Sales Order book

[jimmy_the_builder]

Well you might scoff a lot actually. Of course dealers are going to place orders for stock boats. I wouldn't be surprised if a minimum stock order per year was written into their contracts. The PR story though made it sound like 10 punters walked in off the street unannounced and bought boats which would have been great but is nowhere near the truth. Sorry I have a thing about manufacturers dreaming up sales numbers at exhibitions. One of my competitors does it which infuriates the hell out of me. Maybe I'm just doing it wrong

How did the pr story make it sound like 10 punters walked in off the street, etc? All I saw was a one-liner from Russell Currie that said that 10 boats were sold in the first hour, nothing about who bought them. Doesn't seem that far from the truth to me.

 

[jimmy_the_builder]

yup, suppose indeed an order is an order, so dealers ordering stock boats count as the boat is built and fairline get paid... I bet there is a minimum order requirement if you are a Fairline dealer so they are guaranteeing themselves that story...

I wonder what number of those 10 were retail orders genuinely taken within the first hour.

Well, at least nine of them were dealer orders, so I think only one could have been a retail order.

 

[Nick_H]

I don't know how widespread it is, but some dealers and/or manufacturers allow punters to order boats at boat shows with no deposit, and absolute right to cancel. Arguably that's an option agreement, rather than an order, but I expect they are included in the boat show statistics.

 

[petem]

I wouldn't be surprised if a minimum stock order per year was written into their contracts.

Aren't those days largely gone, at least for Fairline?

With a few dozen dealers and only 50 boats being built per year, I can't see them being forced to purchase many, if any boats at all.

But, as I alluded to earlier, at one time there were the best part of 20 Targa 43 'classics' in Cala D'Or alone, so suspect Jimmy didn't need too much persuading to pre-order a few. And of course that will be repeated in Fairline North Mallorca, Fairline Menorca, etc. These guys are in the business of selling boats so won't want other dealers monopolising the limited supply.

 

[henryf]

How did the pr story make it sound like 10 punters walked in off the street, etc? All I saw was a one-liner from Russell Currie that said that 10 boats were sold in the first hour, nothing about who bought them. Doesn't seem that far from the truth to me.

I think people tend to assume that at boat shows people turn up, have a look and hand over a depo. Many will see that as 10 punters buying a boat.

The reality is with manufacturer / dealer relationships as they are that the bulk of boats get sold to dealers. I witnessed steady business on the Princess stand with Eastern dealers. We often forget on here that it's a global market, not just a UK / Med market.

Henry

 

[freddy the frog]

wow not bad buisiness for a show thats hanging on by the skin of its teeth long may it last

 

[jfm]

Hopefully we will see the builders showing healthy profits.

One thing of course, you sometimes need to see beyond the marketing hype.

... hope we'll see some decent profits coming out of Sunseeker and Princess for a change.

I too hope they can return to profitability but the business models they are running, and have run now for several years, show no obvious sign of it. You'll recall that Princess accounts got news coverage here on ybw in previous years when they showed profits or at least had something positive to report (even if as explained on here their new accounting policies were major contributors to such good news as there was). In contrast, Princess's 2015 accounts were filed quietly, with no apparent PR and perhaps MBY weren't even aware. They're worth a read, to see how tough boatbuilding is for an equity investor and to see how far Princess have plunged deeper.

Princess 2015 sales on a traditional basis of boats delivered which is how Fairline account, ie with no special accounting policy, were £186m, down from £228m in 2014. The £35m of bank debt that's been there for ages but was hard to find (in a Luxembourg SCA) is now novated closer to the assets so is disclosed in the accounts, as predicted on here. They breached bank covenants on both testing dates in 2015. Shareholders injected more money. The headline reported loss for the year was £26m ((£11m loss in 2014). Yep, £26m loss on c.£200m of revenues, gweep. The business managed to report just positive cash flow from operations, but only by selling the glut of finished boat stock they were carrying; the underlying run rate is that the business consumes rather than generates cash. A horror story, alas. I wish them well but the new boss needs to do something significantly different from his predecessor - we wont see the results of his changes until the 2016 accounts get published late in 2017 (2015 was a Gates year). It's hard to see the equity investors getting even a significant part of their investment back let alone a positive return, and easy to imagine their disappointment.

Shows how tough it is, and/or how wrong their business strategy has been. If I were paying £1m in stage payments as an unsecured creditor for a year or whatever, my preference would be Sunseeker first, Fairline second, Princess third.

 

[rafiki_]

Very interesting JFM. Phil has done a sound job to date, bringing the Sunny losses back to break even, in a couple of years. They are working on further opportunities to improve the business, and with the backing they already have, should realise these. Fairline is now a very low overhead business, and hats off to them for the progress they have made in a year. The new model programme looks very impressive, so confidence is growing in the future.

 

[MapisM]

If I were paying £1m in stage payments as an unsecured creditor for a year or whatever, my preference would be Sunseeker first, Fairline second, Princess third.

I guess you are assuming to make a theoretical ranking among UK-only builders, J?
Because aside from the fact that I wouldn't fork out £1m unsecured to ANY boatbuilder on this planet, I don't think those three would even make it to my short list, strictly from a financial standpoint (AZ being the obvious #1 choice, in this respect - probably followed by SL).
And you know I'm not saying this because I'm biased towards IT builders, after having bought a Trader...
...Well, almost!

 

[PowerYachtBlog]

I guess you are assuming to make a theoretical ranking among UK-only builders, J?
Because aside from the fact that I wouldn't fork out £1m unsecured to ANY boatbuilder on this planet, I don't think those three would even make it to my short list, strictly from a financial standpoint (AZ being the obvious #1 choice, in this respect - probably followed by SL).
And you know I'm not saying this because I'm biased towards IT builders, after having bought a Trader...
...Well, almost!

I think Azimut is higher risk then Sanlorenzo from a certain point of view.

Meaning Sanlorenzo always builds about thirty boats a year, and since its boats are all semi custom, half of these (furniture inside etc) are made from sub-contractors.
Less exposure to payrolls then full production builders.
The difference is that Sanlorenzo has invested a lot in the last six years something Azimut did in the best of times of the past decade.
So Azimuts exposure is mostly its payrolls and R and D department.

I think Ferretti is also working good in recent years, although to be fair (I think) they still have a couple sticks they want to get rid off (i.e Itama and Mochi) to start making complete sense on the business side of things. But the future looks good for them even if these two brands stay with FG.

 

[jfm]

I guess you are assuming to make a theoretical ranking among UK-only builders, J?

Yes I was ranking UK only; it seemed relevant to the point I was making but I agree that if buying a boat with 2 commas in the price tag it is definitely worth looking beyond the shores of the UK! :encouragement:

 

[Deleted User YDKXO]

wow not bad buisiness for a show thats hanging on by the skin of its teeth long may it last

You dont need a boat show to sell boats to your dealers

 

[petem]

You dont need a boat show to sell boats to your dealers

But you do need boat shows for punters to buy boats from dealers.

What I can't understand, from an observers perspective, the London Boat Show should be a irritation for manufacturers. It's more expense, is too close to Dusseldorf and Christmas timing wise, doesn't get much footfall, etc, etc. However, they seem to be happy for it to continue.

 

[NGM]

If I were paying £1m in stage payments as an unsecured creditor for a year or whatever, my preference would be Sunseeker first, Fairline second, Princess third.

I suppose a relative ranking out of 3 for a creditor is only relevant if you have a strong sense of the underlying credit risk. If they were ranked AAA, AAA, AA then I'd chose the boat I really want versus the relative credit risk, however, AAA, AA, CC then that's an entirely different matter.

In addition to that, one has to put some probability of the timing of a potential credit event. Whilst Princess's profitability looks worrisome the current cash flow (all models sold til late '18) looks pretty healthy. The uniformed conclusion would be that it's likely that the parent company support stays strong given order books have never been so healthy and hence you could argue that now is not such a bad time to join the queue - purely from a credit standpoint ?

 

[jfm]

I suppose a relative ranking out of 3 for a creditor is only relevant if you have a strong sense of the underlying credit risk. If they were ranked AAA, AAA, AA then I'd chose the boat I really want versus the relative credit risk, however, AAA, AA, CC then that's an entirely different matter.

In addition to that, one has to put some probability of the timing of a potential credit event. Whilst Princess's profitability looks worrisome the current cash flow (all models sold til late '18) looks pretty healthy. The uniformed conclusion would be that it's likely that the parent company support stays strong given order books have never been so healthy and hence you could argue that now is not such a bad time to join the queue - purely from a credit standpoint ?

Yep to all that. Problem with the point in your second para is that Princess cant make cash building boats, so the full order book is actually a full load of further cash burnt. Arguably the most cash generative thing they can do is stop making boats. Now that's partly in jest because of the fixed costs in the business, but my point remains that full order books at Princess do not mean cash will stop being burnt. There is no bottomless pit of parent company support: the equity fund that owns Princess is tiny by PE standards and you'd guess it is already at or close to its contractual limit of cash invested in a single asset. Logically the fund manager must want to exit Princess and move on but I guess the new CEO has to implement a turnaround first. Otherwise it is for sure a less than 1x deal for the owners. I wish them well and hope the new CEOs plans are radical

 

[Deleted User YDKXO]

But you do need boat shows for punters to buy boats from dealers.

Depends on the dealer. I doubt if the Chinese dealer has punters coming to LIBS

What I can't understand, from an observers perspective, the London Boat Show should be a irritation for manufacturers. It's more expense, is too close to Dusseldorf and Christmas timing wise, doesn't get much footfall, etc, etc. However, they seem to be happy for it to continue.

Well the big 3 UK manufacturers are happy because LIBS has effectively become an in house boat show for them but many other manufacturers, particularly foreign ones, have voted with their feet and don't attend any more. In fact somebody ought to report the LIBS organisers to the Advertising Standards Authority because there's nothing international about LIBS any more

 

[petem]

Depends on the dealer. I doubt if the Chinese dealer has punters coming to LIBS

I wouldn't rule it out, a tour of the Cotswolds, bit of shopping at Bicester and a visit to LIBS (bearing in mind the weak £) might be quite an attractive proposition!

Alternatively, they might go to the Eurasia Boat Show in Istanbul or visit one of the bigger shows in DE, FR or US.

 

[Deleted User YDKXO]

I wouldn't rule it out, a tour of the Cotswolds, bit of shopping at Bicester and a visit to LIBS (bearing in mind the weak £) might be quite an attractive proposition!

Alternatively, they might go to the Eurasia Boat Show in Istanbul or visit one of the bigger shows in DE, FR or US.

Not after 2019. All foreigners will be banned from the UK then

 

[petem]

Not after 2019. All foreigners will be banned from the UK then

Nah, keep up Mike, we'll be a tax haven for super rich foreigners by then. They can buy a few boats whilst they're here.

 

[Powersalt]

Interesting twist on the thread. I was thinking about the uk boat market being swallowed up by overseas orders, which will then have a knock on effect later by the uk having less used boats to sell etc etc.. From a personal perspective it makes it difficult if your in the market for a new boat "now so to speak" but then consider JFM remarks. You cant buy now and limit your exposure, you end up on a years wait list ( or more) and your deposit. stage payments become a greater risk. Interesting concept, so is it the uk that think like this as overseas are just adding the orders. Guess I need to consider my next move