McLaren H1 2020 Results€¦ · Formula 1 and beyond F1 Concorde update, Indy Series and Heritage cars New Concorde agreement for 2021 –2025 The long-awaited Concorde Agreement

1 | McLaren H1 2020 Results

McLaren H1 2020 ResultsAugust 26, 2020


H1 2020 – Impact on Group as a result of COVID-19 pandemic

1 - Impact of COVID-19Global Retail closures across all markets

▪ Retail sales network closed as a result of global lockdown

Production facility temporarily suspended

▪ No cars built during April and May as production centre suspension

takes effect

Automotive wholesales reduced

▪ Vehicle wholesales lower due to the above

4 - Business restart – July / AugustAutomotive

▪ MPC fully reopen in July, Series and Ultimate lines on one full shift per

day

▪ Majority of retail network now open

▪ Supply chain intact and resized to new requirements

▪ Social distancing and flexible working in place to minimise risk to

operations

Racing

▪ Commenced F1 season in July with up to 16 - 18 races planned

2 - Actions taken to counter COVID-19Reduced Capital Expenditures

▪ Match investment to current vehicles that deliver a 2020 return

▪ Invest in the all-new, flexible, lightweight vehicle architecture which will

underpin McLaren’s next generation of electrified supercars

Staff, Opex, Overhead and Liquidity

▪ Furloughed staff and completed redundancy programme

▪ Reduced Sales, Marketing, IT and Facilities spending; reduction in

Racing and Applied costs

▪ Tight cost control to protect liquidity until new funding received

3 – Resolve liquidity shortfall Multi-pronged approach to protect company

▪ Shareholder support (Equity and bank funding)

▪ Bank support (Leverage covenant waiver)

▪ Bondholders (securing amendments to indenture for future flexibility)

▪ Government support (Furlough scheme, PAYE holiday, Paycheck

Protection program (USA))

Liquidity shortfall resolved in 2020

▪ £150m funding achieved through new 12 month bridge facility in June

▪ Provides operational stability into 2021


Group

▪ H1 2020 revenues of £217m were down 68.8% vs. H1 2019

▪ H1 2020 LTM Adjusted EBITDA(1) was (£14m) - a direct result of COVID-19 lockdown, no Formula 1

racing and production suspension during H1 2020 reducing revenue generation

▪ Liquidity issue advised in Q1 due to COVID-19 impact on revenues solved via new funding of £150.0m

raised during H1 2020

Automotive

▪ Vehicle wholesales in H1 2020 totalled 584 (2,335 in H1 2019)

▪ H1 2020 production of 621 cars (2,640 H1 2019) was impacted materially as a result of the suspension of

MPC

▪ 2020 order book now confirmed, with >75% share of higher-margin Super Series and Ultimate Series cars

Racing

▪ Revenues £16.6m down vs. H1 2019 driven by lower F1 prize fund receipts due to COVID-19 impacting

season, partially offset by increased sponsorship versus the prior year

Applied

▪ Revenues £13.5m down vs. H1 2019 driven primarily by completion of two large non-recurring projects in

2019 and impact of COVID-19

(1) Adjusted EBITDA – Excluding H1 2020 exceptional financing and redundancy costs of £23.3m related to COVID-19 impact. FY2019 EBITDA is £181.9m after being

adjusted by £4.8m due to a reclassification in McLaren Applied for intangible amortisation in the final statutory accounts.

Automotive > Racing > Applied

Revenue by division H1 2020

Car volumes by region – H1 2020

H1 2020


◼ Revenue (£m)

Key metrics – H1 2019 vs. H1 2020

◼ EBITDA1 (£m)

◼ Wholesale volume (Units, YoY)

◼ Capex (£m)

H1 2020 Capex down (25%) on H1

2019 includes investment in the all-

new, flexible, lightweight vehicle

architecture which will underpin the

next generation of electrified

supercars launching in 2021

◼ Liquidity (£m)

Liquidity increased as a result of

new £150m funding in H1 2020

◼ Net debt (£m)

(69%)

(243%)

(75%)

1 Adjusted EBITDA

At H1 2020 the £130m SSRCF

was drawn £68m


Automotive


McLaren Automotive

▪ Automotive revenues in H1 2020 of £143.1m (H1 2019 £592.4m) were materially lower due to the unprecedented adverse impact of COVID-19 and the strategic decision taken to reduce volumes in preparation of the launch of the all-new, flexible, lightweight vehicle architecture which will underpin the next generation of electrified supercars

▪ Q2 saw the entire retailer network shut down globally for two months, with a full suspension of the production facility from end of March to beginning of June. The factory is now re-open with one full shift on Series and Ultimate lines

▪ Markets commenced re-opening in May - June with China the first market to open, followed by Germany and UK. As of August, c.80% of the retailer network was fully operational and we expect this to increase to 90% over H2 2020

▪ Wholesale volumes of 584 cars was slightly ahead of our revised COVID-19 planned volume for H1 2020. The strongest regional performance was in China where H1 volumes were broadly in line with the pre-COVID-19 2020 plan. China experienced a catch-up in Q2 once COVID-19 restrictions were lifted

▪ The product mix was well balanced across series vehicles, with Sports and GT Series combined contributing to 65% of H1 2020 volume with the balance driven by Super and Ultimate Series. Speedtail wholesales were slightly behind plan due to production timing and are expected to recover fully in H2 2020

▪ Retailer network is fully intact with no permanent closures (with the exception of temporary lockdown closures in certain regions due to COVID-19) with retail sales in H1 2020 exceeding wholesales by c500 cars as demand saw retailers able to clear down existing stocks. A broad range of order bank development actions in place to build good demand for deliveries into early 2021

▪ Automotive supply chain intact and supply base running at production capacity

▪ New multi-year group partnership with Gulf Oil who will be primary fuel and lubricant supplier for the years ahead

H1 2020 Summary


McLaren Automotive

Following the unprecedented impact of COVID-19 on the business during H1 2020, our focus is on meeting our

planned 2020 volumes with a focus on the high margin vehicles including Speedtail, Elva and the new 765LT

Speedtail▪ 106 Speedtails▪ 15 delivered H1 2020▪ Balance in H2 2020

Elva▪ Around 60 planned for 2020 ▪ First deliveries in H2 2020

765LT▪ 765 total volume ▪ Order bank full for H2 2020,

strong orders into H1 2021

Focus on Ultimate and Super Series production in 2020


Volume declined globally driven by impact of COVID-19 and strategic reduction in volumes

▪ Closure of the retailer network globally for

more than two months

▪ Production Centre suspension delayed the

delivery of vehicles in H1

▪ Strategic decision to reduce H1 2020

volumes driven by:

➢ Matching production and inventory to

market demand

➢ Retailer de-stocking

➢ Preparing for 2020 new model launches

Markets commenced reopening during May/June with c80% of global retailer network now open

▪ Conservative 2020 volume forecast of 1,500,

with upside of 100-200 units following better

than expected retail sales in H1 2020

McLaren Automotive

Global volumes

North America

Europe

APAC

RoW

2,335

584

H1 2019 H1 2020

Global

1,125 240

611 157

123 32

392 72

84 83

China


Racing


Formula 1 World Championship

2020 delayed start but now racing

Formula 1

▪ Season now underway with 6 races completed

▪ 17 F1 races now confirmed for 2020 with final four races in Turkey, Bahrain (2 races) and Abu Dhabi

▪ Lando Norris achieved his first podium finishing 3rd in the Austrian Grand Prix becoming the youngestBritish driver to achieve a podium in the sport

▪ After six races McLaren is currently 4th in the 2020 F1 Constructors’ World Championship with 62 points

▪ McLaren has confirmed signing of Daniel Ricciardo from Renault with Lando Norris completing driver lineup for 2021 season

Off-track

▪ Due to the COVID-19 impact and delayed start to the season prize fund revenue will be reduced in 2020due to lower number of races held

▪ Sponsorship remains robust with the signing of two new Partners, Gulf and IQONIQ

▪ Sponsorship revenues ahead of plan for the current year helping to offset the reduced prize funds


Formula 1 and beyond

F1 Concorde update, Indy Series and Heritage cars

New Concorde agreement for 2021 – 2025

▪ The long-awaited Concorde Agreement governing the future of the sport has now been signed by allteams, reaffirming McLaren’s long-term commitment to Formula 1

▪ Financial cost cap commences in 2021 at $145m then reduces to $140m in 2022 and $135m in 2023-25

▪ The agreed technical regulations will commence from 2022

▪ McLaren will change power units from Renault to Mercedes in 2021

Indy Series

▪ The season is now underway (reduced calendar of 14 races) with 7 races completed. The team is showing strong progress with Patricio “Pato” O’Ward now 3rd and Oliver Askew 16th overall in the championship

▪ Indianapolis 500 held with Pato O’Ward finishing in 6th place out of 33 starters with Oliver Askew ending the race after a crash on lap 92 following a restart ending in 30 th place

Heritage Cars

▪ Ongoing preparation and sale of a small number of heritage fleet cars continues to support the Racingbusiness and build strong relationships with Racing fans and customers


Financials


H1 2019 – H1 2020 EBITDA Bridge

▪ H1 resulted in materially lower volumes as a result of the COVID-19 impact on Global wholesales and production impacting revenues

▪ The company has completed a restructuring process in July, resulting in a reduction in labour and other overhead costs across the group

▪ The racing season resumed at the beginning of July. Losses in Formula 1 prize money offset with improved sponsorship and H1 costs lower as a result of no F1 racing during the first half resulting in upside verses 2019


Group Cash FlowWorking Capital

▪ Net working capital outflow in H1 2020 as wholesales reduced but creditor payments still need to be settled

▪ However, debtor collection much stronger than anticipated as retail sales recovered. As a result, liquidity impact much less than anticipated

Investments

▪ H1 2020 investments decreased versus the same period last year as planned investment spend cut to offset the impact of COVID-19

▪ Capex has been reduced for the remainder of 2020

Financing

▪ £291m equity contribution from shareholders to supporting the execution of strategic plan pre-COVID-19, providing incremental liquidity

▪ £150m1 loan to McLaren Group Limited

1 McLaren Group Limited purchased ordinary share capital in McLaren Holdings Limited (Restricted group) using loan proceeds

* Unrealised FX loss H1 2020 £4.9m (H1 2019 £0.9m) included in EBITDA


H1 2019

Cash flow was severely impacted due to COVID-19 in H1 2020

Automotivewholesale

(units)

Adjusted EBITDA

(£m)

Change in NWC(£m)

Total liquidity (£m)

584

H1 19 H1 20

2,335

81

H1 19 H1 20

(97)(104)

H1 19 H1 20

62227

H1 19 H1 20

H1 2020

(115)*

▪ Initial plan was revised downward post COVID-19, given the shut-down of dealerships and the production centre suspension from March to May

▪ As a result of the adverse impact on sales, EBITDA was significantly reduced during H1 2020

▪ Two key drivers of working capital have been cash inflows from retailers, which have been helped by retailers re-opening and the higher than planned retail sales. In addition, payments to suppliers have not been as high as was initially predicted, largely because McLaren’s suppliers worked with the Group on revised payment terms and McLaren was able to build cars from stock once production recommenced

▪ Liquidity increased as new £150m funding received

* Adjusted EBITDA excludes exceptional and restructuring costs of £23.3m as a result of COVID-19


Net Debt & Liquidity

▪ Gross debt reflects $250m and £370m 5-yr Senior Secured Notes issued in July 2017 and $100m issued July/August 2019

▪ RCF fully drawn at end of quarter, overdrafts undrawn

▪ The group liquidity position was strengthened at the end of H1 2020 through a £150m 12 month bridging loan with NBB

▪ This additional short-term financing is the first part of a three-phase strategy to 1. Strengthen the balance sheet in the aftermath of COVID-19

2. To raise new equity and repay the bridging loan

3. Refinancing of the group borrowings (RCF and Notes)

1 Gross debt is equal to Senior Secured Notes (SSNs) outstanding of £645m plus £14.5m accrued interest. The SSNs includes £16.9m capitalisedfees and revaluation FX loss of £8.0m2 Net Leverage includes reported gross debt less cash and LTM Adjusted EBITDA loss of (£14.0m) (H1 2020) / profit £204m (H1 2019)3 Represents £40m undrawn Overdraft facilities. As at H1 2020 the RCF was drawn at £68m


A cautious outlook for 2020

Guidance for 2020 / 2021

▪ FY2020 volumes projected to be around 1,700

▪ c. 75% of the order book for H2 2020 represents limited Super and Ultimate Series model vehicles (Speedtail, Elva, 765LT) which have a

significant contribution per car

▪ Capex reduced to £220m for full year 2020, with £121m spent in H1 protecting models due to be delivered in H2 2020

▪ Capex focussed on two categories:

▪ Capex for Speedtail, Elva, and 765LT being delivered in H2 2020 and H1 2021

▪ Capex for the 2021 new lightweight platform, enabling a strong recovery potential in 2021

▪ Revenue for FY2020 is projected to be £750m - £800m (FY2019 £1,485m) driven by lower wholesale volumes

▪ FY2020 Group Adjusted EBITDA projected to be in the range of £25m to £50m loss (FY2019 £181.9m profit) following the impact of

COVID-19 and reduction in wholesale volumes

▪ The working capital outflow for H2 2020 is projected to be c£150m

▪ 2021 volumes projected from 3,250 to 3,500 cars as global wholesales recover

Volumes

Capex

Revenue / EBITDA /

NWC


Appendix


Summary Income Statement

1 Includes FX gains and losses (excluding FX on translation of USD bond) H1 2020 £15.8m loss, H1 2019 £12.7m loss, H1 2020 £23.3m exceptional restructuring costs 2 Includes FX on translation of USD bond H1 2020 £19.0m loss, H1 2019 £0.9m loss


Group Cash Flow Statement

Adjusted EBITDA by company

*Racing includes the sale of heritage cars, £1.0m (H1 2020) and £3.3m (H1 2019)** Adjusted EBITDA excludes exceptional and restructuring costs in H1 2020 of £23.3m


One outstanding luxury automotive & technology group

FY2019 Sales and car wholesale volumes

◼ Global leader in high-performance luxury and technology offering the

ultimate ownership experience

◼ 55-year history of innovation and technical excellence

◼ Group revenue and cash generation underpinned by Automotive order

book and production capacity now demonstrated

◼ Latest McLaren models McLaren GT, 620R, 765LT, Elva continue to

demonstrate the success of McLaren product pipeline and strength in

brand

Highlights

Automotive Racing Applied

◼ Offering the ultimate ownership experience

creating the iconic supercar

◼ 20,000+ road cars hand-assembled to date

◼ Legendary racing history

◼ 20 Formula 1 World Championships

◼ Delivering advantage at the intersection of physical

and digital

◼ Customers in motorsport, automotive, public

transport and health

Revenue by division Wholesale volumes by region


McLaren has a long history rooted in racing & innovation

Success in racing created a culture of outstanding performance, excellence and innovation


McLaren has a long history in racing & innovation

Success in racing created a culture of outstanding performance, excellence & innovation

▪

▪

▪

▪

▪

▪


Globally recognised brand

World-class car platform built on a foundation of racing successSuccessful racing performance led to a culture of innovation & excellence, enabling success in cars

The only company to win each of the 4 classic competitions: Formula One, Le Mans, Indianapolis and Can-Am

Every model won multiple prestigious awards for unique technology and design

2012 2013 2015 2016 2016 2017

Ranked #1 in car reviews of 2012Jalopnik

Dewar Trophy for Outstanding British Technical AchievementRoyal Automobile Club

China Performance Car of the YearEVO Middle East Car of the Year:

Supercar of the Year 675LT Coupé

BestPerformance Car

Auto Express New Cars Awards

Five Star AwardAUTOCAR & EVO

& Evo2012 2013 2014 2016 2015 2017

James May’s Car of the YearBBC Top Gear Magazine

Jeremy Clarkson’s Car of the YearBBC Top Gear Magazine

Supercar of the YearAUTOCAR ASEAN

Car of the YearCAR Magazine (675LT Spider)

Best Car on Sale – Best Every Day SupercarBBC Top Gear

Performance Car of the YearBBC Top Gear & Road and Track

2012 2013 2014 2016 2016 2017

Best Sports Car Over £120,000What Car?

Hypercar of the YearBBC Top Gear Magazine

Performance Car of the YearAuto Express

Hardcore Car of the Year:Top Gear (675LT Spider

Best Car on SaleAUTOCAR

Super Car of the YearOctane & EVO

2012 2013 2014 2016 2017

Car of the YearMiddle East Motor Awards

Hypercar ofthe Year

GQ

Middle East Carof the Year Awards

Best Supercar

Best of the BestRed Dot Design Award

Sport Car of the YearCAR Magazine

12C P1 650S 675LT 570S 720S

Launched year: 2011 Launched year: 2013 Launched year: 2014 Launched year: 2015 Launched year: 2015 Launched year: 2017


Automotive operates in distinct segments

SuperSports MotorsportUltimate

▪ Super Series is the core of

McLaren's range with the

best technology available

▪ Derivatives include Coupe,

Spider and LT limited

editions

▪ Brings McLaren’s advanced

technologies to the

sportscar arena, a lower

price point

▪ Derivatives include Coupe,

Spider, LT limited editions

▪ Track cars built for racing

▪ Based on road car models

but without road car

regulations and built to a

racing specification

▪ High performance cars

▪ Built on the same basis as

the Super series with

additional ground-breaking

technology

▪ Further track-only

products offers

▪ 650S, 650S Spider, 720S,

720S Spider, 765LT

▪ 540C, 570S, 570S Spider, 570GT,

600LT, 600LT Spider, 620R▪ 650S GT3, 570S GT4 and

570S Sprint, 720S GT3

▪ P1TM & GTR, McLaren Senna,

Senna GTR, Speedtail, Elva

▪ High performance super

cars with track

performance

▪ MonoCage II carbon body

▪ Best power-to-weight ratio of

sports car range in their class

▪ Lightweight construction with

carbon chassis (75kg)

▪ Strictly limited editions for

racing only

▪ Includes the first hybrid

hyper car in the world

▪ Strictly limited production,

sold out years in advance

Description

Models

Features

Purpose

Price range

▪ Road / track▪ Road ▪ Track▪ Road / track

▪ £200-300k▪ £125-200k ▪ £200-400k▪ >£500k

✓ Bespoke customisation options✓ Limited editions and one-off models

✓ Pure McLaren track experience✓ Pure GT racing series✓ Lifestyle and heritage

✓ Expert advice and support✓ Unique service cover

MSO1 Experiences Ownership

1 McLaren Special Operations

Grand Tourer

▪ Positioned alongside our

established Sports, Super and

Ultimate Series, this is a new

McLaren for a new audience

providing an alternative to

existing products

▪ new GT

▪ Attributes of competition levels

of performance and continent

crossing capability, yet lighter,

faster, more engaging

▪ Luxury Grand Touring

▪ >£160k


McLaren H1 2020 Results€¦ · Formula 1 and beyond F1 Concorde update, Indy Series and Heritage cars New Concorde agreement for 2021 –2025 The long-awaited Concorde Agreement

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