As tax time here in the U.S. has arrived (and for some, continues) it’s a good time to have a look at the books. Recently after a review of its accounts, UK-based Sunseeker International announced a return to profitability to the tune of £6 million EBITDA, as the turnaround of Britain’s largest boatbuilder continues. While it’s one part of the narrative, and obviously good news, there’s always more to the story, so I jumped on a conference call with Phil Popham, CEO of Sunseeker International, and Hugues Jacquin, the CFO, to discuss the why and how of the profit statement and dig into some of the details. There are some lessons to serving a market that has seen demand ebb and flow in a strained geopolitical world, and you may be interested to learn how Sunseeker is girding for the future.
New Boats = New Money
First, a boatbuilder can’t hope that interest will suddenly begin to swell in an existing line of products. Something has to change that will catch the eye of the boat-buying public. After all, boatbuilders watch what their competition is doing and tweak their new models based on the design elements and features that work. “From a revenue perspective, our growth is down to product and accessibility,” Popham says. “Over the past few years, we’ve invested heavily in new products, with the benefits of this now being seen. We launched five new models last year, two in 2017 so far and another two planned for the autumn. The market responds well to new designs and exciting innovative products, and that’s the reason why people are buying our yachts—they’re excited by what we’re producing.”
The market for new yachts has a certain luxury built into the equation, and that means the sales channel has to be on a level similar to the boats a builder delivers, and the channel needs to be accessible where the buyers are. “We’ve appointed new dealers in Toronto, New York, Florida, Argentina and Peru,” Popham says. “Those new dealers have helped to generate the doubling of our order bank in the United States and South America. Move farther east across the Atlantic, and we’ve also taken on new dealers in Portugal and Germany, Croatia and Montenegro, and in the Middle East we have a new dealer in Lebanon who’s selling well. Our biggest dealer in the United Arab Emirates has taken on new offices and new staff, and appointed a dealer in Kuwait as well. And if we do the whole circumvention of the world, then we end up in Japan, where we have a new dealer as well. From a representation point of view, we’ve made changes over the last 18 months and we’re really fortunate that there are so many people that are interested in the Sunseeker brand. As a result of this, when we go out looking for new dealers, we’ve got a good selection to choose from, which is really important, because it’s not just about selling product, it’s looking after customers out in the field as well.”
But it’s who the dealers are, and the way they run their business that helps Sunseeker choose. “In North America we decided not to go for the perhaps more obvious route and take on a huge distributor with coast-to-coast coverage. We have such a strong brand, we felt we could benefit the business better by looking for local players, that had very strong regional presence and were very well known,” Jacquin says. “They knew the local client base extremely well. When we went through an analysis of the product two years ago to determine where we were going, we used the input of those local players to influence which product we were going to come out with and which features we were going to introduce. That strategy has paid off immensely. I don’t think there’s any manufacturer that produces our size of boats that has the level of forward ordering that we’re experiencing right now.”
Sunseeker partners with dealers, vetting them carefully to make sure they’re a good fit, because the company understands the importance of the dealer in keeping the brand image consistent. “I really believe in the dealer model,” Popham says. “We’re based in Poole on the south coast of the UK and a strong dealer network is key. Consistently excellent customer service and representation is fundamental to a premium brand. Our customers are discerning, affluent, successful, and they buy the best of everything in life. As a result, they rightfully expect the best service from Sunseeker. We’re only going to be able to do that if we’ve got an excellent dealer network in place— like the one we’ve got, but with anything there are always opportunities to improve and geographical gaps to fill.”
Planning for the Future
How does a company like Sunseeker sustain the growth? “We ended last year with a very healthy forward order bank,” Popham says. “It was up about 41 percent. We are building on this all the time and models like the Manhattan 52 and the Manhattan 66 are a significant part of this. In fact the Manhattan 52 is now our fastest-selling model to date with over 80 orders taken since its launch in autumn last year but it’s not just this model, all of our models have a strong forward bank, taking us into next year.”
Technically those orders are in the past now, so to add to that growth a builder has to plan accordingly. “We’re not predicting huge growth in the industry and actually we believe most of that growth is going to be fueled by increasing our market share,” Jacquin says. “Having that lead position in terms of product—that’s been the key to our success over the last 24 months—is going to be key to being successful over the next three years. It’s really keeping that situation where the competitors are constantly chasing after us because we’re coming out with the next big thing.”
Product and cost-cutting are part of the plan for the future. “There’s a lot of work to do but we’re back to profit now and with confidence we can develop a business plan around growth,” Popham says. “We are planning to invest at least £50 million in product development and investment in our facilities. The products that we introduce have got to be products that are true to the DNA of Sunseeker. That consistency, it’s about the desirability of the Sunseeker brand. We have a responsibility to our shareholders to create profits, so every investment decision that we make has got to be a good decision. We therefore continue to focus on customer data, customer research and trends. We’ll make predictions and forecasts and we’ll make responsible investments on that. Over the next five years, we’ll be investing more money than Sunseeker has ever invested in its history in terms of facilities and new product.”
It will be interesting to see what new launches come this year, from Sunseeker and many other builders. As the competition continues to bring eye-catching new models to market, we’ll be watching.