Facts and figures:
Population — 60.1 million. Language — English. Boat ownership per capita estimated at around 107:1.
Currency — Pound Sterling (£): £1=B1.400, £1=US$2.056. The euro has strengthened slightly against the pound over the past year, which has worked for UK exporters to the Eurozone, but has done importers less of a favour. More importantly, the US dollar has continued to weaken against both the euro and pound, making things ever harder for exporters to the US. Those importing US products are consequently finding things much easier.
Government — Stable. Former longstanding Chancellor of the Exchequer Gordon Brown is now prime minister and leader of the Labour Party (centre left). Brown took over when Tony Blair, PM since May ’97, stepped down in order to give his successor a good run up to the next election, which could well be called next year, even though there is no constitutional requirement until 2010.
Economy — Having nudged up interest rates a little over the past couple of years to cool the British economy down, the Bank of England recently took the decision to trim them down again and not by the expected quarter point, but by a half point, which suggests there is real concern over the recent banking industry crisis that has its roots in the US and the sub-prime mortgage sector. The UK base lending rate is currently 5.5 per cent.
House price inflation, a big concern up until a year ago, has ground to a halt, although the values of British homes remain at an all-time high.
Restrictions — Moderate VAT rate of 17.5 per cent. Boating education and registration schemes available, but voluntary stance (although compulsory registration on a few inland waterways).
Industry Body — British Marine Federation (BMF),
Website: www.britishmarine.co.uk.
Contact: Rob Stevens — Chief Executive.
Key Boat Shows (3)
— Collins Stewart London International Boat Show. Held annually in early January. Now attracts in the region of 640 exhibitors. Around 130,051 visitors attended the 2007 event, 15,000 or so less than the previous year and way down on the figures regularly generated by the event at its old Earls Court venue; the poor results have fueled dissatisfaction with the event among certain members of the UK marine trade.
— Southampton International Boat Show. Held annually in mid-September. It attracted 600 or so exhibitors and 127,345 visitors in ’07, quite a bit less than the tallies of a few years ago.
— Whyte & Mackay Earls Court Boat Show. December 1-9. The jury’s still out on this one, which had its first showing in December ‘07. Lower than expected attendence figures were a disappointment. However the consensus among exhibitors and those that did attend was that the show was well organised and had been imaginatively laid out.
The past year was a peculiar one for the UK marine leisure industry. How successful a company was depended on what sector it addressed and the extent of its export activities. For those relying on the domestic market, the big issue was the weather.
It was a bad year on that score. The UK’s summer was virtually non-existent. After a very encouraging start to the year the summer registered officially as the wettest since records began.
British marine chandlers and anyone else selling small boats whose customers rely on sunshine to warm up their enthusiasm every season, weren’t happy.
Another big knock to marine industry confidence this summer was failure of major boat-sales operation Peters PLC — quite a shock as CEO Brian Peters was an industry stalwart of considerable standing, not to mention actually president of the BMF at the time of his company’s demise. But the failure of that business was not really linked to the health of the UK or European markets it principally addressed, but rather to the loss of a longstanding distribution agreement with Fairline a few years earlier. It tried to replace that brand presence with hook ups with both Azimut and Sealine during the past couple of years, but ultimately the shock was too severe. The fact that it continued to represent the likes of mainstream sailing cruiser giant Bavaria and others wasn’t enough to sustain it either.
Bad weather and the Peters tumble aside, the UK economic backdrop has certainly been shifting a little lately, but overall things are far from unhealthy for marine leisure business. Consumer confidence is beginning to show signs of slipping — a succession of interest rate hikes has had the desired effect of taking the heat out of the property market. As of December ’07 rates have now been promptly dropped by a half point — a move to offset the recent melt down in the US’s sub-prime mortgage industry and the impact to world banking. A UK high street bank got into serious trouble too this autumn and required considerable multi-billion pound assistance from the UK Treasury. That had and probably will continue to have repercussions.
But for now any evident slowness in the UK marine leisure demand needs putting into context. It should be remembered that things have really been very good for much of the past decade or more. And for many businesses only the past couple of years have started to get a little tougher.
There is actually plenty of positive news out there. For instance, take the British marine leisure industry’s big exporters: for many of them business is better now than ever and turnover records continue to be set every year. The likes of Sunseeker, Princess and Fairline still look unstoppable, with order books that stretch far ahead. But then their export percentages are sky high and their risks are spread far and wide, selling boats as they do just about everywhere in the world.
The other big benefit for those big three motorboat builders, plus the likes of the UK’s other premium yacht builders Oyster, Pendennis and Devonport, is the fact that they are in the luxury goods arena, which in certain financial circles is increasingly being viewed as recession proof, free from the kind of ‘cyclicality’ that has always dogged mainstream consumer confidence. Time and perhaps a global recession will be required to put that theory properly to the test. But for now it is true enough that demand for top end boats — just like a number of other premium markets, such as fine art, haute couture fashion, luxury cars and, at the very top end, private aviation — seems insatiable.
All the serious big boat players here and abroad seem to be thriving from ever-bigger, ever-more valuable product. This means that the equipment manufacturers and distributors that have been supplying the ‘big guys’ here, and of course their competitors abroad, also have very little to complain about.
Even in the US, where recession is on everyone’s lips and the dollar is on its knees (and threatening to go lower still) people are still spending at the top end of the boat market. The only difference there is that big means 70ft-plus sector. That business is important for the likes of Sunseeker, Princess and Fairline. Generally the top half of their ranges seem to be doing better than the bottom half.
Take a look at how a few of the big names have been doing:
Sunseeker International
• Record £230 million turnover for ‘06/07
• And £26 million budgeted for ‘07/08
With a portfolio that now includes some 20 or so powercruiser and motoryacht models from 10.4m-39m (34ft-128ft), Poole, Dorset-based Sunseeker International, the world’s second-largest privately owned yacht builder, reported annual sales of £230 million on the sale of 310 boats for its year to the end of July ’07 — a 14 per cent rise over last year’s figure of £202 million. Moreover, the company’s operating profit also rose significantly — up 71 per cent from £7.3 million to £12.5 million, which equates to 5.4 per cent of sales. The budget for ‘07/08 is yet more growth.
“We expect to see turnover reach around £265 million,” says CEO and chairman Robert Braithwaite. “Our order book is strong. In some cases delivery slots stretch through until 2011. The net profit figure for the coming year will also increase. It should end up close to £16 million. So obviously our investments are starting to pay off as regards efficiency too.”
There is no question that ever-bigger boats are the principal source of all Sunseeker’s sales growth over the past decade and more. Indeed the production tally has fluctuated around the 300 mark for years now. At the moment the operation delivers something like 45 boats a year that are 24.4m (80ft) or longer. It currently builds a dozen — or one a month — of each of its popular Predator 82 and 82 Yacht models. Then it turns out another 10 — or one every five weeks — of its 90 Yachts and some four Predator 108s a year.
The 2007 London Boat Show in January saw the debut of its new flagship 37m (121ft) tri-deck motoryacht models unveiled. The second handed over during the summer and the third should leave before the end of the year: Three of them a year is ‘to plan’. Seven more are on the order book.
The 2008 London Boat Show should see Sunseeker show the first of its new 34m two-and-a-half-deck raised-pilothouse model, 14 of which have already been sold; it plans to build four of those a year. April will see the launch of the new Predator 92 and there will be a two-and-a-half-deck raised-pilothouse 30m (100ft) to unveil hopefully for London 2009.
Looking even further ahead still, a new 39m (128ft) flagship model, probably to be known as the Predator 128, is in the ‘business plan’. Two orders have already been taken.
As to Sunseeker going bigger still, Braithwaite admits it is inevitable, though stresses no firm decision has been taken. “We will probably go to a composite 43m-45m (140ft-148ft), but the first thing we do will be to start a tank-test programme.”
Other new models for ’07 included the 70 Yacht, 52 Predator and 52 Manhattan.
Beyond the considerable funding of model-development work, significant capital has also been made available for expansion of capacity, including the acquisition last year of the former Legend Yachts facility at Osprey Quay, Portland, on the UK’s south coast, which has already produced two Predator 108s that were fitted out in Poole while the new 34m was moulded there.
Further expansion is also underway at New Quay Road in Poole, with the building of two new shipyards — not to mention a new 300-tonne hoist — at an estimated total cost of £10 million over the next two years. The first of those halls comes on line in April and eventually the site should be capable of accommodating four 34m (112ft) models at any one time.
Overall the company now employs around 2,000 people directly – which means a sales-per-worker ratio of £130,000 — and the budget for the coming year will require another 140 staff to be found.
“Geographically things remain good just about everywhere, save not surprisingly for the USA,” says Braithwaite. “Overall our business in the States is slightly down, just some 25 boats a year now whereas a couple of years ago it was a consistent 30 or so and before that even more. But then everything we budget for the USA we still sell, and just about all our boats destined for the US are 70ft (21.3m) and above. It’s surprising considering the economy and the atrocious exchange rates, but the US market is still amazingly good when it comes to the bigger stuff.”
Sunseeker’s European market remains incredibly strong. “Just about all our dealers there could have taken more boats had we been able to build them,” says Braithwaite. “Russia continues to do well And the Far East continues to surprise. We’ve now sold a lot of boats to China and Hong Kong, many of them 60ft-plus. Australia is also very good.”
Princess Yachts International
• £200-plus million turnover
• 380 boats a year
With a portfolio that now includes 16 models from 11.6m-29m (42ft-95ft) — nine flybridge models and seven open/hardtop express cruisers — Princess Yachts International continues to break all trading records. When its books close for calendar ’07 its sales should end up at between £200-£205 million, which will equate to a value growth of at least 25 per cent over the previous year’s £160 million or so, which incidentally was also up by an impressive 20-plus per cent.
Unit volumes rose less markedly. In all the company delivered 380 boats during ’07, up from 360-365 or so the year before and 320-325 the year before that.
Forecasts for the year look positive. “I’m never keen on sticking my neck out and tempting fate,” says the company’s longstanding managing director David King. “But I have to admit things do still look very good. Don’t ask me why but sales seem to be stronger than ever and just about all the recent shows, save for the American ones, have been big successes for us. Our order book is up 15-20 per cent on what it was a year ago. What’s more, the growth we’re seeing is both ways, meaning we’re not only selling higher value boats, but also more boats. Based on the order book alone I expect to see at least another 10 per cent on turnover for calendar ’08 and that will be capacity restricted. We’ve got another big new hall under construction but the effect of that won’t be felt until the second half of the year. Through ’08 I expect to see five per cent growth in the first six months and probably 15 per cent in the second half of the year.”Much of the increase in unit numbers now and on the order book are down to additions to the portfolio, particularly the high-volume V45, which is available with optional Volvo Penta IPS drives. It joined the line-up a year ago, so 2007 was its first full year in production. The other addition is the new range-topping Princess 95, although that one’s impact is more on values than units.
The success of that flagship model, which actually measures 29m (95.7ft) overall, although her official load-line length is just 23.99m (78.8ft) and so just under the important 24m (78.9ft) certification barrier, is already assured. Orders for that one already stretch through until mid-2010 and currently they number in the ‘low teens’.
A five-year-old facility plays a big part in the company’s development of bigger models and interestingly it could conceivably cope with hulls up to almost 37m (120ft) in length, which means future flagships could have LOAs conceivably as big as 40m (130ft).
Occupying 55 acres of land area on four sites in and around Plymouth that include 15 factories and a site area that adds up to around 100,000m2 (1,000,000ft2), Princess employs 1,800. So based on its ’07 turnover projection the sales-per-worker ratio is just under £114,000. But the ratio is improving all the time thanks to the company’s investment over the past few years in lean-manufacturing programmes. Despite growing its sales by around 25 per cent — probably 20 per cent in real terms once allowances are made for inflation — its headcount only increased over the past year by around 12.5 per cent.
“For sure we have already achieved a great deal with our lean culture,” says King. “But we’ve still got a long way to go. We’re probably three to six months behind where we want to be. At the moment we’re something like 70-75 per cent lean and another year should see us well advanced. The benefits of lean thinking directly impact the bottom line, but also mean we are so much more space efficient. It literally allows us to build more boats a year. Our net profit is currently around 10 per cent and to put that percentage into perspective, the figure was around seven per cent three years ago. Believe me when I say to put a percentage point on the bottom line every year for the past three years is serious stuff, especially while growing the company at the sort of rates we’ve been achieving at the same time.”
Naturally most of Princess’s business comes from export markets, but the raw percentage figures are a little misleading. Around 15 per cent of sales are in sterling, but two-thirds of that come from boats that will be kept outside the UK.
“Geographically just about everywhere, save for the US, is doing well,” says King. “And in the US, although things are down quite a bit, business doesn’t really look too bad there, particularly for bigger models. Considering the economic situation there and the weakness of the dollar we’re not doing too badly.” In the USA Princesses are branded Viking and most of them tend to be 15m (50ft) or bigger models.
“In Europe even the well-developed traditional stronghold markets of the UK, France, Spain and Italy, continue to show moderate to strong growth — say, 15-20 per cent. And across the rest of the world we’re looking at 20-25 per cent growth in most places and a lot more in some of the ‘hot’ emerging markets“
Plenty is going on as regards product development. For example, a V85 joins the range in January ’08. Up to now the largest Princess hardtop powercruiser model has been the V70, which joined the line-up just over three years ago.
For the middle of next year expect to see the Princess 85 Fly introduced and at some stage the all-new Princess 50 Fly will replace the existing 50.
Fairline Boats
• Record 2007 turnover of around £131 million
• Record order book of £104 million
Celebrating its 40th anniversary this year, Fairline Boats, which ranks as the UK’s third-largest boatbuilding entity behind competitors Sunseeker and Princess, continues to thrive. When its books finally close on calendar 2007 its consolidated sales for the period should end up at another record, somewhere around the £131 million mark from the sale of 292 boats. The previous year saw sales of £125 million on a similar number of boats, clear evidence that the company’s growth continues to come from larger size boats rather than greater volumes — the average Fairline has been over 50ft (15.2m) for quite a few years now and is well on the way to 55ft (16.8m).
Moreover, so good is the forward order position this autumn that it now has some £104 million worth of contracts on its books, a record in itself. “And that number relates to orders secured by proper deposits,” says the company’s chairman and managing director of the past 12 years Derek Carter, who together with fellow directors successfully concluded an MBO in May ’05 with the financial backing of 3i. “In real terms our order book value is something like 50 per cent better than the same time last year, when it would have weighed in around the £62 million mark.”
Via network of some 50 dealers in 35-plus countries, 80-plus per cent of which are now exclusive to Fairline, export sales currently account for over 85-90 per cent of business.
“We’ve seen no real surprises geographically over the past year,” says Carter. “There was a slight reduction in value terms in the USA, but nothing really significant. Our business is now so well spread that the odd slow market, even one as important as the USA, doesn’t impact us too greatly. Our main markets in Europe maybe mature, but we’ve still been able to find pockets of growth there and new opportunities elsewhere in the world, which together have actually more than compensated for any slowness in North America. Best of all have been the oil-based economies — Scandinavia, Russia and the Middle East. Croatia has also been remarkable too. The Far East and Australia have all done better than expected over the past year or two, so our risks are spread comfortably. No one area represents more than 12 per cent of total sales.”
Fairline’s top-line numbers are not the only ones improving either. Its bottom line has also climbed and at a sharper rate, a fact that is bound to please its private-equity backers.
Fairline currently employs just 1,300 people, only 100 more than it did two years ago, which means it has managed to grow its turnover 30 per cent over the period without increasing its direct-labour costs by much more than eight per cent. Its sales-per-worker ratio is currently £101,000, a bit behind Sunseeker and Princess, and much the same as Sealine. However, Fairline has been striving to improve its productivity and profitability on several fronts for the past few years and the results are now starting to kick in, so its efficiency levels are starting to climb.
Two key areas of improvement have been its lean-manufacturing initiatives and a 21st century approach to supply-chain management, which together have effectively helped the company eliminate waste and, in the process, increase capacity. Those initiatives are what are really impacting the company’s bottom line. Its net profit for ’07 should be in excess of 10 per cent, up from the ‘under sevenish’ per cent or so a year ago.
A third improvement relates to its efforts to be equally lean in terms of distribution. Some 18 months or so ago Fairline took what some would have considered a high-risk move to sever its ties with Peters PLC, a longstanding distributor. That Fairline has seen solid sales growth since underlines the fact that what from outside the company could well have seemed a high-risk disturbance to a well-established distribution network, was actually a very smart move. Now Fairline deals with all its dealers directly on one level playing field and over the past year alone Fairline has opened up 22 new sales locations globally.
Of course, new models have also had a lot to do with Fairline’s sales successes of late. The current model line-up continues to include a dozen or so models across three distinct sub-lines — five Targa powercruisers, three Phantom flybridge motorcruisers and four Squadron motoryachts.
The newest two models in the line-up are the new Targa 44 IPS and the Targa 64 Gran Turismo.
In 2008 two more new models will join the line-up. The first to launch in May will be the new Squadron 55. At the back end of the year we’ll see a bigger Targa, probably around 23m-24m (75ft-78ft). Beyond that we can expect to see a new entry-level product join the range, something between 30ft-34ft and in the not-too-distant future a squadron as big as 25m-26m (83ft-86ft), which would be the biggest that it could possibly accommodate at its current inland facilities. When it launched its current flagship, the Squadron 74 Custom, a few years ago, it believed it would have to establish a coastal operation to build bigger, but it seems delivering by road is now feasible following negotiations with various local councils and the Department of Transport.
“We see our core market as being 9m-26m (30ft-85ft),” says Carter. “Within that sector the business remains a production operation. Bigger than that and the business becomes more a semi-custom building scene, which is not what we’re about. That end of the business requires a very different production and distribution approach. It would also have meant establishing a facility on the coast and that would be difficult, as all our structure is round the Oundle and Corby areas”
Fairline now occupies around 34,000m2 (365,000ft2) of factory space across three Northamptonshire sites in Oundle, Weldon and Nene Valley, its Ipswich pre-delivery inspection centre and its US sales and service facilities in Ft Lauderdale, Florida. And facilities are being added and improved all the time. For instance, a major 6,000m2 (65,000ft2) expansion of its facilities in Nene Valley opens this Christmas and that represents an investment of £8 million. Plus a completely new off-site administration building in Oundle will replace the existing old on-site facilities in 2008.
“Both those moves should give us sufficient capacity for the next four to five years of growth,” says Carter. “At the moment we have three models over 60ft (18m), but within three years we will have pushed that up to five models. Our future won’t just be about building ever-bigger boats either. We also see plenty of potential in the 30ft-55ft sector, which some of our competitors seem to have neglected.”
As for the year ahead, Carter says he expects to see consolidated sales of around £145 million, which will equate to 10-11 per cent growth and even stronger profitability gain.
Sealine International
• New direction
• Innovative new models
Since 2001 part of the Brunswick Corporation, the world’s largest boat and engine-building conglomerate, Sealine International remains Britain’s fourth-largest production boatbuilding operation, although a couple of years ago it lost some ground to the top three players. Having peaked in ’04/05 when it employed 700 people and delivered around 360-370 boats to a value of around A65 million, it currently employs around 580 people directly, builds some 300 boats a year and turns over something approaching £60 million and happily is back on track.
“Yes, the company had some problems,” says managing director Steve Coultate, who joined the company with a restructuring brief some 18 months earlier; he was previously one of the senior management at Land Rover, so has plenty of experience of volume production and premium branding. “It had rather lost its way. However, we’re now busy getting back on track and we’ve moved faster in reality than we could have hoped.”
Pretty much the whole company has come in for a shake up. For instance, much of the Sealine management team is new and a ‘right first time’ lean culture is being phased in. “There was a lot to do and a lot that still needs to be done, but obviously we couldn’t tackle everything at once. We’ve tried to make intelligent choices as to where we spend our money, so we’ve prioritised some areas — we’ve spent rigorously to improve things that affect what our customers want directly, but have been more judicious elsewhere. Without doubt our new products are having a huge impact on our results. Our 2006 and 2007 years actually ended up much the same, down a bit from previous years. But we’re looking at a better 2008.”
These days the Sealine range includes just a dozen or so models from 7.6m-18.3m (25ft-60ft). The smallest is the S25, then there’s the S29, SC29, F34, new SC35, F37, new SC38, SC39, S42, F42/5, T50 and T60.
As for new models, 2007 saw two new models join the line-up. The first, the 38SC, was unveiled at the London Boat Show in January. And then Cannes ’07 saw the unveiling of the SC35, which boasts an exceptionally wide beam for size and consequently a remarkable interior volume. Indeed the beams of the two models are virtually the same. Certainly both models benefit from some particularly innovative design inputs, not least their sharp modern styling outside and some equally contemporary interior work.
“These latest Sealine designs, and what will be following them, really reflect where we’re aiming,” says Coultate. “They may be relatively small boats, but they’re designed to have a big impact.”
Exports account for around 50 per cent of Sealine’s sales, which means this yard is a lot more reliant on UK market health than the other three big powerboat players — Sunseeker, Princess and Fairline. Amid all sorts of restructuring at the company, UK distribution arrangements have been adjusted. Now Sealine has six dealers that look after the UK and Ireland. A major coup was the September 1 appointment of Ancasta, one of the UK’s biggest new-build and brokerage boat sales operations. Ancasta looks after Sealine’s prime South Coast region. Another shake-up came this summer when it brought to an end a short flirtation with Peters PLC, once one of Europe’s biggest boat distributors.
As for non-UK markets, things are generally healthy throughout Europe, with the odd exception, according to international sales manager Doug Culverwell. As for the US, Sealine is not currently represented there, which is a shame considering its parent companies’ dominance of that continent, but then the weakness of the US dollar would make life difficult there for Sealine at present.
“Of course, we hope the North American market will eventually be very important to us,” says Coultate. “But our strategy there needs to be done properly. We should be able to tap into the Brunswick expertise over there, but getting our positioning absolutely right will be crucial.”
In terms of units, approximately 60 per cent of Sealines are actually sportscruisers but, when it comes to value, the situation is reversed with around 60 per cent of the company’s sales being earned from the bigger flybridge models.
Overall, the operation now boasts around 40,000m2 of covered area. Everything is on the one Worcester Road, Kidderminster site, save for its Fibratrim upholstery subsidiary in Burntwood, Staffordshire, and its Hartlebury lamination centre, which is busy introducing closed mould techniques to the company’s activities.
Orkney Boats
• 320 boats a year
• Stable turnover
When it comes to motorboat production in the UK, not everyone is interested in the top end of the market and ever-bigger boats. Take, for instance, Orkney Boats. Its current portfolio includes a dozen relatively small composite runabouts and fishingboats, all capable of being trailered. The smallest three are dories — the 3.15m, 4.24m and 5.05m. Then comes the Orkney Spinner 13, the Orkney Four40, the Orkney Longliner 16, Orkney Vanguard 170, Orkney Vanguard 190, the new for autumn 2007 Orkney Five20, the new for early ’08 Orkney Five92, the Orkney Pilothouse 20 cabin-cruiser and the Orkney Pilothouse 24 cabin-cruiser, which by the ’08 Southampton International Boat Show should have metamorphosed with lengthened hull, new deck and redesigned wheelhouse into the new Pilothouse 27.
Taking its name from the group of islands off the north coast of Scotland, Orkney Boats is actually located in Arundel, West Sussex, about as far from the Orkneys as it is possible to get on the UK mainland. Incidentally the choice stems from the yard’s first model, the Longliner 16, the first of which was built in 1973 and is still in production. The moulds for that design were taken from a traditional wooden fishingboat design from the Orkneys.
Employing 23 people directly, Orkney Boats’ turnover has fluctuated over the past few years around the £2 million mark, according to company director Chris Powell. Its best-ever result was £2.1 million in ’05. In ‘06 it was £1.9 million and ’07 looks set to close at £1.95 million.
Generally outputs have been falling, but average values have increased thanks to a general trend for higher specifications, which has enabled turnovers to stay up. The yard presently builds around 320 boats a year.
Orkney Boats sells direct in the South-East of England, but makes use of a further eight dealers to cover the rest of the UK.
As to the health of Orkney’s domestic market, Powell admits ’07 felt tougher than ’06. “Its hard work out there for our size of boats at the moment, but we find the business is out there if we work hard at it It gets harder and harder to keep dealers on their toes and stocking the product. Also its increasingly difficult to compete against the cheaper imports from Poland that are brought in by the outboard companies. So, as for the year ahead, we expect more of the same.”
The potential in export markets is rather limited, says Powell, principally because of the relatively low values of what are fairly small boats, so they don’t tend to ‘travel’ cost-effectively. However, Orkney says it does have one successful importer in France, one based in Northern Brittany. And it has less active representation in Switzerland, Germany and Holland.
Raymarine
• Outsourcing 100 per cent
• Significant gross-margin improvements
The past three years have proved interesting for British marine electronics company Raymarine. Three years ago in December, the company floated on the London Stock Exchange, so that it now has a full listing with around 85 per cent of its shares on the open market. Then in summer 2005 came its decision to outsource production which has had a huge impact on the company’s bottom line and helped unlock capital. Certainly its gross margins are significantly up as a result. They improved from 42 per cent to 47 per cent over the past year alone. Raymarine’s outsouring partner is the US-headquartered global sourcing operation Flextronics, whose client list also includes the likes of Cisco, Ericsson and HP.
“The switch to outsourcing has left us concentrating on what we really do best,” says Raymarine’s CEO Malcolm Miller. “That’s developing new products, marketing, distribution to 80 countries around the world, servicing and so on.”
Raymarine’s sales for the first sixth months of ’07 reached £83.7 million, up very slightly from the £83.4 million of the same period the previous year. The turnover for calendar ’06 was a record £136.5 million, up 12 per cent on ‘05. The final ’07 turnover figure will not be available until February ’08.
“The past year has been interesting,” says Miller. “We’ve seen our UK market improve. The first six months of the year here were up 10 per cent compared to the same period the year before. Over the same period non-US business was up 14.7 per cent, but in the US we saw sales drop by 3.2 per cent, predominantly owing to the US dollar devaluation and slowness at the retail level, which mostly reflects the smaller boat market. For us the OEM activity in the States was actually up 12 per cent, but that position reflects the fact that the bigger boat market is still doing reasonably well and that generally builders are putting more equipment on their boats — increasing specifications are good for us. For the coming year we’re expecting to see the US market flat overall, but the rest of the world up 10 per cent.”
The City has not responded well to recent Raymarine reports, however. At the time of going to press, its share price was £2.68. At issue it was £1.52. Since then it peaked at £4.90. “That’s more about the market being wary of what is happening in the US, says Miller. “And the fact that our sales are down there. But the underlying position is still strong. As far as we are concerned this is simply a short-term lack of confidence, which always impacts this business. Long-term the marine leisure market has been around a long time and has still got everything going for it. New products are the key to our continuing success. People buy new stuff and get switched on by new things. We’ve got plenty that’s new and a lot more coming new for this season: we have AIS, G Series, ST70, new radios and a lot more beside.”
At the moment Raymarine employs around 570 people. It had 650 employees at its manufacturing peak a few years ago, but lost 200 people by moving to outsourcing. Since then it has taken on a considerable number of extra support staff. “The move to outsourcing means we need different people, not necessarily fewer people” says Malcolm Miller. “For instance, we now employ 170 engineers.”
Acquisitions also figure in the company’s strategy. For example, recently Raymarine acquired several of its longstanding distributors. SD Marine in France, Eissing in Germany and Oceantalk in Australia, which it already had a share in, have now been absorbed fully into the group. It’s about getting closer to the end users and cutting out a margin element.
And the future will almost certainly see more acquisitions, and not just distributors, but other manufacturers and service companies. “Our acquisition strategy will be vertical as well as horizontal,” says Miller. “We’re always on the look out for complementary electronics and electro-mechanical businesses. We’re talking to several potentials.”
Lewmar
• Major aftermarket gains
• Grand prix and custom sector gains
Lewmar PLC’s CEO Peter O’Connell, who spent 15 years with the company’s Navtec subsidiary in the States before taking over the reins at the headquarters a couple of years ago, reports a good year. He says his company’s business year went pretty much to plan. Not only did turnover for the year to the end of June ’07 increase to a new record of £58 million, up from the £55 million reported for the previous period, but also it happily managed a significant margin improvement.
But then the previous year’s bottom line had been poor. Overall the company reported a loss of £9.4 million then, most of which was not down to poor trading, but rather goodwill write-offs relating to the acquisition of Lewmar at the end of the ‘90s by Clyde Marine PLC, which was incidentally the holding company’s name until it switched as of August 2007 to the better known industry brand.
“Our 2006/07 year was good,” says O’Connell. “We’ve made a continuous effort across the board, but we’re particularly pleased with our aftermarket advances. We’ve tried hard in that area to help compensate for the increasingly price-competitive OEM sector. Aftermarket margins are a bit better. The aftermarket has even been good in the USA too. In fact in the US the gain on that score was sufficient to more than compensate for the slowness of the OEM sector over there. We managed year-on-year growth in the US market overall. Non-US aftermarket sales grew by 30 per cent. A major ingredient in our aftermarket successes was a good global marketing plan.”
Also doing well is the grand-prix sailboat and custom sectors. “Investments in both those areas over the past 12-24 months are now starting to pay off,” says O’Connell. “A year ago we were working hard calling everyone and making sure they knew what we were doing and what we were capable of. Now happily it’s going the other way. People are calling us up and the business is coming in. The raceboat scene is good on several levels. We’re involved with a large number of top boats. And interestingly it’s not only been about that business entity in its own right doing well, but also we’re benefiting in other more mainstream areas from spin-offs, particularly on the winch side.”
Another area of significant growth is Lewmar’s hatch and portlight business. At peak times, production, which for that product group is still incidentally all located in the UK, has been getting up to 1,000 or so hatches and portlights a day.
Having said that there have been several outsourcing initiatives, mostly in the Far East. There are several cited advantages, not only because of keener pricing, but also because it frees up capacity at the main Lewmar plant in Hampshire. Nearly all windlass production is now in Thailand.
Overall, roughly £35 million of its current turnover stems from the OEM sector and £25 million from the aftermarket. But of course sales come from both Lewmar and Navtec divisions.
Overall the Lewmar group employs around 530 people directly. Most of them are located at Havant, but then there is Lewmar’s steering systems division in Luton, the old Whitlock site and the US-based rigging specialist Navtec/Lewmar USA with its operations in Guilford, Connecticut. Plus there are Lewmar subsidiaries in the Netherlands, France and Australia, which looks after its Pacific Rim interests.
Product development is seen as key to the group’s future and there are a number of new product initiatives that should impact sales positively in the years ahead. Plenty of work has been put into the windlass programme, especially for entry-level motorboats in the 7.6m-9.1m (25ft-30ft) range. And the captive portfolio has been expanded downwards to penetrate the smaller sailboat market. Plus there are new flush portlights, new classic-look winches and new generation equipment from Navtec.
CJR Propulsion
• £1 million a year growth
• Major machine tool investments
Employing 46 people on two Southampton sites — a 2,300m2 (25,000ft2) foundry and finishing plant and a 2,300m2 (20,000ft2) engineering facility — CJR Propulsion traces its roots back as far as 1946, when the current managing director Mark Russell’s grandfather started the business as a metal-polishing operation. Propeller polishing eventually led to propeller machining, which is what it still does today. However, now the offering is a little broader, meaning the whole sterngear package, effectively everything ‘aft of the gearbox’ — shafts, props, glands, bearings, brackets, rudders and so on.
For its 2006/07 year the company managed a turnover of £5.2 million, which was up impressively around 30 per cent. For ‘07/08 the forecasts suggest there is a similar amount of growth to follow. The budget is £6 million, but as things stand sales are well ahead of target, so the final result could easily end up around the £6.5 million mark, says Russell.
Roughly a third of its turnover is derived from propellers, a third from shafts and a third from the other complementary items and sub-systems.
Up to now direct exports account for just 10 per cent of the company’s sales, but then indirectly it’s more like 90 per cent as the company is a key supplier to the likes of Sunseeker and Princess, which both incidentally more or less tie for the honour of being its biggest client. Not surprisingly, therefore, CJR Propulsion’s growth largely mirrors its clients’.
“We have grown rapidly with our existing clients,” says Russell, “but now we’re looking to broaden our offerings and the market focus geographically For the future we hope to penetrate a lot more markets, especially the doorstep ones in Europe. We have a representative in place in Italy, but, for instance, we sell direct to Germany. We do need to strengthen our distribution network.”
The biggest overseas client for CJR Propulsion thus far has been Gulf Craft in the Middle East.
Barton Marine Equipment
• Sailboat hardware specialist
• 15 per cent growth
• Record 2006
Employing 30 people at its 1,900m2 (20,000ft2) Whitstable, Kent facility, Barton Marine Equipment specialises in sailboat hardware, principally blocks and mainsheet/genoa systems for boats up to 15m (50ft), but also other complementary products and accessories.
Exports business accounts for around 70 per cent of its undisclosed turnover. The majority of sales come from Europe, but its market penetration is said to be truly global, which these days is pretty good going for a hardware company whose portfolio is 95 per cent manufactured in the UK — and 80 per cent is produced in-house, says director Paul Botterill, who, along with fellow director David Coleman, owns the business. Coleman acquired the business some 21 years ago and Botterill joined him a few years later.
As to current market health, Botterill says Barton is doing well in a challenging marketplace. Last year the company managed to grow its turnover 15 per cent to a new record and the target for the year ahead is for another 15 per cent.
“For us the UK market has been fairly static, but the disastrous weather during the year (2007) was certainly noticeable. As for the year ahead that should be much the same as usual, providing the weather isn’t too bad of course. If the market for new boats contracts, that should help us, as people holding off on new-boat purchases will often compensate by spending more on their existing boats. That’s actually good for us. Also working in our favour is the trend for safer sailing. The more people want lines led aft to cockpits, meaning they have to go forward less, the better for us. Similarly we benefit from the interest in lazy jacks, single-line reefing systems and Boom Struts.”
Most of Barton’s business these days is with the after-market, but there is now a concerted effort to get back into the OEM sector seriously.
Ocean LED
• Rapid growth
• Wide product portfolio
Just about everyone with any lighting requirement these days seems to be using LEDs, but Ocean LED is what the name implies — a marine LED lighting specialist.
“We’ve really got a massive range for every size of boat and just about every function,” says managing director Nigel Savage. “And eventually our aim is to have every conceivable application available in our catalogue. New products are the company’s lifeblood.”
New products recently introduced include high-intensity LED searchlights and an underwater camera. The latter device means all the aquatic life beneath a boat can be watched aboard on TV screens — the ultimate aquarium.
The Nuneaton, Warwickshire-based company, which now employs 24 people, should, if all goes according to budget, turnover well in excess of £7 million, which is “not bad at all for a company that only came into being on December 10, 2004”, suggests the company’s effusive managing director Savage. “We will have delivered around 9,000 lights during 2007, but for 2008 we expect that to probably double or even treble.”
“It has been quite a ride,” he says. “Around 95 per cent of our business comes from export markets. We’ve already established quite a dealer network and more and more dealers are signing up all the time.”
Ancasta Group
• £33-35 million turnover forecast
• Sealine South Coast coup
Ancasta Group, which is headquartered in Port Hamble, Hampshire, has a wide portfolio of interests and a massive customer base to match. The main business concerns the Ancasta new-boat sales and brokerage operations. Beyond a very strong UK network, it has presences in France, Holland, Mallorca, Portugal and Greece. Yet despite its overseas operations, much of its activity revolves around British clients at home and abroad, so its health should be indicative of the UK scene generally.
In all Ancasta has 22 ‘outlets’, 10 wholly owned by Ancasta offices and another 12 franchise offices, all linked by a powerful database and transaction software. Then Ancasta Group also owns Hamble Yacht Services (HYS), a key service and support business on the UK’s busiest river, the Hamble. HYS owns the freehold of the six to seven acre Port Hamble site and so effectively has 20 or so tenants there as well as 100 deep-water berths. Plus HYS has a presence within the nearby Mercury and Universal marinas. Of all the new-builds that Ancasta commissions a year, 85 per cent of them would probably be commissioned by HYS.
On the new-boat side, Ancasta sells from a non-competing brand portfolio that includes Bavaria’s BMB power line-up, the Bénéteau sail range (only on the south coast), Lagoon cats and Rodman’s Yacht and Muse ranges, plus it represents Marten Yachts (it has two 68s on order) and has clients custom building at the likes of Groupe Bénéteau’s CNB operation, where it currently has a CNB 95 under construction.
A major coup for Ancasta this summer saw it add to its portfolio with the Sealine South Coast franchise along with ex-Sealine guy Mark da Costa to head it up. “It took us several weeks to hammer out the deal, which sees us with all the Sealine business between Kent and Cornwall,” says managing director Nick Griffith. “So we’re one of six Sealine dealers in this country, but obviously the South Coast is a prime territory. I am really excited about the whole thing. I know it’s going to be huge for us. We expect to do around 55-60 boats in our first year and thereafter 80-90 a year hopefully, subject to market conditions of course. And some of those boats are bound to end up in Spain. And it’s not just going to be about the new Sealines for us either. It is estimated that there are 1,000-1,200 Sealines on the English South Coast alone, so we’ll also have plenty of potential on the brokerage side.”
During 2006/07 Ancasta sold 130 new-builds — 65 Bénéteau sailboats, 40 Bavaria BMB motorboats, five Rodmans and eight to 10 Lagoons, plus a few Martens and the odd CNB project — plus 600 brokerage boats. The new-build and brokerage businesses tend to go hand in hand.
All in all the Ancasta group employs 165 people. Last year it turned over around £24 million for its year to the end of August, which was eight per cent up. With the Sealine business factored in, the forecast is £33-35 million for ‘07/08.
Griffiths says 2006/07 was a good year, but it could have been so much better. “We came out of both the Southampton 2006 and London 2007 shows feeling so positive and way ahead of where we expected to be, but all that atrocious weather hit us hard. In the end we only just made our targets. Our brokerage business held up reasonably well, but then that is a very mature business. As for the year ahead I expect to see more of the same, but hopefully with some better weather, plus the Sealine business. So, barring no disasters with the economy, it should end up being a cracker.”
Lombard Marine Finance
• Asset finance specialist
• Aggressive growth
Few companies have a better view of the new-boat and brokerage scene than marine mortgage specialists, so the UK market can’t be doing too badly if one of the leading exponents, Lombard, reports significant growth through much of 2007.
“We’ve had a really good year thus far,” says Ian Braham, who heads up Lombard Marine Finance and Lomabard Superyacht Finance operations, who took time out to talk to IBI halfway through the 2007 Southampton show. “For the first eight months of this year our results are up 36 per cent. But I don’t believe there are really that many more people taking out finance for boat purchases. In fact I am fairly confident the market out there is flat just now. We’ve been growing our operations aggressively for the past three years or so. Virtually all our business is in the UK too.”
The growth percentage is not only about more loan agreements either.
“For instance four to five years ago the average marine mortgage was between £60,000 and £70,000, whereas now its is somewhere between £130,000 and £140,000,” Braham says. “Plus we’re doing a lot more in the superyacht sector these days. We’ve done lots recently in the £8 million to £10 million range. Typically we’d start at £5,000, but there’s no reason why we couldn’t go up to, say, £25 million or even higher.”
Braham says he remains very positive about the year to come. “We’re still pushing ahead. We’re not concerned about the boat market at all — indeed we’ll continue to gear up more or less continuously.”
Mailspeed Marine
• Growth for the year
• Targeting online
Founded by Simon Relph in 1982, Mailspeed Marine started out as a small chandlery shop in Manchester and has grown to become one of the UK’s largest mail order chandlers. The company offers thousands of products in the dinghy sailing, yachting, motor boating, inland waterways and fishing markets from its UK stores in Cheshire and Essex, and through its mailorder catalogue and website.
“It’s been tough. The year started off quite well until around May,” Mailspeed’s Dave Somers told IBI. “We had a good London boat show, above our expectiations, but things began to slow in May. It wasn’t a good summer. The Southampton boat show was pretty average for us. The attendance wasn’t that great, but the customer quality was good, so in terms of ‘sales per customer’ we were actually up. We’ll finish the year a little up on 2006. 2008 will be another tough year, but we’re still pretty buoyant. We have a Christmas catalogue out at the moment which is giving us some good trade, and we have three stores which are performing on par with last year. The online side of the business is growing a lot and we’ll be targeting that area of the market aggressively in 2008.”