deck. That is semi-custom, plus a choice to have a master stateroom on the main deck.
I think in the recent years Princess have out-priced itself a bit to the product it offers, going to closer to what more real semi-custom products.
Sunseeker is a bit more aggressive on pricing then they are for example, and can do the semi-custom part better.
Also how are you quoting 10 millions for the S80, its prices start from under 6 million Euros. 10 million is the price of Y95 or X95.
I think they do not make money is probably because the operation is not lean enough. Also Brexit and some more complicated bureaucracy in the last years did not help.
As getting your expenses back, usually it takes five to ten hulls to take Research and Design, and Mould expenses back. Five if its a very basic model (probably with the S80 is less same hull as X and Y and so on), ten if its something completely new. Think Princess R35 or a Magellano 73 back when it debuted in 2009.

What most surprised me about the video tour was just how many eighty foot boats they had in production….do the other manufacturers build and sell that many big boats ?

Its a three boat same hull line up, S - X - Y, so each model usually would do 5 to ten boats a years. Probably they will have a plan of five hulls for the S80 for the first year, ready to be bumped up to ten if demand needs it.
So maximum I cannot see them able to do is like twenty hulls of 80s divided into the variants. It is normal for the World brands (Azimut/Ferretti/Sanlorenzo/Sunseeker) to do these numbers in an eighty footer.
The Ferretti 860 has been delivered in sixteen units since it arrived in mid 2022, while Sunseeker has sold seventeen of the 88 Yacht which arrived in the fall of 2021, and Princess 45 Y85 arriving in 2019,

Considering all it is interesting how Princess does not make money, since they do not seem to take a lot of risk in RaD, with the exception of the R35 and the X95.
I think the first did not work out well but I do not have numbers to back that up, and the second did okay, although it was far from the numbers they said.
The X95 is selling well, but I remember they said they sold like 50 of them in 2020 and after launch, and so far in four years down the line they have delivered 21 hulls (according to Boat International data).

Imagine them doing products like the new Seadeck, or the Magellano range as Azimut did and the expenditure that goes with that.
Sanlorenzo doing the new SX and SP lines, with both of them being revolutionary and different in their segments, and also launching the first green methanol super yacht.
Or having a portfolio of different brands like the Ferretti Group, with every brand needing a different hull (Pershing/Wally/Riva/Ferretti) to the other.
The risk Princess have took in the last years is rather minimum.

 

[MapisM]

Or having a portfolio of different brands like the Ferretti Group, with every brand needing a different hull (Pershing/Wally/Riva/Ferretti) to the other.

Did I possibly miss their announcement about pruning dead branches, eventually?

 

[jakew009]

I almost had ptsd by the end of the video just at the thought of trying to manage that lot good lord no wonder they make no money

 

[jakew009]

I'm not disagreeing with you at all as my knowledge of manufacturing is zero, but surely outsourcing simply adds an additional layer of cost? Obviously it makes sense for things like engines and electronics to access economies of scale (which Princess already does), but away from those components, and given how specialised boat building is, surely outsourcing still means paying workers to create something, paying for a building in which it can be done, electric to light it, gas to heat it, etc. But then you have to layer on a profit for that outsourced company plus an additional administrative layer (from book keeping to insurance). As I say, not disagreeing, just not understanding - very happy to be educated.

Because it's completely impossible to try and do all those different processes under one roof efficiently and well whilst being able to scale up / down as demand dictates.

 

[markc]

The video brought to mind the Troubleshooter TV series by Sir John Harvey-Jones, especially the one on Morgan cars. Here's a link to a 'revisit' in 2000

 

[jfm]

Were they not sold to KPS Capital Partners, a US-based private equity firm in Winter 2023.

I do not think they are for sale at this time, although with an equity firm they always are.

Correct, but Mapism's comment is still in substance correct. No investors showed any interest at the price Princess/LCatterton hoped for, or at any substantial price at all, and the eventual selling price was tiny - you could say that the business was almost given away. Of course they are always for sale, but there wont be a transaction for a long time until KPS have built some equity value.

Substantially all the value in the business was destroyed over the 15 years of L then LCatterton ownership, at least partly from the choices made by management (ultra insourcing, not enough focus on cash, the design choices in the boats, the 40m, and so on). All imho of course. Chris Gates is/was. alas, the principal architect of this imho, and CEOs after him including the current folks show no signs that I can see of doing the things necessary to turn this around. It always seems to me, and it comes through to me in these videos, that there is an institutional delusionalism at Princess whereby they think they are a great company making great boats, and whereby they ignore the value destruction that is/has been going on. There was plenty of bar room chat at Cannes over Will Green's recent speeches at the recent supplier conference where he said words broadly to the affect that Princess are the best.

A good new CEO could fix all this over 5-7 years, but it's a tough job and much incentive would need to be offered to the right person.

 

[PowerYachtBlog]

First paragraph of the BI on Princess future plans
QUOTE
British boatbuilder Princess Yachts is headed for a strong financial turnaround, announcing it is "largely on track" to break even by the end of 2024 with a return to profitability expected in 2025.
UNQUOTE

I think I have been hearing this since 2015. Also they say to want to return to thirty meters plus.
Technically I think it is risky for them at this moment, as I think even Sunseeker is struggling beyond the thirty meters size in these times.

 

[jfm]

Yup, deeply unconvincing but I hope they are right on the profitability thing.

They're delusional at 30m plus. Their brand simply doesn't stretch that far, though they can't see it. There is just no kudos in their brand at that size and price point. They can't style boats at that size, inside or out, and all the furniture in their 30m stuff (and 30m+) is built on the same line that you can see on Aquaholic's video and therefore looks like it came from a 50 footer. Of course they will sell a few, but not enough.

Their other problem is balance sheet weakness. Not every customer might notice, but those who do have to gulp when giving them deposit+ stage payments on say a €10m 30m boat. Princess appear to have less cash and liquidity than surely all their customers at that level. I would not choose to become an unsecured creditor of Princess to the tune of say €8m worth of stage payments and I'm not sure who in their right mind would. To give a stark contrast, my stage payments exposure buying a sanlorenzo in that price range was directly to Sanlorenzo spa, the listed company (not a subsidiary of it) with €1.5bn market cap and a couple of hundred million of liquidity, so near-zero exposure.

 

[doug748]

The video brought to mind the Troubleshooter TV series by Sir John Harvey-Jones, especially the one on Morgan cars. Here's a link to a 'revisit' in 2000

Hell, I remember that show.

Wisely they ignored him, which is probably why you can still buy a Morgan today.

.