A strong first half for GYG
Is GYG's growing new build market share indicative of the superyacht industry's desire to professionalise?
GYG, the market leading superyacht painting, maintenance and supply company, has announced its unaudited interim results for H1 2019. During Monaco Yacht Show (MYS) 2019, SuperyachtNews spoke exclusively with Remy Millott, CEO of GYG, about GYG’s performance in 2019 and what the future holds for the business.
- Group revenue increased 31.2 per cent to €33.1m (HY18: €25.2m)
- Coatings (refit and new build) revenue increased 37.1 per cent to €27.3m (HY18: €19.9m)
- Supply revenue increased 8.8 per cent to €5.7m (HY18: €5.3m)
- Adjusted EBITDA increased to €1.5m (HY18: loss of €0.1m)
- Operating profit increased to €0.1m (HY18: loss of €1.4m)
- Profit before tax increased to €0.1m (HY18: loss of €1.7m)
- Net debt of €5.9m as at 30 June 2019 (HY18: €10.5m; FY18: €6.6m)
- Cash of €5.8m as at 30 June 2019 (HY18: €2.3m; FY18: €5.1m)
“The interim message is strong,” starts Millott. “The 2019 results show us that our business and the market is getting back to some normalisation. A number of the refits that were pushed back in 2018 are starting to come back. Decisions are being made, bookings seem to be coming in earlier and it feels as though there is a lot more energy around the refit market. In addition, our work in the new build sector, which has seen us go out there and claim a greater market share, has been incredibly well received.”
The desire to gain greater market share in the northern European new build sector has been a central tenet of GYG’s growth strategy for a number of years now. However, growth in this area has not happened as quickly as GYG might have imagined, thanks in large to established relationships between shipyards and preferred suppliers.
“The industry if growing, the established northern European yards are getting busier and the boats are getting bigger,” continues Millott. “The yards are now realising that relying on one supplier for 80 per cent of their new build capacity isn’t a healthy business position. A number of the shipyards are also hiring new management personnel that are looking at their suppliers and analysing where the risks are and coatings remains a massive risk for shipyards. The group has made significant progress in developing new relationships with shipyards and establishing GYG as an alternative preferred supplier in the new build sector.”
In total GYG now has eight new build contracts signed, including two contracts that were signed on 25 September (day one of MYS 2019). Both new contracts come from an existing shipyard partner, the vessels are 60m-plus and 70m-plus respectively and GYG is scheduled to start work on them in H1 2020.
Since floating on the AIM stock exchange in 2017, Millott believes that GYG has been conferred with greater legitimacy and, perhaps, the business’ ability to gain greater new build market share is indicative of a wider market movement towards professionalisation and working efficiencies.
“When we are talking to shipyards the conversations are about ethics, disciplines, documentation, professionalism and quality. It’s not just about which boats require painting anymore,” continues Millott. “It is about what we do as a company and how you are going to operate within the confines of another business and it is these conversations that are brilliant for us because we are able to tick all those boxes quickly. Floating has given us greater respect, but equally it means that every six months we have to show people how well we are doing, we have to be transparent because it is a requirement.
“If you look around the [Monaco Yacht] show, show me on other applicator that has a stand and is present with senior members of staff that are engaging with the industry and connecting with clients. There is not a single one.”
Millott believes that GYG’s competitors’ lack of visibility is indicative of their lack of capital and a by-product of their willingness to price low.
“It is still all about price. Certain stakeholders will still take low hanging fruit on price because they want to be able to go back to their superiors and pretend that they got a good deal or discount. When the prices are compared, however, the owners are not shown that one price came from a premium supplier, whereas the other did not. They aren’t given that option. However, these same companies that price low are unable grow because they don’t have the money to do so. Their pricing structure means that they are unable to invest in their own businesses. They can’t afford to have a stand at MYS because they are charging their clients bottom prices and just about paying wages. You don’t have to price low to win business, you just have to be good at what you do.”
Whereas GYG’s position had previously been to grow its new build market share, Millott believes the business is nearing the point at which it will be able to become more selective with the projects that it accepts. As well as consolidating this position and focussing on the development of its core European market, Millott further explains that GYG has ramped up its operations in the US with a number of key managerial hires, including that of a new managing director, and is eagerly awaiting a number of refit infrastructure developments for large superyachts in the region.
“I think that we are one more financial report away from focussing on more serious acquisitions,” concludes Millott. “There is a long list of things that we could do to enhance our core business and I’m not sure yet whether or not we will invest in existing parts of the company in order to expand them or whether we will go out and acquire a couple of key businesses.”
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