1 | McLaren H1 2020 Results
McLaren H1 2020 Results August 26, 2020 2 | McLaren H1 2020 Results
H1 2020 – Impact on Group as a result of COVID-19 pandemic 1 - Impact of COVID-19 3 – Resolve liquidity shortfall Global Retail closures across all markets Multi-pronged approach to protect company ▪ Retail sales network closed as a result of global lockdown ▪ Shareholder support (Equity and bank funding) Production facility temporarily suspended ▪ Bank support (Leverage covenant waiver) ▪ No cars built during April and May as production centre suspension ▪ Bondholders (securing amendments to indenture for future flexibility) takes effect ▪ Government support (Furlough scheme, PAYE holiday, Paycheck Automotive wholesales reduced Protection program (USA)) ▪ Vehicle wholesales lower due to the above Liquidity shortfall resolved in 2020 ▪ £150m funding achieved through new 12 month bridge facility in June ▪ Provides operational stability into 2021
2 - Actions taken to counter COVID-19 4 - Business restart – July / August Reduced Capital Expenditures Automotive ▪ Match investment to current vehicles that deliver a 2020 return ▪ MPC fully reopen in July, Series and Ultimate lines on one full shift per ▪ Invest in the all-new, flexible, lightweight vehicle architecture which will day underpin McLaren’s next generation of electrified supercars ▪ Majority of retail network now open Staff, Opex, Overhead and Liquidity ▪ Supply chain intact and resized to new requirements ▪ Furloughed staff and completed redundancy programme ▪ Social distancing and flexible working in place to minimise risk to ▪ Reduced Sales, Marketing, IT and Facilities spending; reduction in operations Racing and Applied costs Racing ▪ Tight cost control to protect liquidity until new funding received ▪ Commenced F1 season in July with up to 16 - 18 races planned 3 | McLaren H1 2020 Results
Automotive > Racing > Applied
H1 2020
Group Revenue by division H1 2020 ▪ 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 Car volumes by region – H1 2020 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. 4 | McLaren H1 2020 Results
Key metrics – H1 2019 vs. H1 2020
◼ Revenue (£m) ◼ Liquidity (£m) (69%) Liquidity increased as a result of new £150m funding in H1 2020
◼ EBITDA1 (£m) ◼ Net debt (£m)
(243%) At H1 2020 the £130m SSRCF was drawn £68m
1 Adjusted EBITDA
◼ Wholesale volume ◼ Capex (£m) (Units, YoY) H1 2020 Capex down (25%) on H1 2019 includes investment in the all- (75%) new, flexible, lightweight vehicle architecture which will underpin the next generation of electrified supercars launching in 2021 5 | McLaren H1 2020 Results
Automotive 6 | McLaren H1 2020 Results
McLaren Automotive
H1 2020 Summary ▪ 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 7 | McLaren H1 2020 Results
McLaren Automotive
Focus on Ultimate and Super Series production in 2020 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 Elva 765LT ▪ 106 Speedtails ▪ Around 60 planned for 2020 ▪ 765 total volume ▪ 15 delivered H1 2020 ▪ First deliveries in H2 2020 ▪ Order bank full for H2 2020, ▪ Balance in H2 2020 strong orders into H1 2021 8 | McLaren H1 2020 Results
McLaren Automotive
Global volumes
Volume declined globally driven by impact of COVID-19 and strategic reduction in volumes Europe ▪ Closure of the retailer network globally for more than two months 611 157 North America ▪ Production Centre suspension delayed the delivery of vehicles in H1 1,125 240 China ▪ Strategic decision to reduce H1 2020 84 83 volumes driven by: ➢ Matching production and inventory to market demand ➢ Retailer de-stocking Global ➢ Preparing for 2020 new model launches RoW Markets commenced reopening during 123 32 May/June with c80% of global retailer network 2,335 APAC now open
584 ▪ Conservative 2020 volume forecast of 1,500, 392 72 H1 2019 H1 2020 with upside of 100-200 units following better than expected retail sales in H1 2020 9 | McLaren H1 2020 Results
Racing 10 | McLaren H1 2020 Results
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 youngest British 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 line up for 2021 season
Off-track ▪ Due to the COVID-19 impact and delayed start to the season prize fund revenue will be reduced in 2020 due 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 11 | 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 governing the future of the sport has now been signed by all teams, 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 Racing business and build strong relationships with Racing fans and customers 12 | McLaren H1 2020 Results
Financials 13 | McLaren H1 2020 Results
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 14 | McLaren H1 2020 Results
Group Cash Flow Working 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 * Unrealised FX loss H1 2020 £4.9m (H1 2019 £0.9m) included in EBITDA Holdings Limited (Restricted group) using loan proceeds 15 | McLaren H1 2020 Results
Cash flow was severely impacted due to COVID-19 in H1 2020
H1 2019 H1 2020 ▪ Initial plan was revised downward post COVID-19, given the shut-down of dealerships and the production centre Automotive 2,335 suspension from March to May wholesale 584 (units) H1 19 H1 20 ▪ As a result of the adverse impact on sales, EBITDA was significantly reduced during H1 2020 81 Adjusted ▪ Two key drivers of working capital have EBITDA (115)* (£m) been cash inflows from retailers, which H1 19 H1 20 have been helped by retailers re- opening and the higher than planned H1 19 H1 20 retail sales. In addition, payments to
Change in (97) suppliers have not been as high as was NWC (104) initially predicted, largely because (£m) McLaren’s suppliers worked with the Group on revised payment terms and McLaren was able to build cars from stock once production recommenced Total liquidity 62 (£m) 227 ▪ Liquidity increased as new £150m funding received H1 19 H1 20 * Adjusted EBITDA excludes exceptional and restructuring costs of £23.3m as a result of COVID-19 16 | McLaren H1 2020 Results
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 capitalised fees and revaluation FX loss of £8.0m. Following change in presentation H1 2020 excludes drawn RCF £67.7m shown in Bank loans and overdrafts whereas prior year H1 2019 includes drawn RCF £50.0m 2 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 17 | McLaren H1 2020 Results
A cautious outlook for 2020
Guidance for 2020 / 2021
▪ FY2020 volumes projected to be around 1,700 Volumes ▪ 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 ▪ 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 Revenue / ▪ EBITDA / COVID-19 and reduction in wholesale volumes NWC ▪ 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 18 | McLaren H1 2020 Results
Appendix 19 | McLaren H1 2020 Results
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 20 | McLaren H1 2020 Results
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 21 | McLaren H1 2020 Results
One outstanding luxury automotive & technology group
Automotive Racing Applied
◼ Delivering advantage at the intersection of physical ◼ Offering the ultimate ownership experience ◼ Legendary racing history and digital creating the iconic supercar ◼ 20 Formula 1 World Championships ◼ Customers in motorsport, automotive, public ◼ 20,000+ road cars hand-assembled to date transport and health Highlights FY2019 Sales and car wholesale volumes Revenue by division Wholesale volumes by region ◼ 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 22 | McLaren H1 2020 Results
McLaren has a long history rooted in racing & innovation
Success in racing created a culture of outstanding performance, excellence and innovation 23 | McLaren H1 2020 Results
McLaren has a long history in racing & innovation ▪ ▪
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Success in racing created a culture of outstanding performance, excellence & innovation 24 | McLaren H1 2020 Results
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
12C P1 650S 675LT 570S 720S
Launched year: 2011 Launched year: 2013 Launched year: 2014 Launched year: 2015 Launched year: 2015 Launched year: 2017
2012 2013 2015 2016 2016 2017 Dewar Trophy for Outstanding British Best Ranked #1 in car reviews of 2012 EVO Middle East Car of the Year: Five Star Award Technical Achievement China Performance Car of the Year Performance Car Jalopnik Supercar of the Year 675LT Coupé AUTOCAR & EVO Royal Automobile Club Auto Express New Cars Awards & Evo2012 2013 2014 2016 2015 2017
James May’s Car of the Year Jeremy Clarkson’s Car of the Year Supercar of the Year Car of the Year Best Car on Sale – Best Every Day Supercar Performance Car of the Year BBC Top Gear Magazine BBC Top Gear Magazine AUTOCAR ASEAN CAR Magazine (675LT Spider) BBC Top Gear BBC Top Gear & Road and Track
2012 2013 2014 2016 2016 2017
Best Sports Car Over £120,000 Hypercar of the Year Performance Car of the Year Hardcore Car of the Year: Best Car on Sale Super Car of the Year What Car? BBC Top Gear Magazine Auto Express Top Gear (675LT Spider AUTOCAR Octane & EVO
2012 2013 2014 2016 2017 Hypercar of Middle East Car Car of the Year Best of the Best Sport Car of the Year the Year of the Year Awards Middle East Motor Awards Red Dot Design Award CAR Magazine GQ Best Supercar
Every model won multiple prestigious awards for unique technology and design 25 | McLaren H1 2020 Results
Automotive operates in distinct segments
Sports Grand Tourer Super Ultimate Motorsport
▪ Brings McLaren’s advanced ▪ Positioned alongside our ▪ Super Series is the core of ▪ High performance cars ▪ Track cars built for racing established Sports, Super and technologies to the McLaren's range with the ▪ Built on the same basis as ▪ Based on road car models Ultimate Series, this is a new the Super series with sportscar arena, a lower best technology available but without road car Description McLaren for a new audience additional ground-breaking price point ▪ Derivatives include Coupe, regulations and built to a providing an alternative to technology ▪ Derivatives include Coupe, Spider and LT limited racing specification existing products ▪ Further track-only Spider, LT limited editions editions products offers ▪ 540C, 570S, 570S Spider, 570GT, ▪ new GT ▪ 650S, 650S Spider, 720S, ▪ P1TM & GTR, McLaren Senna, ▪ 650S GT3, 570S GT4 and Models 600LT, 600LT Spider, 620R 720S Spider, 765LT Senna GTR, Speedtail, Elva 570S Sprint, 720S GT3
▪ Best power-to-weight ratio of ▪ Attributes of competition levels ▪ High performance super ▪ Includes the first hybrid ▪ Strictly limited editions for sports car range in their class of performance and continent cars with track hyper car in the world racing only Features ▪ Lightweight construction with crossing capability, yet lighter, performance ▪ Strictly limited production, faster, more engaging sold out years in advance carbon chassis (75kg) ▪ MonoCage II carbon body
Purpose ▪ Road ▪ Luxury Grand Touring ▪ Road / track ▪ Road / track ▪ Track
Price range ▪ £125-200k ▪ >£160k ▪ £200-300k ▪ >£500k ▪ £200-400k
MSO1 Experiences Ownership
✓ Bespoke customisation options ✓ Pure McLaren track experience ✓ Expert advice and support ✓ Limited editions and one-off models ✓ Pure GT racing series ✓ Unique service cover ✓ Lifestyle and heritage 1 McLaren Special Operations 26 | McLaren H1 2020 Results