GYG.L Regulatory News (GYG)

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

31 October 2018

GYG plc

("GYG", the "Company" or the "Group")

Trading Update

GYG (AIM: GYG), the market leading superyacht painting, supply and maintenance company, announces the following update on trading:

The trading environment in the second half of the financial year has proved challenging and as a result, the Group now expects to report revenue and profit for the year ending 31 December 2018 significantly below current market expectations. Revenue is expected to be c.€44.0m resulting in an EBITDA loss of approximately €(1.2)m. In light of this, the Board is taking a more cautious view in relation to future years' revenue and earnings. The Board also believes it is in the best interest of the Company not to pay a dividend in the current financial year, however it is the Board's intention to return to the dividend list at the earliest appropriate opportunity.

The Board believes that the continued turbulence in the Refit market and the associated revenue deterioration is due, at least in part, to:

· A number of projects being delayed which were planned for H2 2018. Some of the revenue relating to these projects should be recovered in 2019;

· Owners choosing to extend the use of their yachts in the current Caribbean season, given the hurricane disruption in the region last year;

· Late decisions being made on some very large and complex projects causing delays;

· Increasing work scopes resulting in more planning in order to execute certain projects; and

· One shipyard facility undergoing annual maintenance resulting in decreased utilisation.

The compulsory 5 year special surveys are often brought forward but they cannot be delayed so yachts will still have to carry out these maintenance programs, where exterior painting works and upgrades are usually combined in the same shipyard periods, which gives visibility on some of the delayed projects.

At the time of the Group's Interim Results announcement on 20 September 2018, the Board anticipated significant pipeline conversion in the remainder of 2018, however, this has not materialised as expected. In addition to the factors mentioned above, this is also due to certain build schedules and New Build shipyards continuing to use existing paint suppliers in the short term and in some cases, additional planning requirements to introduce more capacity for a smoother transition of new contracts.

Encouragingly, the Group has secured two important New Build contracts for 2019 and there are also other New Build opportunities in advanced stages of negotiations for 2019 and beyond. The Board strongly believes that this ratifies the Group's strategy of growing in this sector generating additional income in the latter part of 2019 through 2020.

In contrast to recent trading, the Group is very pleased with the progress both at and in the weeks since the Monaco Yacht Show, having signed a number of projects with an Order Book value of over €3.5m. A number of additional contracts are also in advanced stages of negotiation. These projects are for work to be undertaken at the end of 2018 and into H1 2019. GYG is signing its first contract with a major European shipyard following a number of years of continuous engagement, further endorsing the Group's strategy. This is a substantial development for the Group and management intends to build on this deal as the relationship develops.

Whilst the Board anticipates the results for 2018 will be disappointing, the Group enters into 2019 with a strong Order Book(1) for this stage in the year. The Order Book currently stands at €31.3m with €18.2m relating to 2019 and €6.5m relating to 2020. This compares to an Order Book of €26.0m, with €7.4m relating to 2018, €nil relating to 2019 and €4.6m relating to 2020 at the same time in 2017. Management are pleased with the progress in getting a higher visibility of income at an earlier stage for the following year, giving more certainty to deliver expected revenues, with increasing New Build income throughout the year to soften the refit seasonality.

The pipeline(2) for the Group stands at €309.0m and a 2019 relevant pipeline of potential projects of €178.0m, including €34.5m made up of prospects which are in advanced contractual discussions and negotiations.

With regards wider industry developments:

· MB92 Barcelona, GYG's refit partner for over 20 years, has recently invested in the South of France, acquiring an established shipyard and one of the largest dry docks in Europe, dedicated to superyachts. GYG has signed a new agreement with MB92 to extend the current relationship in Spain to the new French operation, which will see significant growth in this region compared to the previous two years.

· Two major yacht facilities in the US are nearing completion of significant site upgrades which are expected to come online in H1 2019. GYG is well placed in both facilities and the Group's US team is gearing up for additional expansion, with a strengthening of its workforce and management team.

As also outlined in the Group's Interim Results announcement, the Board has restructured the organisation's senior and middle management and has appointed Raul Galan as Chief Operating Officer. Raul is focused on gross margin, efficiencies and cost savings. A great deal of focus is currently underway with regards the sales team, and Rupert Savage, Managing Director, reporting to the CEO, has assumed day-to-day control of the Commercial department, increasing diligence and focus on the immediate win rate and pipeline per quarter in 2019. With continued significant investment in key relationships, account management and pipeline management, together with ongoing upgrades in the CRM system, the Group will be able to utilise a greater level of information with regards to forecasting, tracking win rates and relevant news.

Remy Millott, CEO of GYG commented:

"Despite 2018 being a very disappointing year for the Company, we have made significant progress in many areas of the business. We have recently restructured the management team so there is a more concentrated focus on production and gross margins, pipeline, sales and key industry partnerships, combined with improved technology which will enable prospecting and engaging with clients much earlier than we have done in the past.

GYG's reputation and quality of service are highly regarded in the industry and this was evidenced both at and since Monaco Yacht Show with a number of projects agreed and signed. Having discussed 2018 with other operators at the Show, it is clear that the industry as a whole has had a turbulent year. However, it is also clear that based on a review of New Build orders, charter and yacht sales there is enough evidence that the industry remains in good shape.

While 2018 is a year the industry will wish to put behind it, I am confident in GYG's long term prospects and I am excited by the deals we have signed and the ongoing discussions we are having, both with existing and new customers and shipyards."

For further information:

Notes to Editors:

GYG is the market leading superyacht painting, supply and maintenance company, offering services globally through operations in the Mediterranean, Northern Europe and the United States. The Company's brands include Pinmar, Rolling Stock, Pinmar Supply, Pinmar USA, Techno Craft and ACA Marine. GYG's operations can be divided into three key sales channels:

· Refit: repainting and finishing of superyachts, normally as part of a refit programme. Revenues also include scaffolding and containment work;

· New Build: fairing and painting of new vessels as part of the build process; and

· Supply: selling and delivery of maintenance materials, consumables, spare parts and equipment primarily to trade customers.