mclaren q1 2020 results€¦ · 3 | mclaren q1 2020 results north america 53% apac, ex. china 10%...

1 | McLaren Q1 2020 Results

McLaren Q1 2020 Results

May 28, 2020


Q1 2020


North America

53%

APAC, ex. China10%

China6%

Rest of World7%

Europe24%

Automotive63%

Racing28%

Applied10%

Group

▪ Q1 2020 revenues £109m (Q1 2019 £284m)

▪ Q1 2020 LTM EBITDA £75m (Q1 2019 £150m)

Automotive

▪ Vehicle wholesales in Q1 2020 totalled 307 (953 in Q1 2019)

▪ Production expected to resume from a position of strength, focused on specials (Speedtail followed

by Elva and 765LT)

▪ Current order book of 993, with greater share of higher-margin Super series and Ultimate series cars

Racing

▪ Revenues £4.4m down vs. Q1 2019 driven by lower F1 price fund due to COVID-19 (season not

started yet) and sale of three heritage cars in 2019, partially offset by £4.1m of increased

sponsorship

Applied

▪ Revenues £5.8m down vs. Q1 2019 driven primarily by completion of two large non recurring

projects in 2019

Automotive > Racing > Applied

Revenue by division Q1 2020

Car volumes by region – Q1 2020

Q1 2020


Key drivers of volume decline globally:

▪ Dealership closures have prevented

customers from being able to make purchases

▪ Production centre suspension has delayed the

delivery of Speedtails to customers

▪ Strategic decision to reduce Q1 2020 volumes

(c. 400 wholesales) driven by:

➢Matching Production and inventory to

market demand

➢ Dealer de-stocking

➢ Preparing for 2020 new model launches

First signs of recovery during May, especially from China

▪ Conservative volume forecast for the

remainder of the year, with potential upside

should conditions improve

▪ China, Germany and US ahead of revised plan

due to relaxed restrictions

McLaren Automotive

Global volumes

North AmericaChina

Europe

APAC

RoW

953

307

1Q19 1Q20

Global

321161

343 73 36 19

4022

213 32


22

(81)

Q1 2019 Q1 2020

Results – Q1 2020

Revenue (£m)

▪ Automotive: Reduced volumes due to COVID-19 impact on manufacturing process and point of sale and strategic decision to reduce volumes

▪ Racing: Decrease in F1 prize fund partially offset by an increase in sponsorship revenues

▪ Applied: Revenues down driven primarily by completion of two large non recurring projects in 2019

▪ Q1 2020 plan of ~£(10)m EBITDA pre-COVID to prepare for strong 2Q, 3Q and 4Q

▪ Incremental negative performance driven by COVID-19 impact and operating leverage of the business

▪ Cost rationalisation measures taken have been implemented in April (run-rate capex and opex impact of up to £185m p.a.)

284

109

Q1 2019 Q1 2020

EBITDA (£m)


We have already identified and implemented a number of cash-preserving measures

Capex

Item Actions Cash saving (£m)

▪ Postponed first deliveries to customers of new platform vehicle to 2021

▪ Other than the new vehicle platform, only invest in vehicles or projects that will deliver a return in 2020

▪ Reduced racing capex

Staff

Opex / overheads

Trade payables

~110

(full year)

▪ Automotive production is gradually restarting

▪ Racing staff will return when F1 seasons starts (expected to start in July)

▪ Staff on Furlough, working staff on reduced salary and no bonuses in 2020

▪ Corporate restructure process has commenced to ensure long-term future success

~45

(full year)

~30

(full year)

▪ Reduced spend in sales & marketing, events, motorsport, travel and other overheads

▪ Reduction of racing costs

▪ IT and facilities savings

▪ Working with our supplier partners to help us with our 2Q 2020 cash outflow. We have agreed extended terms as

we collectively recognise the impact of COVID

Additional

creditor days

20-50

Full run-rate savings of ~£40m per quarter (opex & capex), which will set a new cost base entering 2021


Q1 2019 – Q1 2020 EBITDA Bridge

▪ Lower volumes driven by COVID-19 impact on manufacturing process and point of sale combined with strategic decision to reduce volumes in the quarter

▪ Company has rapidly put in place cost saving measures to reduce labour cost and reduce operating leverage. Other cost rationalisation measures include reduction in marketing and events spend, motorsports and travel

▪ Racing staff also on furlough until F1 season resumes. Losses in F1 prize money offset with improved sponsorship

▪ All measures have been executed during April and therefore no impact in Q1 2020 figures


Group Cash Flow

Working Capital

▪ Reduction of volumes drives significant working capital consumption, explained by an increase in stock and retailer extended payment periods

Investments

▪ Q1 2020 investment includes investment in new McLaren vehicle platform. Original planned delivery date of 2020 now delayed to 2021 due to impact of the Coronavirus

▪ New plan to significantly reduce capex for the rest of the year

Equity

▪ £300m contribution from shareholders to support the execution of strategic plan pre-COVID, providing incremental liquidity

Q1 2020 Q1 2019

Cash flow from operating activities (190.7) (16.0)

of which EBITDA (80.5) 22.0

of which increase in stock, WIP / goods (74.4) (51.0)

of which decrease/(increase) in debtors 66.6 (31.1)

of which (decrease)/increase in creditors

(102.0) 47.3

Cash flow from investing activities (81.1) (84.6)

of which addition of intangibles (74.3) (81.1)

of which addition of tangibles (6.8) (4.0)

Cash flow from financing activities 224.6 33.6

of which interest paid (18.3) (15.4)

of which issue of ordinary share capital 243.6 49.3

Net cash movement (47.0) (67.0)


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 undrawn at end of quarter, but has been drawn since then

▪ Cash utilisation in Q1 2020 was predominantly driven by working capital cash consumption driven by lower volumes

▪ April 2020 cash outflow of £53m, partially offset by £16m cash inflow related to Ventilator funds

▪ McLaren Group is currently looking at a number of potential financing alternatives, secured and unsecured, of up to £275m equivalent to strengthen its liquidity position. An update will be provided as soon as reasonably practicable

1 Gross debt is equal to Senior Secured Notes (SSNs) outstanding of £645m plus £5.9m accrued interest. The SSNs includes £18.7m capitalised fees and revaluation FX loss £6m, Undrawn SSRCF2 Net Leverage includes reported gross debt £638m less cash and LTM Adj. EBITDA of £74.5m3 Includes £49m held at McLaren Group Limited as of Q1 2020. Subsequently to this, £47m was paid to McLaren Holding Limited. Also includes £18m drawn overdraft 4 Represents £68m RCF and £40m Overdraft facilities. As at Q1 2020 £18m of overdraft facility was utilized included in Cash and cash equivalents

Q1 2020 FY2019

Gross debt1 638 628

Cash and cash equivalents (60)3 (56)

Underlying net debt 578 572

Net Leverage / EBITDA2 7.8x 3.2x

Committed liquidity and overdraft lines

1084 112

Total available liquidity 168 168


Current trading update


McLaren Group - Coronavirus Pandemic Update

The Group is a major employer in the UK in the South East and Sheffield region, with a workforce of around 4,000 people and a

diverse supply chain of over 500 companies

Our priority is our people and due to the global Coronavirus pandemic, the Group has swiftly taken the following actions to

protect the health and safety of our people and to ensure the company is well placed to resume operations as smoothly as

possible in the future:

▪ Withdrew from the Formula 1 Australian Grand Prix following a positive test of a team member

▪ Request employees work from home where possible to protect their wellbeing and to comply with Government guidelines

▪ Announced the suspension of operations at the McLaren Production Centre until the end of April and closed all other McLaren

Group sites to employees in line with Government guidance

▪ Temporarily furloughed a number of employees as part of wider cost-cutting measures due to the impact of the Coronavirus

pandemic on the business

▪ c. 3,000 employees furloughed and asked those not furloughed to take a temporary reduction of 20% in pay

▪ Corporate restructure process has commenced to ensure long-term future success


McLaren Group’s response to helping tackle Coronavirus – applying our innovation & expertise

McLaren Group is working as part of the Ventilator UK consortium run by the UK's High Value Manufacturing Catapult, deploying

considerable planning, project management, contractual and legal support and purchasing teams to procure all parts to help

ramp-up production of one of the ventilator designs

Group expertise from Automotive, Racing and Applied that covers design, engineering, lightweight structures, testing and

manufacturing is being deployed in the following areas:

Automotive

▪ Designing bespoke trolleys on which the ventilators are fixed for use in clinical settings

▪ Crash tested to ensure they meet the relevant standards

▪ Deploying engineering expertise to design and build test equipment to ensure that the ventilator units meet all of the specif ied

functional and safety requirements

▪ Facilitating duplicating and expanding the production of existing devices to meet demand

Racing

▪ Machine shop is manufacturing ventilator components

▪ Working with around 100 of its suppliers and also with other UK-based Formula 1 teams

Applied

▪ Supported the ventilator device build assessments, in particular around electronics


Month of April1Q1 2019

1 Actual

A number of factors, including COVID-19, have had a severe impact on cash flow

AutomotiveWholesale

(units)

EBITDA(£m)

Change in NWC(£m)

Total liquidity (£m)

953

307

Q1 19 Q1 20

22

(81)Q1 19 Q1 20

(35)

(110)

Q1 19 Q1 20

116 168

Q1 19 Q1 20

131

Q1 19

(9)

70

Q1 19

(22)

Q1 19

Q1 2020


Some of the capital injected was used on strategic actions aimed at increasing margin and CF generation of future models

£m

168 168

291

(71)

Liquidity Dec-19 Capital injection Q1 Capex plan Q1 ∆NWC plan Q1 EBITDA plan &other costs

Pre-Covid planned Q1liquidity

EBITDA shortfall inQ1 due to COVID

Savings on CAPEXin Q1 due to COVID

Working Capitalsavings, reacting to

COVID

Liquidity Mar-20

205-215


We continue operations with a cautious outlook on the rest of 2020

Working assumptions from end-April to end-December

▪ Q2 expected to be in line with Q1, with a stronger Q3 and Q4, depending on global recovery from COVID-19

▪ Conservative approach, base case for 2020 nearly covered by current order book of 993 units, with any demand beyond this as upside

▪ c. 50% of the order book represents limited series models vehicles (Elva, 765LT) which have a significant contribution per car

▪ Capex reduced to £220m for full year 2020, with £81m spent in Q1

▪ Remaining capex consisting of two categories

▪ Capex for Speedtail, Elva, and 765LT – all sold out in 2020 and hence showing an immediate positive return on capital spend

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

▪ Further NWC unwind of potentially up to £100m (majority deposits unwind as Speedtail and Elva units get delivered)

▪ However, NWC unwind strongly correlated with actual wholesales achieved through the remainder of 2020

Volumes

Capex

NWC


Illustrative Free Cash Flow analysis

Preliminary illustrative normalised yearly cashflow (£m)

270

55

(0)

(175)

(0)

(40)

Automotive EBITDA Racing/Applied Group Capex ∆ NWC Interest + tax FCF

2019 Automotive EBITDA

Normalised yearly capex levels of £150-200m over platform

lifecycle

1 For illustrative purposes only

1

2019 figure


Appendix


Summary Income Statement

1 Includes FX gains and losses (excluding FX on translation of USD bond) Q1 2020 £9.1m loss, Q1 2019 £1.8m gain2 Includes FX on translation of USD bond Q1 2020 £17.0m loss, Q1 2019 £4.3m gain


Group Cash Flow Statement

Reported EBITDA by company

*Racing includes the sale of heritage cars, £0.1m (Q1 2020) and £5.1m (Q1 2019)


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 success

Successful 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

▪ 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 q1 2020 results€¦ · 3 | mclaren q1 2020 results north america 53% apac, ex. china 10%...

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