By any corporate measure, the past year or so for Princess Yachts International (PYI) has been a period of pivotal change. The company itself says that it has experienced “one of the most challenging years in its history” that included significant management changes, workforce cuts, and an intense product development and launch period, yard developments and dealer changes. Ironically, this period of change also saw the company’s 50th anniversary.
A clear sign that PYI has emerged from the worst of its experiences is the recent announcement of a three-year GBP 55 million (approx USD 67 million) investment programme, related to product development and facility improvements, for which GBP 14 million (USD 17 million) is already being spent, and an operating loss for 2015, a positive recent order performance with the prospect of profits going forward. It is also restarting recruitment of 100 people when 172 were laid off just 10 months ago. In a nutshell, this can only be described as a successful turnaround with much more to come.
Recently appointed Executive Chairman Antony Sheriff commented after the new orders from the Cannes, Southampton and Monaco shows that: “We are really pleased that the recent shows over the past few weeks have resulted in over GBP 70 million (USD 85.2 million) in terms of retail sales being generated, bringing our order book to over GBP 280 million (USD 340.6 million), the strongest forward orders since before the global financial crisis struck our industry in 2008.”
Considering the financial gains being received from other changes made in operations and production, the PYI board forecasts renewed buoyancy across its business in 2016 and 2017. PYI has also returned to an operating profit over the past three months.
At the end of 2015, the company reported a loss (before taxation) of GBP 20.2 million (USD 24.6 million) from a turnover of GBP 201.2 million (USD 244.8 million). In 2014, the turnover was GBP 239.6 million (USD 291.5 million). PYI stated that: “Although disappointing, exceptional factors have played a significant part. The lingering effects of damage to stock, facilities and production scheduling caused by the hurricane force storms in 2014, coupled with unfavourable sterling exchange rates and high-margin boat models reaching the end of their life-cycle, combined to exert unprecedented pressure on PYI’s operations throughout 2015.”
Contributing to the turnaround was an intensive product development programme that saw six new state-of-the-art models, including two “M” Class superyacht designs introduced in six months. Another significant move was the appointment earlier this year of Antony Sheriff as Executive Chairman. Previously the CEO of McLaren Automotive for more than 10 years, Sheriff has a strong track record in leading profitable businesses with best-in-class luxury products.
His presence in the PYI management team means the company benefits from his substantial knowledge and experience of the automotive sector’s advanced manufacturing processes, longer-term planning and management skills, which are increasingly being applied by production yacht builders. Also, having worked with McLaren, his expertise in the luxury brand markets aligns well with Princess’s major shareholder LMVH.
During a press visit to Princess’s extensive Plymouth-based facilities, Sheriff told YACHT STYLE: “(Managing Director) Chris Gates and I are working together to develop a long-term plan for Princess Yachts over the next 10 years. We have developed a schedule of new models through that period and we are looking at how we can resource that programme.”
He added: “This is a product-led process that centres on improving the product, quality of manufacturing and strengthening of the brand. Boat manufacturing is a complex operation and having come from the car industry, I am looking to increase innovation throughout the whole process.” With LMVH also owning Feadship, he commented: “I am keen to increase links with Feadship and links within the group.”
The LVMH relationship dates back to 2008, and with its wide range of global luxury brands, a number of them such as Fendi, are being introduced to the design of PYI yachts. Such links are proving popular with customers and are also helping to enhance the quality of the Princess yacht models, especially the larger ones.
Since the LVMH takeover, there have been on a number of occasions, market speculation suggesting that Princess is up for sale. LVMH has a track record of rarely selling its brands. Gates commented on the speculation: “These rumours have been mentioned often but as far as I know there is no intention to sell Princess, but everything has its price.”
With respect to the Princess management team, Sheriff indicated: “We have just appointed a new CFO and we will strengthen the management as opportunities and needs are identified to do so.” Other appointments over the past year or so have included Kiran Haslam as a new Marketing director.
Marketing is an area that Sheriff sees can be strengthened. He suggested: “We need to do this not only to show people what we are doing, but to also make sure the name is being spread ever further around the world.”
Haslam told YACHT STYLE earlier this year: “The work volume is increasing and we are currently booked for more than 80% capacity this year. Our sales have increased by between 40% and 50% over the past year with the 70-90ft range rising 5-8%.”
“In addition to the 70-90 ft sector,” he added, “we have seen a healthy increase in 40-70ft sales as well, and within that we are seeing a real return to Open boating. Our V58 – Open and V48 – Open boats are currently particularly strong, and so too are the Princess 52 and Princess 56.”
“In terms of forward orders,” he continued, “our Princess 60 and 68 are both at full capacity in build, and don’t seem to be slowing down anytime soon. Our S65 is getting magnificent traction and is a star within our line-up. Whilst not as strong as the 5-8% increase we see on the 75, 82, and 88 models, this size range is currently around 3% up on last year in terms of retails; the last Southampton Show was hugely successful for us with 24 boats sold that were directly attributable to that show. Our largest dealer reported eight of those as pre-owned boats. Perhaps our increase will level out by the end of the year, but for now it has us feeling very positive, whilst we still operate in a very uncertain marketplace.”
It is in sales that clear positive results are beginning to show through which all confirms that the changes made are starting to work and that the whole business is on a strong footing going forward. Sales Director, Will Green, confirmed earlier this year: “We are gaining market share around the world as new models are introduced, and the work to strengthen and promote the brand continues. In this process, our global dealer network plays a vital role.”
The contribution of the global Princess dealer network cannot be understated both in the sales success the company has, and in the promotion of the brand. They are treated as an integral part of the team, and constant communication is maintained to keep them informed and to share sales leads. There are frequent meetings of dealers at shows such as Cannes, with many having been brought in for international clients were planning to visit the show.
An annual review of dealers is undertaken to monitor their performance and also highlight opportunities for sales, promotions and development. In Asia Pacific, PYI has one of the strongest dealer networks, if not the strongest. At shows like Singapore, Taiwan, Hong Kong and the ones in Australia, a good flow of orders are reported.
Regarding the global market, PYI reports ‘solid growth” in the US and growth in Europe. The latter is the biggest market followed by the US, but through its large dealer network, the company sells in all market areas; this allows Princess to adapt to adverse market conditions. In Europe, the PYI management does have concerns with regards to Brexit and, the eventual deal that is reached for the UK to leave the EU but that is still over two years away.
Through its large customer base, there is strong loyalty towards the product, resulting in a high percentage of repeat business. Here too, the dealers play a key role in keeping in touch with buyers and their wishes, such as upsizing or downsizing. The wide spread of the Princess model designs extends across four ranges, means that the company offers products that are able to meet on all current boating requirements.
The ranges are as follows:
• V Class – Seven models between 39ft and 62ft
• Flybridge Class – 11 models between 43ft and 88ft
• S Class – Two models between 65ft and 72ft
• M Class – three models between 30m and 40m
The development of the “M” class superyacht range has been developed over the past few years. PYI has had considerable success with these models, gaining over 20 orders for the crafts from all over the world. To cope with the construction of these large yachts, Princess first leased and then purchased the 7.5ha site at South Dock, the oldest part of the Royal Navy’s Devonport Dockyard in Plymouth.
The company has put in considerable investment to support the construction of the M Class vessels, and further investment is proposed at some future date that could see Princess building even larger yachts. The South Dock facility has the potential for constructing superyachts up to 70m. PYI currently uses some of the older buildings on the site to build full-sized mock-ups of new designs before they are introduced to the market.
For branding, Princess, and the fact that her key facilities are based within the Plymouth area, goes hand-in-hand. Plymouth is a city with a long maritime heritage, and the company strongly promotes that over 80% of all that goes into a Princess yacht is made in-house or close by. There is a large Princess Design Studio that is included in major product development and upgrade projects. It is available to assist buyers with their personal requirements, and also offers the option of working together with an owner’s design team in order to meet his or her needs.
Other strong elements of the brand are that it has a stable work force, with many having worked for the company over a long period. The average age of a worker is just over 40, and they have worked for the company for 11 years. In addition, PYI has an active apprenticeship programme involving some 40 people at a time.
In Plymouth, apart from the South Dock, the company has a number of plants that are involved in yacht construction, or other elements that go into making a yacht, such as interior furnishings. For example, the building where the first Princess yacht was built 50 years ago is across the creek from the current main Princess building facility.
That very first yacht, known as Project 31, has since been found and purchased by the company, who completely refurbished it. During its 50th year, it was put on display at a number of shows such as Cannes and Singapore. This highlights the strong traditions that are inherent in PYI’s DNA.
The company is increasingly forming global brand partnerships as part of promoting the Princess name. Plymouth Gin, which has a strong association with the Royal Navy, is one such link. Other recently announced ones have been with Seabobs and the Marine Conservation Society.
PYI makes constant investment in new equipment to boost productivity. Recent investments have included a new Poseidon CMS 5-axis machine; research to identify how 3D printing can be used; and initiatives to increase productivity throughout the manufacturing process. The company operates a comprehensive performance-monitoring programme as a key method of highlighting where improvements can be made. Training courses are also an integral part of all this.
Looking ahead, the company says that it is seeing tangible indications of a return to normative performance in 2016 with positive operating profits over the past three months. Orders are at their highest levels since 2007, and trading conditions are increasingly favourable as the company is deriving significant market advantage from the recent realignment of sterling-based exchange rates.
Gates emphasises that growth is the key objective for 2016. Having worked through the staffing restructure; strengthened its management team, and with rising sales across the four ranges, there is a growing confidence that the company is now well placed to take full advantage of the global marine leisure markets as they work through their respective challenges.
That confidence is backed up by the actions initiated by the company. Princess states that it has embarked on an ambitious product development strategy and a new product renewal cycle as part of its long-term business plan, and the company is now recruiting skilled professionals in key areas to realise its ambitions. PYI will see further development of the product portfolio, as well as production improvements at the company’s manufacturing facilities in Plymouth.
This article was written by David Robinson, and was first published in Issue 36 of Palace Magazine.