The Majorca-based Global Yachting Group (GYG) saw its shares fall by over 45% late last week following the issue of a profit warning. The AIM-listed superyacht services group saw its shares fall to 72p, a drop of 45.1%, after its half-year update referred to trading being “significantly weaker than expected”. The share price has since recovered nearly 20% to 85p.
In the six months ended June 30, 2018, GYG – which provides superyacht painting, supply and maintenance – achieved revenues of €25.1m compared with €22.2m in the corresponding period of 2017 and the company only broke even.
In the update, GYG said: “Trading has been significantly weaker than expected in the first half of the year due to lower than expected project wins in new-build and some additional delays in anticipated refit contracts resulting in revenue for the six months ended 30 June 2018 of approximately €25.1m and approximately breakeven at the adjusted EBITDA level.
“However, the company has an order book that is expected to be completed during 2018 of €12.1m with a pipeline of potential 2018 projects of €146m, including €25m made up of high probability prospects. The result for the Supply division is expected to remain consistent over the period. As a consequence, the group expects full-year revenue to be flat on 2017 and adjusted EBITDA to be materially below the board's expectations at approximately €5m.”
In regard to new-build, GYG indicated: “The company is pleased to announce two substantial new-build contracts in Northern Europe alongside the previously announced REV 182 project. These contract wins further highlight the group's progress in winning market share in the new-build sector and there are a number of additional contracts in negotiations for 2019 and 2020. The three confirmed new build orders are:
- a 140m (460ft) superyacht due to start in early 2019. This is a significant opportunity as there are only 11 superyachts in the world which are over this size;
- a circa 94m (307ft) superyacht due to start in Q4 2018
- the previously announced Letter of Intent with the owner of 'REV 182', the world's largest research and expedition vessel currently under construction
GYG warned, however, that the company also bid on a number of material new-build contracts during H1 2018 that were unsuccessful. Given the size of these contracts, this had a significant impact on revenue and reduced GYG’s activity during the summer peak cruising period, when it typically undertakes less refit work.
“To date, the company has relied more on its relationships with existing owners commissioning new boats to win new-build business,” says the statement. “However, management has worked hard to develop stronger relationships with new-build yards and the team has spent significant time meeting with these shipyards in the first half of the year in order to secure work on new vessels coming on stream.”
It continued: “As a result of these endeavours, the new-build order book currently stands at €13.4m for 2019 and €5.6m for 2020. For comparison, at the half year in 2017, the 2018 new-build order book stood at €1m.
In refit, GYG says it has seen part of the work previously scheduled in the second half of 2017 that was impacted by the extraordinary sequence of hurricanes, flow through into the first half of this year, with the remainder falling in the second half and in some cases into 2019. However, the expected benefit of the 2017 contract deferrals has been offset by delays in projects that were originally scheduled for H1 2018.
Despite these challenges, the second half of the year has started well and there are some multimillion euro refit contracts in the pipeline, with others already in the order book.
GYG summed up: “Whilst the first half of 2018 has been challenging for the group and the wider industry, the board is reassured by the significant momentum that is visible in the company.” GYG will report interim results for the six months ended 30 June 2018 on 20 September 2018.
Remy Millott, CEO of GYG, commented: “Despite the first half of the year being difficult for the group and the industry as a whole, we remain confident that the superyacht refit market is returning to normal trading patterns. In accordance with our unchanged strategy since listing on AIM in July 2017, we have made significant progress in winning contracts in the new build sector and this, combined with large refit contracts in the pipeline for 2019, ensure that we are well-placed to take advantage of the many opportunities that are being presented.”