YARD UPDATE '08: Ferretti Group

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Record 'value of production'; Candover and Cannatelli; more again for ‘07/08… February 2008

FEBRUARY 2008

The Ferretti Group now ranks as Europe’s second-largest pleasureboat builder and the world’s third largest. However, if it achieves its forecast for the current year, it could slip into pole position in Europe and the number two slot globally – meaning behind the Brunswick Corporation and just ahead of Groupe Bénéteau, whose own forecasts place it just behind. That number two and three slot will be a close call.
Certainly what we now know as the Ferretti Group has come along way in just 10 short years. At the back end of the ‘90s Ferretti Spa was a relatively modest one-brand Italian motoryacht builder with an Italian Lire turnover that was the equivalent of around €37 million. Today Ferretti Group turnover is something like 27 times greater and its illustrious brand portfolio not only includes the original operation, now know as Ferretti Yachts, but also Pershing, Itama, CRN, Custom Line, Riva, Apreamare and Mochi Craft in Italy and Bertram in the USA. Those are nine of the best boating brands in the world.
At the moment the Ferretti Group portfolio accounts for around 65 production and semi-custom models from 7—46m (36—150ft) and the count is climbing, plus there is its significant custom superyacht construction capability, which currently extends up to around 72m (237ft) with the Clarena II project currently in build at CRN.

'Candover has 51 per cent of the group. The remainder of the shares is in the hands of Norberto Ferretti (16 per cent) and his management team (23 per cent) and Permira Europe II (10 per cent)...' 

Towards the end of ’06 the Ferretti Group surprised most of the industry when instead of floating on the Milan Stock Exchange for the second time as per the avowed plan, its principal investor the Permira Europe II private-equity fund — formerly known as Schroder Ventures and a longstanding Ferretti venture-capital investor — sold the majority of its controlling stake in the company privately to yet another private-equity firm, this time the London-based Candover fund. That deal valued the burgeoning group at an incredible €1.7 billion! Candover has 51 per cent of the group. The remainder of the shares is in the hands of Norberto Ferretti (16 per cent) and his management team (23 per cent) and Permira Europe II (10 per cent).
Overall Ferretti Group companies now employ around 3,000 people, including around 220 ‘managers’. That is 10 per cent more than the previous year. There are around 22 ‘production’ sites in Italy, Spain and in the USA that add up to around 673,000m2 (7,240,000ft2) of site area. And if all that were not enough, it also now owns a number of specialist moulding, joinery and boat-maintenance and service companies to support its frontline operations, the biggest of which include Resin Sistem, Diesse and Zago in Italy and Spain-based big-yacht paint specialist Pinmar.
Over the past four to five years the Ferretti Group has sustained a CAGR (compound annual growth rate) of 20-25 per cent, significantly more than a €14 billion-€15 billion global market, which is estimated to have had a CAGR of between 10-12 per cent.
During its ‘06/07 year the Ferretti Group’s ‘value of production’ grew almost 21 per cent to €933 million based upon some 530 boats built. For comparison, its corresponding ‘05/06 year value of production figure reached €770 million on the sale of 470 or so boats, which in turn was up from the year before’s €653 million and 430 or so boat tally. Its EBITDA for ‘06/07 grew by some 34 per cent to €158 million, which equates to 17 per cent.
“Our performance, our growth in ‘06/07 was excellent,” says the Ferretti Group recently installed new CEO Vincenzo Cannatelli, talking to IBI in mid-February at the Miami ‘08. “All our companies have done well, delivering positive results… We ended ’07 with a backlog that covered all of ‘08 and a substantial component of ‘09… So not surprisingly we still expect to see a 20-plus per cent growth for ‘07/08, in terms of value of production and profitability.”
As of autumn this year the Ferretti Group order-book value was already up to a record €1.1 billion and via a CRN slot it stretches through until 2013. Significantly a large proportion of that order-book value is above 24.4m (80ft).
“And our brand development strategy reflects this growing demand for larger boats,” says Cannatelli. “So we’re moving just about all brands up into the bigger sizes. It is vital that we have the right products in the 80-120ft sector… At the moment our design and engineering department is overseeing no fewer than 25 new projects -- some model replacements, some model additions.”
But then big boats are where the action is according to just about everyone. This is not just a Ferretti Group phenomena.
The guy responsible for Candover’s Ferretti Group investment, Candover Italy’s CEO Aldo Maccari, who is based in Milan, told IBI sister magazine back in September ’07 that his operation was convinced that cyclicality at the premium end of the new-build spectrum was no more. Confidence indeed. One can’t help wonder whether the private-equity firm is quite so bullish today following all the upheavals in the financial sector globally and concerns that severe recession in the USA will spread to Europe and beyond. Time will tell.
New owner Candover says its strategic plan for the business includes double-digit growth for at least the next three years. And that the company is already worth considerably more than the valuation delivered by its deal.
Ferretti Group exports account for around 75 per cent of its consolidated sales tally and the geographical breakdown is roughly as follows: 25 per cent Italy, 35 per cent EU, 15 per cent USA, and 25 per cent from ROW (rest of world). In all, the group now serves 85 or so dealers, between them covering no fewer than 95 different countries.
“Europe is still going incredibly well for us,” says Vincenzo Cannatelli. “All the key fall boat shows – Cannes, Monaco, Genoa, Barcelona and so on – rated as our best ever… Even Fort Lauderdale was good, which is remarkable considering the dollar position… It is true the US has slowed down significantly in the past six to 12 months, however… And yes we’ve seen that in our sales… The slide began in early ’07, but now it is a serious decline. Thankfully much of the slowdown is focused at the lower end of the spectrum, the sub-50ft sector. Things are much better as we go up the size scale… Overall we’re down a little in North America as compared to last year’s sales… Europe is holding up very well seemingly across the board and still growing, although Eastern Europe and Russia are contributing greatly… Italy is still incredibly good for us, as is France, Spain and UK… We are starting to develop local business in the Middle East, which is very encouraging. It used to be that clients from that region spent their money in Europe and kept their boats in the Med, but increasingly we seeing a new client group emerge that want their boats to be where they live and work in the Gulf States… Infrastructure is growing there at a remarkable rate… And we’ve started to achieve sales successes in both China and India. Most of that interest is for the bigger models too, the 24m-plus product… And South America is developing nicely from Panama down to Brazil and Argentina… Southeast Asia and Australisia are developing markets for us, so not that significant.”
These days Ferretti Group sales break down roughly as follows — Ferretti 33 per cent, Pershing 17 per cent, Itama two per cent, CRN/Custom Line 15 per cent, Riva 13 per cent, Apreamare five per cent, Bertram 11 per cent and Mochi four per cent.
Certainly plenty of money has been pumped back in. Around €50 million was invested in ‘06/07 and an average of €45 million per year has been pumped back in over the past three of four years. That will go on facilities and infrastructure expansion, plus as mentioned already its relentless model-development programme.

'Yet no one is ruling out the odd complementary brand won’t be picked up along the way and the odd new brand could always be created...'

Candover says its strategy with Ferretti Group will be a bit different to that under Permira Europe II. It intends to focus most on leveraging the group’s existing operations, rather than embarking on another quick build-up campaign of acquisitions. Yet no one is ruling out the odd complementary brand won’t be picked up along the way and the odd new brand could always be created.
“But we’ll continue to be a consolidator,” concludes Vincenzo Cannatelli. “With markets coming under pressure as they are today it is guaranteed that various targets/opportunities will arise in the months and years ahead… And for the right ones we’re ready… We’re still keen on vertical integration too, so we’re not only talking about boatbuilders… For instance, we’re very keen to increase/improve our global service structure… Suitable acquisitions in the service sector would be very interesting to us… The service sector ticks the right boxes. It’s generally a profitable sector. It’s stable. And it’s anti-cyclical, in that it would often grow when the new-build sector is slow.”
It’s never dull looking at Ferretti Group, that’s for sure!
For more, www.ferrettigroup.com.

© Phil Draper