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Merbatty Case Study Summary

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Steven John Calizo

on 23 January 2014

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Transcript of Merbatty Case Study Summary

Merbatty Case Study Summary
Market Overview
The developing luxury boat building industry is one with a growing customer base of wealthy, successful individuals and corporate clients.
Mostly concentrated in Europe and the USA
In 2012, the luxury boat building industry generated approximately $5.5 billion in revenues and delivered nearly 3,600 engine-powered boats globally.
The industry produces a range of over 180 different models
Companies typically appoint agents to secure sales from the end customer
As the market has become more competitive, the need to live up to ‘what the customer wants, the customer gets’
Merbatty
Was formed 33 years ago by its current Chairman and is based in a northern European country
It currently has two boat building facilities, one at its head office base in Europe and a second on the West Coast of the USA
Majority of sales worldwide are secured through sales agents appointed by Merbatty
Sales Procedure
Operating Profit for 2012
Merbatty’s Personnel
Almost 2,200 employees
Total staff costs were €87m in 2012
Sales Agents
Merbatty currently has sales agents worldwide
Most work exclusively for Merbatty except in a few locations
Agents receive a fixed percentage of the final revenues of around 4%
Agent’s fee is paid in two installments for each sale, 50% of the agent’s fee at the point of signing a sales contract with the customer and the final balance on delivery of the boat to the customer
Signing of a binding contract
Boat's engines are delivered to facility
Completion of the boat and after inspection by customer
Deposit of 20%
by the
customer
Second installment
of 30% is paid
by the customer
Final payment
of remaining 50%
by the customer
Merbatty’s recent history
Merbatty’s current position
Merbatty had signed contracts, and received the required 20% deposits from customers, on
future orders for 39 boats (building of which has not yet commenced) at the end of June 2013
2008
2010
2012
Acquired some land in the USA
Developed a totally new purpose-built
The USA facility becomes operational
Merbatty’s Chairman, Alberto Blanc, was
(November)
Flotation of Merbatty in (issued 120 million new shares)
Generated a cash inflow of €336 million
Repaid bank loan of €120 million and its bank overdraft, which had reached over €120 million
Andreas Acosta also renegotiated a new loan.
This new loan is for €200 million, at an annual interest rate of 10%
boat building facility on said land
awarded the ‘Business Person of the
Year’ in a European awards ceremony
Merbatty’s profit, before dividends, was €40m for 2012, a record profit level

The country in which Merbatty is based charges tax at
35% of operating profits less finance costs
Merbatty’s shareholders

Directors
Investors
Other shareholders
180 million shares in issue
Future Plans
for
Expansion
Inclusion of large boat models
Currently, Merbatty produces 15 different models of boat
One new model is due to be introduced early in 2014
There are possible enhancements to existing models by the middle of 2014
Lukas Dian, Technical Director – Design, believes that there is a strong opportunity to build larger boats
Jesper Blanc is confident that the demand in the Middle East will be so great that Merbatty could sell any large boat that it builds.
Sales offices
Stefan Gil is working on a proposal for Merbatty to open sales offices in over 20 locations worldwide.
Will result in the termination of some sales agents’ contracts
It will allow Merbatty to save costs, as it is anticipated that the costs of running Merbatty’s own sales offices would be lower than that paid in agents’ commissions
Five-year expansion plan
Merbatty is currently on target to achieve the budgeted number of 300 new boats to be commenced in 2013
Includes forecast capital expenditure for the opening of Merbatty’s third boat building facility in September 2013
Includes capital expenditure that would be required for a fourth boat building facility planned to be built during 2016 and 2017.
Planned opening of third boat building facility in Surania in 2013
March 2012, the Merbatty Board approved the proposal to open a third boat building facility s located in Surania which is a thriving country in the Middle East
Is due to be opened in September 2013
This new facility will specialise in building larger boats.
Will enable Merbatty to build approximately 180 additional boats each year
Merbatty’s development plans
Bernie Ritzol, Global Market Development Director is investigating the possibility of expanding the range of boats Merbatty builds, to have 10 new models over the next two years, instead of the planned 3 new models per year
€10m expenditure is needed on the design of new IT systems, including state of the art boat building CAD and CAM systems
A further €15m of expenditure would be required on new boat design
Current use of new technology
Investment in technology in the last two years has increased by 10% and has cost the company a total of €10m.
Also spent over €4m on new technology
The old technology is still used in the European boat building facility and for smaller boats built in the USA facility, but is being phased out in 2013.
Merbatty sponsorship contracts
A major global speedboat race organiser - €5m per year for three years from July 2012 to June 2015
Merbatty’s supplier relationships

Merbatty’s investment in new IT systems
In 2012, Merbatty invested in a newly released ‘off the shelf’ state-of-the-art production management software system
Allows Merbatty’s management team to respond quickly to minimise potential, and actual, disruptions to production
This software has been installed at both the European and USA facilities and it is intended that it will also be installed within the new Suranian facility
A global travel and high quality hotel chain - €5m per year for five years from January 2013 to December 2017
Full transcript