YARD UPDATE '07: Fairline Boats

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Record 2007 turnover of around £131 million; record order book of £104 million… September 2007 For the most recent Fairline Update, check out the January/February 2009 issue of Yachtbuilder International, the page-turning e-magazine just one click away from the right side of your screen.

 

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 some 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 average size boats rather than greater volumes. Indeed 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).

Derek Carter: “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!”


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 or so 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… And 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 10-12 per cent of our total sales.”
Growth has not just been export driven either. The UK continues to be pretty good for the Fairline brand. Best over the past year there remain at a consistent and healthy level.

Key areas of improvement have been its lean-manufacturing initiatives and a 21st century approach to supply-chain management... 


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 — such interested parties like strong profit growth even more than they like to see turnovers head north!
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 getting on for 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.
The third benefit 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 dump 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 no fewer than 22 new sales locations globally. Plus Fairline has probably gone further than any other production boatbuilder in encouraging its dealers to present a consistent fairline message and provide that message from a dedicated branded environment.
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, notable for the fact that it is Fairline’s first product to feature twin Volvo Penta IPS drive legs and that the model has been specifically designed for them, and the Targa 64 Gran Turismo. Both of those models received simultaneous launches at the 2007 Cannes and Southampton shows in September.
Then ’08 will see two more new models join the line-up. The first to launch will be the new Squadron 55, the first of which should go in the water in May. Then at the back end of the year we’ll see a bigger Targa, probably around 23-24m (75-78ft). And beyond that we can expect to see a new entry-level product join the range, something between 30-34ft and in the not-too-distant future a squadron as big as 25-26m (83-86ft), 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 going a bit bigger while still delivering by road is now feasible following negotiations with various local councils, the Department of Transport and so on.
“We see our core market as being 9-26m (30-85ft),” says Carter. “Within that sector the business remains a production operation. Bigger than that and the business becomes more or a semi-custom building scene, which is not what we’re about. That end of the business requires a very different production and distribution approaches… It would also have meant establishing a facility on the coast and that would be difficult, as gravitationally all our structure is round the Oundle and Corby areas…”
In all Fairline now occupies around 34,000 square-metres (365,000 square-feet) of factory space across three Northamptonshire sites — Oundle, Weldon and Nene Valley — as well as at its Ipswich pre-delivery inspection centre and its US sales and service facilities in Fort Lauderdale, Florida. And facilities are being added and improved all the time. For instance, a major 6,000 square-metres (65,000 square-feet) 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 ‘08.

  Carter says he expects to see consolidated sales of around £145 million for the year ahead... 


“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 30-55ft sector, which some of our competitors seem to have neglected in recent years.”
As for the year ahead, Derek Carter says he expects to see consolidated sales of around £145 million, which will equate to 10-11 per cent or so growth and even stronger profitability gain.

© Phil Draper