INTERIM RESULTS
McLAREN HOLDINGS LIMITED Unaudited Consolidated Financial statements Registered number 10756310 6 months ended 30 June 2019 McLaren Holdings Limited Interim financial statements 30 June 2019
TABLE OF CONTENTS
Business review and outlook ...... 3
Recent developments and factors affecting comparability ...... 9
Consolidated profit and loss account ...... 12
Consolidated statement of comprehensive income ...... 12
Consolidated balance sheet ...... 13
Consolidated statement of changes in equity ...... 14
Consolidated statement of cash flows ...... 15
Notes to the financial statements ...... 16
McLaren Holdings Limited Interim financial statements 30 June 2019 Business review and outlook
Principal Activities
McLaren Holdings Limited (the “Group”) is a global leader in luxury automotive high-performance sports cars and supercars, motorsport and technology. The Group is constituted from three divisions: Automotive, Racing and Applied Technologies. Founded in 1963, the Racing division has been one of the most successful teams in motorsport history. Since its foundation, the team has won 20 Formula 1 World Championships, the Indy 500 three times and the Le Mans 24 Hour race. The Automotive division first produced the iconic McLaren F1 road car in 1992 and more recently launched its new series of products in 2011 starting with the 12C. Today, Automotive has a range of luxury high performance cars across four defined product families: Sports Series, Super Series, Ultimate Series and GT Series. It has produced further ground-breaking cars such as the P1TM, the 600LT and the McLaren Senna. 2018 was an extraordinary year for Automotive, not least because it reached the production rates required to achieve the c5,000 units per year originally promised in Track22. Further to this, Automotive put the McLaren Senna into production and revealed and launched the 600LT. The first half of 2019 has been strong and has already included the launches of Spider versions of the 600LT and the 720S, the reveal of the new GT, and the announcement of a new open-top Ultimate Series car. All current and future models continue to command premium pricing and a strong order bank. The Applied Technologies division focuses on the application of McLaren’s technological know-how in a wide variety of fields. Starting from a successful motorsports division which to this day is still the sole supplier of electronic components to Formula 1, NASCAR, Indycar and Formula E, the division has expanded to focus on three further market segments: automotive, public transport and health. Success in these areas has included taking McLaren know-how in high speed data transmission from Formula 1 and applying it to public transport where it has worked with several train operating companies to design, test and introduce new systems that enable reliable high speed WIFI on trains. Applied Technologies is also working with new entrants to the connected and autonomous vehicle sectors.
The development of the new McLaren Group Limited
The Group has continued to develop during the first half of 2019, a process that started in 2017 with the consolidation of the McLaren Technology Group (holding the Racing and the Applied Technologies divisions) and McLaren Automotive under the ownership of McLaren Holdings Limited. This transaction was completed on 20 July 2017. At the same time, the Group issued a sterling Bond of £370m and a dollar Bond of $250m traded on The International Stock Exchange. The Group is now managed along the three business lines of Automotive, Racing and Applied Technologies and the Group’s legal structure has been changed to reflect this. During 2018 and completed on 2 January 2019, the assets and liabilities of McLaren Marketing Limited and Team McLaren Limited were hived into McLaren Racing Limited to form one single racing company. The ownership of McLaren Racing Limited and McLaren Applied Technologies Limited were also transferred to McLaren Holdings Limited from McLaren Technology Group Limited. McLaren Technology Group Limited was then renamed McLaren Services Limited and continues to provide IT, Facilities Management and similar services to the operating entities. 2019 will see the completion of this reorganisation with further dormant subsidiaries wound up. The performance for Q2 2019 continues the same positive trend reported in Q1 2019. Turnover has increased by 36% from £511.4m in H1 2018 to £697.6m in H1 2019. In addition, the Group has reported an EBITDA of £80.7m compared to an EBITDA of £12.4m in H1 2018. Both these are driving a return to profitability at the operating level, with an operating profit of £11.5m reported in H1 2019 in comparison to a loss of £53.8m in H2 2018. Overall losses for the Group before tax are significantly lower, with a loss of just £21.7m reported in H1 2018 versus the £75.5m loss reported in H1 2018. The improvement in the H1 2019 results is driven by the Automotive division which has built on the success of 2018 by not only continuing to build cars at a rate of 20 units per day, but also delivering Ultimate Series cars in the sales mix. Further, the losses from the Racing division have begun to reduce, largely reflecting the improved finishing position in the 2018 Formula One World Constructors’ Championship.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Business review and outlook (continued)
Automotive
The Automotive division forecast sales growing to c5,000 units per annum within the 7-year Track22 strategy which was first announced at the Geneva Motor Show in 2015. 2018 saw 4,829 vehicles delivered, as planned, which was the achievement of this objective. 2019 is about consolidating this performance and the division plans to deliver a similar number again. Total wholesales in H1 2019 are 2,335 compared to 2,178 in H1 2018, an increase of 7%. Wholesale volumes by region are:
Region H1 2019 H1 2018 YoY Growth Europe 611 739 -17% North America 1,125 850 32% Asia Pacific 392 347 13% China 84 114 -26% RoW 123 128 -4% Global 2,335 2,178 7%
In terms of regional mix, while the European performance is good, there is some weakness in the overall market which has led to a small fall in volumes in this region in comparison to 2018. However, Automotive has been able to more than compensate with volumes in North America and Asia Pacific where both McLaren’s performance, and the market, continue to be strong. There has also been a slight fall in Chinese volumes in comparison to 2018; while the market is weaker than twelve months ago McLaren’s overall market share has improved and therefore this variance is expected to be timing only and the division is on track to deliver a similar volume to last year in China by the end of the year. The mix of products delivered in H1 2019 verses H1 2018 was also stronger; there were just 10 Ultimate Series vehicles delivered in H1 2018 whereas there were 217 delivered in H1 2019. The mix difference is the key driver behind the improved financial performance verses 2018 in the Automotive division. This trend is expected to continue to the full year where, despite the guidance on volume being to deliver a similar number to 2018, it is expected that the mix will contribute to an improved financial performance over 2018. Automotive continued to announce and launch new products in 2019. Having revealed the 720S Spider to the world in December 2018, it announced a second Spider in Q1 2019: the 600LT Spider. Both cars were reviewed by the world’s press in February 2019 and both received numerous 5-star accolades from the global media. Both these vehicles are now in full production and being delivered to customers. Following this, in May 2019, the new GT was revealed. Sleek, elegant and muscular, the superlight new GT challenges the conventions of the Grand Tourer category with a compelling blend of beautiful design, high-quality innovative materials, true supercar performance and McLaren driving dynamics and engagement. Positioned alongside the established Sports, Super and Ultimate Series families, this is a new McLaren for a new audience and provides an alternative to existing products in an expanding market segment. Finally, in August 2019, McLaren announced an all-new Ultimate Series McLaren supercar, focused on the exhilaration of pure, open-top driving. The as yet unnamed model is a two-seat, open cockpit roadster that will be the latest offering in McLaren’s range-topping Ultimate Series lineage of supercars that include the P1TM, McLaren Senna and Speedtail. Strictly limited to just 399 examples, the roadster will differ from both the McLaren Senna’s focus on being the ultimate road-legal track car and the Speedtail’s high-speed aerodynamic efficiency by offering the purest distillation of road-focused driving pleasure and an unrivalled sense of driver connection with the surrounding environment.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Business review and outlook (continued)
Automotive (continued)
While designed more for the road than the track, the new model will utilise McLaren’s trademark carbon fibre construction making it the lightest car ever produced by McLaren Automotive and will be powered by a version of the twin-turbocharged V8 engine currently employed in the McLaren Senna to ensure breath- taking performance. Coming to the market in late 2020, the new Ultimate Series model is likely to be priced between the current McLaren Senna (£750,000) and the Speedtail (£2.1m) models. The division has already started to collect expressions of interest. Further emphasising the rapid growth in Automotive, the division also announced in May that it had produced its 20,000th car during May 2019. This latest milestone represents a further significant achievement for the British marque and comes eight years after the first McLaren road car left the Production Centre in July 2011. The order book continues to be strong. The order book totalled 1,925 units at 30 June 2019, with Ultimate Series sold out and Super Series and Sports Series 600LT Spider sold out into Q4. The demand will be further enhanced with the addition of the new GT. This, along with the delivery of the remaining McLaren Senna’s and McLaren Senna GTRs in 2019, is expected to contribute to further growth in revenue and EBITDA from the Automotive division in 2019 and further demonstrates that Automotive is on plan to deliver the targets set out in Track25.
McLaren Racing
The 2019 Formula One season has passed the half-way mark. The team has had an excellent season so far, scoring 82 points in the first twelve races and lie fourth in the Formula One World Constructors’ Championship. The team has already exceeded their points total from 2018 (62 points) with nine races still to go. The car is a big step forward from the 2018 model and the team are confident that this positive start can be maintained. The on-track results are a direct result of the changes made by Zak Brown following his appointment as CEO in the first half of 2018. This includes the appointment of James Key (Technical Director) and Andreas Seidl (Team Principal) who are both now on board and beginning to influence the performance of the team. The team is also benefiting from appointing the experienced Carlos Sainz Junior to drive alongside Lando Norris for 2019. Their performance has impressed to such a degree that McLaren has already confirmed both as drivers for 2020. Off the track, the team has also been successful in acquiring new sponsorship for the 2019 season as highlighted in previous reports. The roster for 2019 is now full and the focus has moved on to building on the sponsor portfolio in 2020. There is a healthy pipeline for the new year and the team is confident of adding some new partnerships to its impressive portfolio in 2020. In respect of the wider Formula 1 commercial environment, McLaren continues to work with the FIA and Formula 1 Management to create a more sustainable sport. The current commercial framework for Formula 1 ends at the end of 2020 and all parties are looking to sign a long-term agreement that will both improve the sport and the financial returns for all parties involved. As widely publicised, the target is for all the teams to have signed the new agreement in October 2019. The aim of these changes is to grow the size of Formula 1 as a business and ultimately the value of the team franchises from 2021 and beyond. The final proposals have been put forward to the teams and these cover: • the control of costs and cost capping ($175m per year) • more equitable revenue distribution of prize money • the growth of Formula 1 as a business with a wider fan base reaching new markets • exploitation of digital channels and environments such as e-sports.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Business review and outlook (continued)
McLaren Racing (continued)
Finally, Racing was pleased to announce in August that the brand is returning to Indy Car racing in the USA from the 2020 season. McLaren has an impressive history in Indy Car, winning three Indy 500 titles and last competing in the championship in 1979. This new venture will give Racing a significant commercial advantage over other F1 teams, none of which have such a significant racing presence in North America. McLaren is entering through a strategic partnership with an existing team, Arrow Schmidt Peterson Motorsports (Arrow SPM), and Chevrolet. Under the partnership, the team will be renamed Arrow McLaren Racing SP and will field two Chevrolet-powered cars in the 2020 NTT IndyCar Series, reflecting the continuing status of Arrow Electronics as the team’s title partner, as well as a new manufacturer partnership with Chevrolet. This will allow McLaren to be competitive almost immediately. Whilst the commercial opportunities are significant, the costs of competing are not expected to be material due to the low cost (compared to F1) of competing in Indy Car and the sponsorship arrangements the team already have in place. The Group’s strategy is to build performance of the F1 team, looking forward to the new regulations which are due to come into force from 2021. McLaren is playing its full part in agreeing these regulations and welcomes the measures to control costs and improve revenues for teams. As a result, the Group plans to reduce the net cost of competing in Formula 1 over the next five years but at the same time take advantage of the new regulations to improve the competitiveness of the team. This, alongside the commercial advantage of Indy Car, should see the costs of the Racing division falling to closer to break-even over the next two to three years.
Intangible Investment
The Group continued to invest in new products and services, investing £151m in H1 2019. The majority of this was invested by the Automotive division in new road car projects including new Ultimate, Super and Sports Series models. These new models are part of the commitments made in the Track25 plan and are part of taking the Company to volumes over 6,000 units by 2025. While this is an increase of £35.6m in comparison to H1 2018, this is due to timing only and the Group expects the total intangible investment in 2019 to be similar to 2018.
New Equity Issued
On the 14 May 2018, McLaren Holdings issued £100.0m of new shares to McLaren Group Limited. On the 16 November 2018, McLaren Holdings issued £50.0m of new shares to McLaren Group Limited. On the 1 February 2019, McLaren Holdings issued £49.3m of new shares to McLaren Group Limited. The new capital, which is part of the Group’s simplification over the last 12 months, will significantly strengthen the Group’s balance sheet and underpins its ambitious growth plans laid out in its five-year business plan.
Issue of Debt and increase in Revolving Credit Facilities
On the 12 July 2019 the Group announced that McLaren Finance plc had entered into financing arrangements in an amount equal to $150.0 million (equivalent), consisting of: (i) a private placement of an additional $100.0 million in aggregate principal amount of the Issuer's 5.750% senior secured notes due 2022 (the "Notes"); (ii) incremental commitments under its existing super senior revolving credit facility of £20.0 million and (iii) c. $24.9 million in the form of commitments under a separate US dollar-denominated short-term credit facility, which remains undrawn as of the date of this report.
The new facilities and debt added to the liquidity headroom available to the Group and was raised to give flexibility over the next 18 to 24 months around the launch of new products in the pipeline. The Group is now better placed to respond to changes in customer demand and competitor actions.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Business review and outlook (continued)
Key performance indicators
The Directors consider turnover, sales and production volumes, position in the FIA Formula 1 World Championship, earnings before interest and tax, profit before tax, cash flow and performance against engineering programme milestones to be the principal Key Performance Indicators (KPIs). These are used to assess progress towards achieving the Group’s strategies over the medium term and performance against these measures is reviewed regularly.
Principal risks and uncertainties
The risks associated with the manufacture of luxury road cars relate primarily to the costs associated with the development of future vehicles, the ability of McLaren Automotive to leverage a competitive advantage, demand for the brand and also the economic position of key markets into which cars are sold. Further, the Group is exposed to the performance of Formula 1 as a global sports entertainment business and on-track performance. On-track performance impacts income from prize money and the renewal and acquisition of sponsorship. As with any company active on a global stage, foreign exchange volatility presents a risk. Currency exposure will remain high as 66 per cent of worldwide sales revenues are denominated in non-Sterling currencies. The Group operates in an international environment with revenues denominated primarily in US dollars, Japanese Yen, Chinese Yuan and Euros. Purchases are transacted primarily in Sterling and Euros. The principal risks, however, are exposure to the US Dollar and Euro. The Group operates under a treasury policy and accordingly has a hedging portfolio in place to cover a proportion of these cash flows. Interest exposure is governed by the rate at which long-term loans are agreed and the rate contracted with high-yield bond holders and the banking group supporting the revolving credit facility. The interest rate on the revolving credit facility is linked to LIBOR whereas the rate contracted with the high-yield bond holders is fixed.
Brexit considerations
The current uncertainty regarding the way the UK leaves the EU makes it very difficult to plan for, with multiple scenarios having to be considered and addressed. The Group continues to keep the progress of the exit discussions under review but considers the impact of the UK’s exit on the financial results of the Group to be low. However, the Management Team has considered the risks that exiting the EU poses and established that the following risks exist: • The Group sources approximately 50% of supplies from the EU, in terms of value, and is therefore dependent on the movement of goods into the UK to maintain production. The Group could be required to hold additional stocks of parts or slow production during the Brexit period which would have a short, temporary impact on cash flow. • The Group’s imports could become subject to tariffs due to the cessation of free trade arrangements as a result of Brexit. This could have an impact on the Group’s input costs. • There is uncertainty over the rights of EU nationals to work in the UK which could increase the risk of hiring talent. • Exchange rate volatility could impact the Group’s revenues, profits and cash flows.
However, the Management Team has taken a number of actions in order to mitigate any potential impact. These actions include: • Establishing a cross-functional team of subject matter experts to monitor the impact of Brexit and report their findings to the Management team and, ultimately, the board. • The Group has ensured that it has sufficient cash reserves forecast to be in place through the Brexit period in order to allow additional stocks to be held or production to be slowed or to cover any additional costs. This has been further helped by the additional debt raise, which strengthens liquidity around the new 31 October 2019 Brexit deadline.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Business review and outlook (continued)
Brexit considerations (continued)
• Through the Group’s Government Affairs department, the Group has strong engagement with Government through bodies such as the Automotive Council and the Society of Motor Manufacturers and Traders. • The Automotive division has obtained AEO accreditation. • The Group has continued to follow its hedging policy, as described elsewhere in these accounts, in order to mitigate any short-term volatility in exchange rates.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Recent developments and factors affecting comparability Income statement
Revenue
Revenue was £697.6m for the 6 months ended 30 June 2019, an increase of £186.2m or 36.4% on the 6 months ended 30 June 2018.
Automotive saw a 42.5% increase in revenue driven primarily by a 7% increase in wholesale volumes and a change in sales mix between comparative periods. The key driver is the success of the Ultimate Series in H1 2019, with 217 McLaren Senna wholesales compared to 10 in H1 2018. However, there were also positive shifts in the other series. In the Sports Series, there was a shift away from the 570S and 570S Spider models towards the 600LT. In the Super Series, there was a shift away from the 720S Coupe following the introduction of the 720S Spider.
Racing reported revenue of £75.9m for the 6 months ended 30 June 2019, an increase of £6.4m or 9.2% on the 6 months ended 30 June 2018. This increase was primarily in Formula 1 prize money reflecting the ranking in Constructor’s championship position of 6th in 2018, compared to 9th in 2017 (as Formula 1 prize money is paid retrospectively).
Applied Technologies revenue was £30.4m for the 6 months ended 30 June 2019, an increase of £1.8m or 6.3% due predominantly from the Formula E battery project moving from product development to product supply for season five races.
Gross profit
Gross profit was £204.1m for the 6 months ended 30 June 2019, an increase of £93.2m on the 6 months ended 30 June 2018. Gross profit as a percentage of revenue improved from 21.7% in 2018 to 29.3% in 2019.
Automotive reported a strong increase in gross profit in line with revenue performance and the Ultimate Series sales increase in H1 2019.
Racing reported a lower gross loss, and an improved margin, in the 6 months ended 30 June 2019, compared to the 6 months ended 30 June 2018, due to the improved revenues as detailed above.
Applied Technologies gross profit margin was consistent year on year.
Administrative expenses
Administrative expenses were £125.8m for the 6 months ended 30 June 2019, an increase of £14.0m or 12.5% on the 6 months ended 30 June 2018.
Automotive reported an increase in administrative expenses with investment in headcount and marketing, to match the business growth with the company now producing c5,000 cars per annum.
Other operating income
Other operating income was £15.1m for the 6 months ended 30 June 2019, an increase of £2.9m on the comparative period. The increase is primarily attributed to higher Automotive grant income recognised in the 6 months ended 30 June 2019, and an increase in R&D expenditure credits across the Group.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Recent developments and factors affecting comparability (continued)
Income statement (continued)
Depreciation
Depreciation was £12.5m for the 6 months ended 30 June 2019, an increase of £2.7m on the same period in 2018. The most significant movement outside of standard capital investment across the Group is from Formula E batteries being capitalised and depreciated as the product is leased to the teams, as well as additional equipment needed to manage the service.
Amortisation
Amortisation was £69.4m for the 6 months ended 30 June 2019, an increase of £14.1m compared to the 6 months ended 30 June 2018. This increase is driven by the shift in sales mix towards the Ultimate Series cars which receive a higher amortisation charge per car, compared to the Sports and Super Series.
Finance costs
Finance costs were £33.2m for the 6 months ended 30 June 2019, compared to £21.6m for the equivalent period in the prior year. The majority of this variance is due to the higher FX losses in H1 2019 compared to H1 2018 on remeasurement of the USD high yield bond and other currency balance sheet positions, and realised losses on FX trades.
Income tax
The income tax credit was £1.5m for the 6 months ended 30 June 2019 compared to £3.1m in the corresponding period in 2018. The tax payable on overseas profits has fallen as 2018 included an amount of tax in respect of prior years. The charge has been offset by an increase in deferred tax assets. This is principally in respect of trading losses which are carried forward and are anticipated to be utilised against future profitability. The level of credit has fallen relative to 2018 as losses have decreased and a certain amount has been utilised by way of current year group relief.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Recent developments and factors affecting comparability (continued) Cash flow statement
The six months to 30 June 2019 saw a net cash outflow of £(79.6)m, compared to a net cash outflow of £(29.6)m in the 6 months to 30 June 2018. The net cash balance at 30 June 2019 was £16.5m, compared to £70.0m as at 30 June 2018.
Cash flow from operating activities
Cash used in operating activities was £(11.5)m in the 6 months to 30 June 2019 compared to cash generation of £12.5m in the equivalent 6-month period to 30 June 2018. The impact of improvement in operating loss has been offset with an increased working capital position. The key driver to this is the shift in sales mix to Ultimate series in Automotive.
Debtors increased in Q2 2019 due to timing of wholesales in the quarter and because these now include a significant number of Ultimate series cars compared to the comparative period.
Creditors are lower despite trade creditors being marginally up due to the timing of spend. Offsetting this is a lower trade finance balance than last year. The fall in the trade finance balance is due to sales mix within debtors where sales to the US and Ultimate Series cars are not currently trade financed.
Cash flow from investing activities
Net cash used in investing activities increased to £(150.7)m for the period ended 30 June 2019 compared to £(115.2)m in the same period for 2018. This is primarily due to increased expenditure in 2019 on intangible assets because of continued growth in new product development in the Automotive business. The increase is due to the phasing of the spend in the year and the launces of the various products; Automotive is launching four new products in 2019 as opposed to two in 2018. The expectation for the full year is that the spend on intangible and fixed assets will be in line with the prior year.
Cash flow from financing activities
Net cash inflow from financing activities was £82.6m for the 6 months ended 30 June 2019, compared to £73.1m in the 6 months to 30 June 2018. Proceeds of £49.3m were received in H1 2019 from the issuance of new shares to McLaren Group Limited and £50m from the drawdown of the revolving loan facility. In the equivalent period in 2018, £100m was received from share issuance offset with repayment of £10m of revolving loan facility. Interest payments were comparable in the two periods under review.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Consolidated profit and loss account for the six months ended 30 June 2019
Note 2019 2018
£000 £000
Turnover 4 697,570 511,419 Cost of Sales (493,482) (400,477)
Gross profit 204,088 110,942
Administrative expenses (125,769) (111,787) Other operating income 15,085 12,153
Operating profit before depreciation and 93,404 11,308 amortisation Depreciation (12,461) (9,848) Amortisation (69,422) (55,288)
Operating profit/(loss) 11,521 (53,828)
Finance costs (net) (33,231) (21,649)
Loss before taxation (21,710) (75,477) Tax on loss 5 1,526 3,145
Loss for the financial period (20,184) (72,332)
Consolidated statement of comprehensive income for the six months ended 30 June 2019
2019 2018
£000 £000
Loss for the financial period (20,184) (72,332) Other comprehensive income/(expense): Deferred tax movement on revaluation reserve 71 518 Gain/(loss) on cash flow hedges arising during the 2,922 (17,221) period Gain on foreign currency translation reserve 757 1,989
Total comprehensive expense for the period (16,434) (87,046)
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McLaren Holdings Limited Interim financial statements 30 June 2019
Consolidated balance sheet
As at 30th As at 31st
June December 2019 2018 Note £000 £000
Fixed assets Intangible assets 6 768,682 693,424 Tangible assets 7 289,679 288,034 Heritage assets 8 57,981 58,186
1,116,342 1,039,644
Current assets Inventories 9 200,018 155,393 Debtors 10 337,900 296,329 Cash at bank and in hand 35,550 97,216
573,468 548,938 Creditors: Amounts falling due within one year 11 (731,542) (671,374)
Net current liabilities (158,074) (122,436)
Total assets less current liabilities 958,268 917,208
Creditors: Amounts falling due after more than one 12 (578,615) (572,564) year
Provisions for liabilities (12,362) (8,413)
Deferred capital funding 13 (98,321) (100,150)
Net assets 268,970 236,081
Capital and reserves Called-up share capital 89 87 Share premium account 199,314 149,993 Revaluation reserve 52,500 52,804 Capital contribution reserve 2,039 2,039 Merger reserve 218,547 218,547 Foreign currency translation reserve (10,951) (14,630) Accumulated losses (192,568) (172,759)
Total Equity 268,970 236,081
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McLaren Holdings Limited Interim financial statements 30 June 2019
Consolidated statement of changes in equity for the six months ended 30 June 2019
Foreign Called up Share Capital currency share premium Merger contribution translation Revaluation Retained Total capital account reserve reserve reserve reserve earnings equity
£000 £000 £000 £000 £000 £000 £000 £000
At 1 January 2018 80 - 218,547 2,039 4,753 56,109 (116,663) 164,865
Loss for the financial ------(60,196) (60,196) year Other comprehensive (expense)/income for the - - - - (19,383) (3,305) 4,100 (18,588) year
Total comprehensive - - - - (19,383) (3,305) (56,096) (78,784) expense
Issue of share capital 7 149,993 - - - 150,000
At 31 December 2018 87 149,993 218,547 2,039 (14,630) 52,804 (172,759) 236,081
At 1 January 2019 87 149,993 218,547 2,039 (14,630) 52,804 (172,759) 236,081
Loss for the financial ------(20,184) (20,184) period Other comprehensive income/(expense) for the - - - - 3,679 (304) 375 3,750 period
Total comprehensive - - - - 3,679 (304) (19,809) (16,434) income/(expense)
Issue of share capital 2 49,321 - - - - - 49,323
At 30 June 2019 89 199,314 218,547 2,039 (10,951) 52,500 (192,568) 268,970
In February 2019 McLaren Holdings Limited issued 206,313 ordinary 1p shares for £49,323k.
The foreign currency translation reserve represents a combination of the movement on the effective portion of cash flow hedges and revaluation of foreign subsidiaries.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Consolidated statement of cash flows for the six months ended 30 June 2019
2019 2018 Note £000 £000
Net cash flows from operating activities 14 (9,265) 19,290
Taxation paid (2,240) (6,836)
Net cash (used)/generated from operating activities (11,505) 12,454
Cash flow from investing activities Addition of intangible assets (146,509) (105,788) Addition of tangible assets (4,507) (9,637) Proceeds from disposal of tangible assets 50 55 Interest received 282 215
Net cash outflow from investing activities (150,684) (115,155)
Cash flow from financing activities Repayments of obligations under finance lease (450) (293) Receipts from revolver loan facility 50,000 (10,000) Interest paid (16,317) (16,634) Proceeds from issue of ordinary share capital 49,323 100,000
Net cash inflow from financing activities 82,556 73,073
Net decrease in cash and cash equivalents (79,633) (29,628)
Cash and cash equivalents at beginning of period 96,738 99,316
Effect of foreign exchange rate changes (610) 310
Cash and cash equivalents at end of period 16,495 69,998
Cash and cash equivalents consists of:
Cash at bank and in hand 35,550 69,998 Bank overdrafts (19,055) -
Cash and cash equivalents 16,495 69,998
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McLaren Holdings Limited Interim financial statements 30 June 2019
Notes to the financial statements
1. General Information McLaren Holdings Limited (“the Company”) and its subsidiaries (together “the Group”) is privately owned and incorporated in the United Kingdom. The address of the registered office is McLaren Technology Centre, Chertsey Road, Woking, Surrey, GU21 4YH.
2. Basis of preparation The condensed consolidated interim financial information for the six months ended 30 June 2019 has been prepared with reference to FRS 104, ‘Interim financial reporting’, and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This condensed consolidated interim financial information has not been audited or reviewed.
3. Accounting Policies The accounting policies applied are consistent with those of the annual financial statements of McLaren Group Limited for the year ended 31 December 2018.
4. Turnover by class of business 6 months ended 30th
June
Turnover 2019 2018 £000 £000 Automotive 592,394 415,694 Racing 75,866 69,471 Applied Technologies 30,443 28,626 698,703 513,791 Less: Inter-segmental turnover (1,133) (2,372) 697,570 511,419
5. Tax on loss 6 months ended 30th
June
Tax (expense)/income included in profit or 2019 2018 loss £000 £000 Current tax (4,197) (8,391) Deferred tax 5,723 11,536 Total tax 1,526 3,145
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McLaren Holdings Limited Interim financial statements 30 June 2019
Notes to the financial statements (continued)
6. Intangible assets
New production IT systems Internally Other development development developed development costs costs software costs Total £000 £000 £000 £000 £000 Cost: At 1 January 2019 1,087,562 67,496 9,822 14,979 1,179,859 Additions 141,137 950 140 4,282 146,509 Disposals - (364) - - (364)
At 30 June 2019 1,228,699 68,082 9,962 19,261 1,326,004
Accumulated amortisation: At 1 January 2019 463,718 20,900 - 1,817 486,435 Charge for the period 66,296 3,775 526 654 71,251 Disposals - (364) - - (364)
At 30 June 2019 530,014 24,311 526 2,471 557,322
Net book value: At 30 June 2019 698,685 43,771 9,436 16,790 768,682
At 31 December 2018 623,844 46,596 9,822 13,162 693,424
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McLaren Holdings Limited Interim financial statements 30 June 2019
Notes to the financial statements (continued)
7. Tangible assets
Leasehold Premises Plant, Fixtures, Assets Freehold and machinery, Fittings in the land and Improve- tools and Motor and office course of buildings ments equipment vehicles equipment construction Total £000 £000 £000 £000 £000 £000 £000 Cost: At 1 January 2019 279,119 19,824 111,872 8,782 79,453 7,687 506,737 Additions - 90 2,361 77 10,125 1,490 14,143 Disposals - (3,060) (464) - (688) - (4,212) Reclassification - 244 763 - 2,299 (3,306) - Exchange adjustment - - - - 4 - 4
At 30 June 2019 279,119 17,098 114,532 8,859 91,193 5,871 516,672
Accumulated depreciation: At 1 January 2019 71,276 5,354 73,286 7,113 61,674 - 218,703 Charge for the period 2,982 128 5,847 232 3,272 - 12,461 Disposals - (3,060) (430) - (685) - (4,175) Exchange adjustment - - - - 4 - 4
At 30 June 2019 74,258 2,422 78,703 7,345 64,265 - 226,993
Net book value: At 30 June 2019 204,861 14,676 35,829 1,514 26,928 5,871 289,679
At 31 December 2018 207,843 14,470 38,586 1,669 17,779 7,687 288,034
8. Heritage assets
Historic
Cars £000 Cost and Net book value: At 1 January 2019 58,186 Transfer to inventory (205)
At 30 June 2019 57,981
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McLaren Holdings Limited Interim financial statements 30 June 2019
Notes to the financial statements (continued)
9. Inventories
As at 30 As at 31 June December 2019 2018 £000 £000
Raw materials and consumables 63,165 53,851 Work in progress 54,533 53,881 Finished goods and goods for resale 82,320 47,661
200,018 155,393
10. Debtors
As at 30 As at 31 June December 2019 2018 £000 £000
Trade debtors 145,460 132,974 Amounts owed by related parties 118 735 Taxation 21,829 22,319 Other debtors 33,699 20,545 Deferred tax asset 82,820 75,346 Derivative financial assets 3,872 2,803 Prepayments and accrued income 50,102 41,607
337,900 296,329
11. Creditors – amounts falling due within one year
As at 30 As at 31 June December 2019 2018 £000 £000
Bank loans and overdrafts 69,055 478 Obligations under finance leases 1,734 862 Amounts owed to related parties 2,245 - Trade creditors 101,187 75,881 Taxation and social security 7,664 9,700 Other creditors 151,991 184,646 Derivative financial liabilities 20,600 22,451 Accruals and deferred income 377,066 377,356
731,542 671,374
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McLaren Holdings Limited Interim financial statements 30 June 2019
Notes to the financial statements (continued)
11. Creditors – amounts falling due within one year (continued) Other creditors includes £55,576K (31 Dec 2018: £109,052K) of Trade Finance which is used to support wholesales to McLaren dealers.
12. Creditors – amounts falling due after more than one year
As at 30 As at 31 June December 2019 2018 £000 £000
Senior secured notes 552,638 549,653 Obligations under finance leases 5,204 852 Amounts owed to related parties 15,733 16,976 Other creditors 780 - Derivative financial liabilities 4,260 5,083
578,615 572,564
13. Deferred capital funding
£000
Cost:
At 1 January 2019 100,150 Amortisation credit for the period (1,829)
At 30 June 2019 98,321
Funding received to build the McLaren Technology Centre is treated as deferred income and is credited to the profit and loss account in annual instalments over the estimated useful lives of the fixed assets concerned.
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McLaren Holdings Limited Interim financial statements 30 June 2019
Notes to the financial statements (continued)
14. Statement of cash flows Reconciliation of profit to net cash flow from operating activities
As at 30 As at 30 June June 2019 2018 £000 £000
(20,184) (72,332) Loss for the financial period Adjustments for: Tax on loss (1,526) (3,145) Net interest expense 33,231 21,649 Operating profit/(loss) 11,521 (53,828)
Depreciation and amortisation charges 81,883 65,135 R&D expenditure credits (9,903) (6,521) Foreign exchange (loss)/gain (11,690) 16,234 Increase in stocks, work in progress and (44,420) (47,588) finished goods (Increase)/decrease in debtors (18,314) 10,761 (Decrease)/increase in creditors (24,677) 35,527 Increase/(decrease) in amounts owed to related 2,399 (288) parties Increase/(decrease) in provisions 3,949 (137) Profit on disposal of fixed assets (13) (5) Cash flow from operating activities (9,265) 19,290
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