A Regal Recovery – Princess Yachts
Princess Yachts is back in the black, with a record-breaking £770 million ($1 billion) orderbook – the highest in the company’s history.
Even with an orderbook up 20% from 2016, Princess is not resting on its laurels. Princess also hinted at an additional six new model launches in 2018, including a new carbon-fibre sports boat, the R35.
Princess attributes its sales in 2017 to a strong showing at the international boat shows, a boost in marketing and a substantial investment in production – including hiring more than 500 new members of staff last year.
Antony Sheriff, executive chairman of Princess Yachts, said: “This has been a landmark year in the history of Princess. We have a clear vision to be the highest-quality, most-innovative and best luxury yacht producer in the world, and it is gratifying to our highly skilled and dedicated 2,700-strong team that the market has responded in tune with our efforts.
“With our exciting launch plan this year of unique and exceptional yachts, coupled with our unprecedented $1 billion order book which stretches well into 2019, 2018 is set to be another record year for sales and profits.”
The yacht builder saw positive results all round, with a £274.4 million turnover in 2017, up 26.6% from £216.7 million in 2016. Princess also hit profitability in 2017, with profit of £7.9 million. The shipyard had made significant improvements in 2016 but not enough to land it in the black, it cut its net loss from -£20 million in 2015 to -£12 million in 2016.
How it was done
In January 2016, Princess Yachts embarked on a major restructuring process, where the shipyard plan to cut 350 jobs. The company later confirmed 172 jobs were cut in March 2016.
In the wake of the global financial crisis that kicked-off in 2008, shipyards had to manage in an environment where both new and old customers were not buying new yachts. Global superyacht orders dropped from around 260 in 2007 to around 110 in 2009.
Whilst the market was weathering the storm, real warning signs for Princess started to show in 2014, when the company saw a net loss of £11.3 million compared to a profit of £4.8 million the previous year.
In 2016, Princess decided to restructure, cutting the workforce and production. It streamlined the building process and launched new models across its M Class, S Class, V Class and FlyBridge ranges.
As Mr Sherriff puts it: “It is common to find companies that will discount heavily to fill the orderbook and keep the production running.
“Rather than do this, we initially cut production in order to stabilise the company. This worked out well because when I joined Princess had some fantastic new products being developed which drew interest… Over time, even though demand was increasing, we held firm and tried to keep the production steady whilst we were improving our stability, quality, reliability and deliveries.”
In the background, the weakening pound in the wake of the Brexit vote is also an attractive proposition for new owners to buy a British yacht. With the number of working UK shipyards falling over the past decade, the remaining yards like Princess and Sunseeker are well poised to make the most of the resurgence of interest from international customers. When Princess’s order book began to grow last year, it cited Brexit as one of the key reasons prompting it to bring on more workers.
As Mr Sheriff added: “The lower value of the pound in 2016 definitely gave us an advantage, especially in comparison to 2014. Our boats were less expensive for international customers, which was attractive for them. However, we also saw a lot of business within the UK where the exchange rate means nothing.”
Fresh Financing
The shipyard has steadied its financial standing this year, securing a multi-year facility with banking group HSBC in January. Graham Maxa, Princess’s chief financial officer said: “The decision to move to HSBC complements the company’s existing business partners and provides strong support to the growth of Princess’s aggressive development plans. This strength, together with HSBC’s global reach, will support growth internationally and keep the company on a solid positive financial trajectory for the rest of 2018 and beyond.”
Princess also established a £100 million investment programme in September last year in the wake of its successful showing in Cannes where it ended up securing £640 million in orders, an 85% increase over 2016 – the Telegraph reported.
The funding was provided by the company’s core financial backer L Catterton, which has been a key investor in the company since 2008.
“When I came in, I had a firm agreement and commitment where we came to the same conclusion that we needed to invest very heavily if the business was to grow and reach its full potential. We agreed on investing £100 million in the company over five years. Most of this is going into upcoming models but substantial investment is also being made into modernising the facilities to make sure they are up to the job of producing the highest quality boats possible,” Sheriff said.
