Princess Yachts announces £17.9m profit

Looks pretty good, turnover down £10M but profits only down £1M. A bit of investment to boot, looks like a good, well run company in the current climate. At least they aren't Tesco.
 
Profit has become an odd thing - it's not what real investors think of as profit anymore. The company spent the same amount on R+D as last year, paid no dividends and received no new outside financing, yet ended the year with £10m less cash than at the start of the year. That puts a bit of a bit of a back story behind the £10m profit

I'm certainly not saying there is anything wrong with the company - it is financially strongish, relative to boatbuilders. It is interesting to examine why they ended up with £10m less cash though. As ever a lot of things contribute but the stand outs were an increase in stocks/debtors (both of which might be unsold boats) and an all new entry of £22m "debtors on long term contracts" which, as a total guess is the big M Class yachts. If that guess is right then it's interesting that buyers seem not to be paying as they go and that Princess is financing the build. All will be fine if the clients are not too long on roubles I guess. The cash position would have been worse if they had not stretched payment terms to suppliers, though in all fairness Princess are generally regarded as the fastest payer out of the Fl/s-seeker/Prin trio so absolutely full marks to them on that generally. All I'm really trying to draw people's attention to is that just looking at reported profit isn't really where it's at these days. Boatbuilding remains very tough financially

The accounts seem to have been filed 3 months late - the filing deadline stipulated by law was 30/9/14. That's not a good sign but probably not the end of the world
 
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All good observations JFM, this is taken from IBI News received last night and perhaps explains a little more.
plus.ibinews.com/article/ncvuRWGEsI6/2015/01/08/princess_reports_modest_decline_in_sales_and_profits_for_201/?nsl=c0C3d3x8A7qM
 
Imperial One said:
perhaps explains a little more.
Click to expand...

I'm smiling at the idea that one can learn how to interpret accounts and business performance from an ibi journo :)
https://plus.ibinews.com/article/nc..._modest_decline_in_sales_and_profits_for_201/

My point is this: Imagine you're an investor/business owner and you can own one of two businesses. AOTBE the first business reports £17m profit and burns £10m cash. The second business reports say £(17)m loss but generates £10m free cash. Which one do you want to own? (OK, you wouldn't make the choice just on those headline numbers but there is an important point about the distinction these days between reported profit and cash generation)
 
Yes many 'profitable' businesses have run out of cash and disappeared. No disrespect to Princess and I wish them only the best, but I bet the story isn't one of unalloyed glee, rubbing together of hands and triples all round.
 
jfm said:
I'm smiling at the idea that one can learn how to interpret accounts and business performance from an ibi journo :)
https://plus.ibinews.com/article/nc..._modest_decline_in_sales_and_profits_for_201/

My point is this: Imagine you're an investor/business owner and you can own one of two businesses. AOTBE the first business reports £17m profit and burns £10m cash. The second business reports say £(17)m loss but generates £10m free cash. Which one do you want to own? (OK, you wouldn't make the choice just on those headline numbers but there is an important point about the distinction these days between reported profit and cash generation)
Click to expand...

I'm no Warren Buffet, but I was surprised to read in that PR statement that: "All expenditure on new product development is written off in the year in which it is incurred and further adds to the robustness of the company's performance". Nice and conservative of course but open to interpretation as a company which is relatively content to knock out product rather than to invest in major r&d.
 
jfm said:
My point is this: Imagine you're an investor/business owner and you can own one of two businesses. AOTBE the first business reports £17m profit and burns £10m cash. The second business reports say £(17)m loss but generates £10m free cash. Which one do you want to own? (OK, you wouldn't make the choice just on those headline numbers but there is an important point about the distinction these days between reported profit and cash generation)
Click to expand...
Funny you should say that J, because your question epitomizes very nicely the fact that we are living in a world where we don't have REAL "business owners" anymore, meant as proper entrepreneurs, but rather "investors", which is actually an elegant term for "bean counters with fat wallets".
It's pretty obvious that the first would go for the profit, and the latter for the cash.
Sad, 'innit? :(
 
MapisM said:
Funny you should say that J, because your question epitomizes very nicely the fact that we are living in a world where we don't have REAL "business owners" anymore, meant as proper entrepreneurs, but rather "investors", which is actually an elegant term for "bean counters with fat wallets".
It's pretty obvious that the first would go for the profit, and the latter for the cash.
Sad, 'innit? :(
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Cash is always king irrespective of your interest / position in a companies capital structure...
 
Nope. Cash is king if your only concern is to resell the company ASAP, and for more than you paid for it.
 
Happy to agree to disagree, but you're now shifting the goalposts, sort of.
Fwiw, even if I've never been on the lender side of the table, I've also handled a few corporation LBOs. And I had the opportunity to know reasonably well both small entrepreneurs and senior partners of private equity firms.
Of course lenders would rather trust the latter than the first, because they share the very same targets - namely, make more money out of money.
But that was not the point of my reply to jfm, which is who aims for what.
Quite often (albeit not always, admittedly) the folks which I called "proper entrepreneurs" as opposed to "bean counters" - and I accept that we can argue forever on this definition, so let's take it just for sake of clarity - have very different targets.
Different both in terms of timeframe and in terms of what they value most.
Proper entrepreneurs couldn't care less if the cash went down 10m or whatever, as long as they know that it was well spent, and that they will eventually have a return.
Bean counters, otoh, are only interested in cash because they can't properly value anything else - and when they do, they can only see the risk component of other goals.
 
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jfm said:
My point is this: Imagine you're an investor/business owner and you can own one of two businesses. AOTBE the first business reports £17m profit and burns £10m cash. The second business reports say £(17)m loss but generates £10m free cash. Which one do you want to own? (OK, you wouldn't make the choice just on those headline numbers but there is an important point about the distinction these days between reported profit and cash generation)
Click to expand...

I'd go for the first every time. Most businesses can't generate cash beyond the short term without making profit, and it's not feasible that a fairly mature manufacturing business would make £18m profit every year without fairly soon generating cash.
 
benjenbav said:
I'm no Warren Buffet, but I was surprised to read in that PR statement that: "All expenditure on new product development is written off in the year in which it is incurred and further adds to the robustness of the company's performance". Nice and conservative of course but open to interpretation as a company which is relatively content to knock out product rather than to invest in major r&d.
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They spent 4% of turnover on R&D, which is fairly high for a manufacturing company.

edit: though of course everything gets thrown into the R&D pot these days to maximise tax credits.
 
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Nick_H said:
They spent 4% of turnover on R&D, which is fairly high for a manufacturing company.
Click to expand...

Without wishing to draw false analogies with car-making, porker spend 10% and toyota 4%. I suppose Princess aim to buy in customer mech and electronics and there's only so many new ways to rearrange the soft furnishings?
 
MapisM said:
Nope. Cash is king if your only concern is to resell the company ASAP, and for more than you paid for it.
Click to expand...
Have to disagree with that entirely at least for SMEs. Cash is what allows you to weather downturns in your market, take advantage of quantity and early payment discounts from suppliers, offer credit terms to gain orders at higher prices than your competition, spend on R&D, move fast to buy up assets which suddenly come on to the market and a whole host of other advantages. Even the old saying 'turnover is for vanity and profit is for sanity' is not entirely true because profit is such a adjustable figure in a SME. These days, with banks and lending institutions reluctant to lend to SMEs, cash is most definitely king and at the end of the day, it's what allows the owners of the business to sleep at nights
 
In reality, at least 50% of Porsche's R&D investment is on Powertrains, 50% of the rest will be on electric motors/hybridisation etc, which Princess does not need to invest in, so like for like they are investing more in PD than Princess.
 
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