Where did it all go wrong?

[petem]

In the course of researching for my boat purchase I've been looking back at 10 year old YBW mags.It seems that every other month there was a giant test comparing the latest 35-60 foot sport cruisers / flybridges from the big 4. The magazines were bulging at the seams with features and adverts. MBM was the same.

Ten years later, the UK boating industry has lost Sealine and things are looking far from rosey at Fairline, Sunseeker and Prnicess.

All the manufacturers have contracted but their profit making ability looks pretty perilous.

I know we've had the financial crisis, but these builders must have survived and prospered at one time making low volumes of boats (when they were on their way up). Why is it not possible for them to do the same now? Has manufacturing become less efficient? Does it take more hours to build a boat? Have they become too complex / fancy for them to be built quickly? Is the current strength of the pound causing euro selling prices to be unviable?

What's the way forward. Can more parts be built overseas perhaps? There must be an answer or in ten years time there could be no UK boat manufacturers at all.

Pete

 

[longjohnsilver]

I walked past the Princess complex in Plymouth 2 days ago, saw lots of boats in the shed and about another 5 in the water alongside. Where do you get the impression that they are not doing well?

 

[petem]

Their recent redundancies and rumours of unsold stock and employees that have had no pay rises for many years.

 

[jfm]

I walked past the Princess complex in Plymouth 2 days ago, saw lots of boats in the shed and about another 5 in the water alongside. Where do you get the impression that they are not doing well?

The boats and the boatbuilders are great but the business appears to be burning £1m/month cash, consistently. Something has to change.

 

[rafiki_]

I know we've had the financial crisis, but these builders must have survived and prospered at one time making low volumes of boats (when they were on their way up). Why is it not possible for them to do the same now? Has manufacturing become less efficient? Does it take more hours to build a boat? Have they become too complex / fancy for them to be built quickly? Is the current strength of the pound causing euro selling prices to be unviable?

Pete, part of the problem today is that the bigger builders, Sun/Prin/Fair, and also Sealine before they went pop, grew substantially as businesses, growing a huge fixed cost with it. Boats have also become far more complex with many more features, hence more expensive to build. They don't generate the economies of scale that volume car makers do, hence they cannot drive down supplier prices.

Pearl have gone the other way, divested themselves of most tof their fixed costs, and building boats through contract suppliers.

As long as Sun/Prin have decent business plans, I think their shareholders will continue to support them. They have big corporations behind them. Fairline is in a different place unfortunately, and it is getting worse by the day for them, as who would place an order now?

 

[Deleted User YDKXO]

Where did it all go wrong?

I'm not sure it has all gone wrong. Firstly and in retrospect, the decade until 2008 (the 'nice' decade as Mervyn King famously called it) was a total aberration, a debt fuelled boom that was always going to blow up sooner or later. Any industrial manufacturing companies thinking that the global economy is ever going to return to that level of consumption are deluding themselves. That wasn't the reality, this is the reality now.

So the question is how do manufacturing companies adjust themselves to this reality. My impression is that, judging by recent financial results, the UK motorboat building industry has hardly begun to adjust itself. It isn't just about laying off workers but changing the whole mentality of the company from thinking big to thinking not necessarily small but differently. The good news is that there is still a market for UK built motorboats; the challenge is how to sell into that market and make a profit. That obviously means addressing costs and yes, making the labour intensive components of a boat in a lower cost country might be help. After all if you buy a PrinFairSeeker you don't really care where the hull was moulded or the furniture was made so long as it was done correctly. Maybe there is also scope to share costs or achieve higher supplier discounts by cooperating on purchasing. Maybe there is scope to reduce marketing costs by sharing exhibition stands or by not attending exhibitions altogether. Whatever, I get the impression that PrinFairSeeker are still acting like big companies in a growth market when the reality is completely different

I know a couple of industrial manufacturing companies whose turnover now is about 40% of what it was in 2008 and they have survived so there's no apparent reason why the UK motorboat building industry could not do the same

 

[NoIllusion]

In the course of researching for my boat purchase I've been looking back at 10 year old YBW mags.It seems that every other month there was a giant test comparing the latest 35-60 foot sport cruisers / flybridges from the big 4. The magazines were bulging at the seams with features and adverts. MBM was the same.

Ten years later, the UK boating industry has lost Sealine and things are looking far from rosey at Fairline, Sunseeker and Prnicess.

All the manufacturers have contracted but their profit making ability looks pretty perilous.

I know we've had the financial crisis, but these builders must have survived and prospered at one time making low volumes of boats (when they were on their way up). Why is it not possible for them to do the same now? Has manufacturing become less efficient? Does it take more hours to build a boat? Have they become too complex / fancy for them to be built quickly? Is the current strength of the pound causing euro selling prices to be unviable?

What's the way forward. Can more parts be built overseas perhaps? There must be an answer or in ten years time there could be no UK boat manufacturers at all.

Pete

Whilst moored on Lymington Town Quay on Saturday, a guy knocked on my boat and started a conversation about Princess. Turns out he has worked at Princess for 20 years, on many P42 Flys, probably ours at some point back in 2006. He seemed very happy with his lot, thoroughly enjoying his time at the yard in Plymouth and by all accounts being kept extremely busy.

 

[Medskipper]

IMHO boat builders have been going more and more up market making just a handful and aiming to sell very high priced boats. They now seem to be running out of clients with enough money to purchase them. The recession has clearly not helped.
When I started boating 35 years ago there was a plethora of new small boats a person could buy, this really got them into boating and of course the people who loved it continued on to purchase larger vessels. Now it's very hard for a man with a young family to afford a new large vessel.

 

[pks1702]

I'm not sure it has all gone wrong. Firstly and in retrospect, the decade until 2008 (the 'nice' decade as Mervyn King famously called it) was a total aberration, a debt fuelled boom that was always going to blow up sooner or later. Any industrial manufacturing companies thinking that the global economy is ever going to return to that level of consumption are deluding themselves. That wasn't the reality, this is the reality now.

So the question is how do manufacturing companies adjust themselves to this reality. My impression is that, judging by recent financial results, the UK motorboat building industry has hardly begun to adjust itself. It isn't just about laying off workers but changing the whole mentality of the company from thinking big to thinking not necessarily small but differently. The good news is that there is still a market for UK built motorboats; the challenge is how to sell into that market and make a profit. That obviously means addressing costs and yes, making the labour intensive components of a boat in a lower cost country might be help. After all if you buy a PrinFairSeeker you don't really care where the hull was moulded or the furniture was made so long as it was done correctly. Maybe there is also scope to share costs or achieve higher supplier discounts by cooperating on purchasing. Maybe there is scope to reduce marketing costs by sharing exhibition stands or by not attending exhibitions altogether. Whatever, I get the impression that PrinFairSeeker are still acting like big companies in a growth market when the reality is completely different

I know a couple of industrial manufacturing companies whose turnover now is about 40% of what it was in 2008 and they have survived so there's no apparent reason why the UK motorboat building industry could not do the same

Could not have put it better Mike.

One of the key issues in running a business is about looking at not just today but the future and putting in place a strategy for tomorrow not today.

 

[jfm]

Prin .... have big corporations behind them.

Far from it! Controlling shareholding in P is held by a collective investment fund, quite small fund for which P is perhaps its biggest investment. They've had the investment 7 years and P appears to burning cash, so I guess it isn't on plan. They will be working hard (and I hope with much eventual success) on how to turn the business around from its current cash burn position so as to rebuild value in the equity and hopefully make a decent ultimate return, but alas there are no private equity buyers in this space (Tamburi excepted, but that was different) and there isn't another Dalian Wanda out there. They perhaps need to keep a roll of red carpet ready just in case Mr Vitelli happens to be passing by the Plymouth area:encouragement:

 

[pan]

Frankly I can't see how Fairline is going to get out of it's current situation, no-one is going to place an order with a deposit, but that is what they propose is the new business model, it simply makes no sense. Imo it has been taken over for the brand name & liquidate the assets, maybe someone from within (company or industry) finds some backing & takes the moulds etc to build bespoke, but that would need quite some financial backing to guarantee clients deposits & stage payments, the final product would have to be substantially cheaper or better than Princess etc for anyone to consider buying.

As to the future of British boatbuilding, I am sure that Princess & Sunseeker have spent a great deal of time looking forward as to where the market will be, it appears to me SS have decided their market is larger high end and Princess see themselves slotting in at lower price point, neither seem particularly interested in competing with others on price.

Whether their strategies work only time will tell, but if they can see through the current weak market, the European arena is poor at the moment, as can be seen with low 2nd hand market in the Med, but that will strengthen, it may only need a 10-15% upswing in sales for these 2 companies to move into a decent profit. I truly hope so, as competition keeps prices down.

 

[andrewbarker]

Well, I don't get this either. I agree that it's really astonishing looking back over the mags 10 or even 20 years ago. There was UK representation from 26 ft up to 80 - 90 ft. Look at the mags now, and there's still a great range of boats in these sizes - from Beneteau/Jenneau etc to the fab Absolute 52 and MCY 70 ft in this months M&Y. The Europeans still seem able to produce at volume and price, but the designs are changing in ways that UK builders seem unable to replicate - far from out innovate.

 

[MapisM]

They perhaps need to keep a roll of red carpet ready just in case Mr Vitelli happens to be passing by the Plymouth area

Blimey J, I just replied to your comment on Mr.V on FL thread, and now I read this. Do you mean that...
...Nah, coming to think of it, forget it.
I know you couldn't comment, if you were working on that. But just in case, good luck! :encouragement:

PS: btw, funny that - spot on as you are (obviously) on shareholding structures with investment funds - most often than not, the general perception is that there are "big corporations" behind them, as rafiki put it. "Millantato credito" is the IT expression for that, but I can't for the life of me think of an appropriate translation....

 

[jfm]

No no! You're "over reading" my comments MM!. I'm not doing anything with Mr V. I was commenting just on the facts of life currently at Princess, in response to the "backing of big corporation" statement. Princess is a private equity controlled company bought at 2008 prices and cannot be anywhere near on plan if it is consuming cash 7 years on. It is hard to reverse engineer LBOs from published accounts even if you understand the industry but it at least looks like L Capital's investment is underwater and the management equity is literally worth the paper its written on (I could be wrong on those things; happy to be corrected). They will no doubt be working hard on how to restore value and would love a great exit like FL's exit from s/seeker, but seriously where is that going to come from? Mr V isn't an impossible answer to that question but a guy (perhaps the only guy?) who has big-time navigated 2008-till-now in this industry with outstanding financial success is surely not likely to be interested in P at a price that will give a +ve return to L. So, things have to change at P (and maybe they are already executing a plan, and I wish them well in that, but for the thing to be successful they need to be shooting for an enterprise value of say ballpark £200m and unless my calculator needs a new chip they are some way from that number)

(I owe you a reply on other thread - will do)