GYG, the market leading superyacht painting, supply and maintenance company, has provided a trading update for the six-month period ending 30 June 2018. Trading for the first half of 2018 has been weaker than projected due to lower than expected project wins in new build and some additional delays in anticipated refit. SuperyachtNews speaks exclusively with Remy Millott, CEO of GYG, about the market conditions that have made for a difficult first half of the year and the group’s strategy moving forward.
“When we went public, new build strategy was paramount for us and was at the forefront of our organic growth,” starts Millott. “What we have struggled to do is to win short-term builds. We’ve done a number of the big iconic boats like S/Y A and M/Y Lunar, and we have won those contracts through our owner relationships. However, we have never been a yard supplier, a supplier that a shipyard provides recurring new build business, apart from at Feadship Royal Van Lent.”
Millott explains that becoming a yard supplier remains central to GYG’s organic growth plan and that, thanks to some restructuring, GYG is able to provide “market rates, greater capacity, higher quality [than its competitors] and a global aftersales service” where others cannot.
“The message back from the shipyards was that we are absolutely correct, the current suppliers are stretched,” continues Millott. “But, because the shipyards and suppliers grew their businesses together they have become more and more nervous about introducing a second supplier. On the short-term wins we were not successful, but the yards have admitted that in the bigger picture they need to take on a second supplier and that there will be more activity in 2019 when we can be introduced slower with a better plan in place.”
“The message back from the shipyards was that we are absolutely correct, the current suppliers are stretched”
It should be noted that GYG has announced the signing of two “substantial” new build contracts with northern European shipyards, as well as the previously established letter of intent for the REV 182 project.
The plan therefore had been to plug the shortfall in the new build sector with an increase in activity in the refit sector. However, due to the issue of French social security payments, refits yards in the south of France have gone through a particularly difficult first half of the year. One such yard, ACA Marine, was acquired by GYG in 2017.
“All of the superyachts in the south of France became incredibly nervous [about needing to pay French social security] and every refit yard’s business in France reduced hugely,” comments Millott. “ACA Marine didn’t convert the business that we thought it was going to, but this was the case for everyone, the only difference being that we are required to report on it.”
Under a previous iteration of the French social security legislation, the time that a superyacht crew spent at a refit yard in France would contribute to the time required to necessitate French social security payments, as a result a number of superyachts chose to conduct their refits elsewhere. However, thanks to lobbying on the part of a number of superyacht businesses and associations, the issues relating to French social security payments have been resolved for the refit market. The French authorities have accepted that the crews of vessels undergoing maintenance in refit yards qualify for a suspension period that does not contribute towards the time criteria that necessitates social security payments. For more detail on the topic click here to subscribe to The Superyacht Report and read the Business Commentary in issue 189.
In conjunction with the confusion surrounding French social security payments, Barcelona was in the midst of a period of political unrest at the end of 2017 where MB92, the Barcelona-based refit behemoth and major partner of GYG, was undergoing major infrastructure upgrades and thus suffering from a reduction of berthing space and capacity. “The three things [short-term new build business, French social security and reduced capacity in Barcelona] compounded our situation,” explains Millott.
“The great news is that the market is really picking up again and is back to business,” continues Millott. “Everyone is getting very excited about the second half of the year. There is a lot of boats that have pushed their refits back and the market is incredibly active again and it looks like it is going to be an absolute humdinger of a season for us. There are lots of big refits out there and lots of discussions on going.
“At present we have a five per cent market share of the new build market. With the volume of the large boats and the size of the vessels, and the way the new build market is set up with single suppliers to yards, we are in a fantastic position to introduce new capacity to the market. We are one of the top two companies in the world in our field, we are solid with the big contracts, we are financially stable and we have the capacity and quality. We have made big strides with new build yards and that is what our investors are really happy about.”
Millott expresses his annoyance that the first half of 2018 was not as fruitful as had previously been projected, however he remains pleased that GYG’s organic growth strategy is still very much moving in the right direction.
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