Remy Millott, Chief Executive of GYG plc, commented:
“Despite the first half of the year being difficult for the Group and the industry as a whole, we believe that the superyacht refit market is returning to normal trading patterns and that we have the right strategy in place to capitalise on the many opportunities that are being presented. We have made significant progress building relationships with shipyards and establishing ourselves as a preferred supplier which has resulted in us winning contracts in the New Build sector and this, combined with large Refit contracts in the pipeline for 2019, ensures that we can support future growth and development of the Group.”
GYG Plc (LON: GYG), the market leading superyacht painting, supply and maintenance company, today announced its unaudited interim results for the six months ended 30 June 2018.
· Group revenue of €25.2m (HY17: €33.9m)
o Coatings (Refit and New Build) revenue of €19.9m (HY17: €28.6m)
o Supply revenue consistent at €5.3m (HY17: €5.3m)
· Adjusted EBITDA (1) loss of (€0.1m) (HY17: €3.3m)
· Operating loss of €1.4m (HY17: loss of €1.0m)
· Cash of €2.3m as at 30 June 2018 (HY17: €4.7m; FY17: €6.2m)
· Net debt position of €10.5m at 30 June 2018 (HY17: €6.8m; FY17: €6.7m)
Adjusted EBITDA is defined as operating profit before finance costs, taxation, depreciation, amortisation and exceptional items. This is an alternative performance measure and should not be considered an alternative to IFRS measures, such as revenue or operating profit.
As previously announced, GYG had a challenging first half of the year, due to lower project wins in New Build and some additional delays in anticipated Refit contracts. There were three main factors contributing to this:
1) The Group’s strategy is focused on gaining market share in the New Build sector. It has taken longer than initially expected to build market share, and the Group was unable to win some short-term New Build business in 2018. This has created a shortfall in this division in H1 and the full year.
2) MB92 in Barcelona, one of the leading superyacht refit centres in the world and one of GYG’s main Refit locations, underperformed during the season compared to previous years. In addition to the political unrest in the region, the main reason for this underperformance was due to the disruption in the shipyard while it is undergoing a major upgrade to its facilities. The building work in Q4 2017 and H1 2018 contributed to the fall in activity in this highly regarded shipyard. However, the work is an important investment which will increase the shipyard’s lifting capacity by approximately 40% by the beginning of 2019. GYG expects to benefit from these improvements and deliver organic growth in this region.
3) There was also an issue in the South of France which is another important superyacht refit destination. The French authorities indicated that they would enforce a law that would mean yacht crew and owners would be obliged to pay certain social security taxes if yachts remained in French waters for more than three months. As a result, the Group saw a significant slowdown of yachts entering French shipyards which we believe was connected to this tax issue. However, the French authorities have reversed the decision in the last few weeks and any yacht entering a refit facility will be exempt from any tax obligations. Accordingly, we have since seen a resurgence of activity.
Order Book and Pipeline
GYG currently has an Order Book(2) of €35.6m with €14.9m relating to 2018 which is expected to be completed in the remaining six months of 2018; and a total order book of €20.6m for FY19 and FY20.
The pipeline(3) for the Group stands at €355m and a 2018 relevant pipeline of potential projects of €85m, including €34m made up of prospects which are in advanced contractual discussions and negotiations. Some of these contracts are very large and will continue into Q1 2019.
This year the Group has announced two substantial New Build contracts in Northern Europe, alongside the previously announced REV 182 project, resulting in a record of visibility in terms of FY19-20 Order Book for Refit and New Build, standing at 30 June 2018 at €13.4m for FY19 (at 30 June 2017 equivalent was €2.5m for FY18) and €5.6m for FY20. The Group is also in advanced negotiations for several other New Build contracts for 2019 and beyond, which is a result of management’s strategy and actions taken in H1 2018 to gain more market share in the New Build sector.
Management has taken steps to improve systems, processes and controls across the Group. Raul Galan has been appointed as the Group’s new Chief Operating Officer, focusing on the Group’s day-to-day operations including production, margins and cost savings alongside the existing management team. This will complement the team’s excellent relationships and industry knowledge on the commercial side of the business in managing sales and client relationships.
Order Book is defined as contracted but unbilled New Build and Refit projects across the Group.
Pipeline is defined as the projects the Group are looking to secure, covering the stages from sending a proposal to final negotiation.
Despite the challenges witnessed across the industry in the first half of 2018, the Board remains confident about the future, while recognising the challenges of completing the current Order Book and converting the H2 2018 pipeline.
Looking into next year, the team has made significant progress in building relationships with shipyards and establishing GYG as a preferred supplier. This has resulted in the Group winning contracts in the New Build sector coupled with large Refit contracts in the pipeline and the team is encouraged by the increasing number of enquiries for 2019-20.
The Board believes that GYG is well positioned to benefit from the growth opportunities in New Build and maintains a positive outlook for the Group.