Q2 2017 Results September 29, 2017 0 C O N F I D E N T I A L - - PowerPoint PPT Presentation



C O N F I D E N T I A L

Q2 2017 Results

September 29, 2017



1

C O N F I D E N T I A L

One outstanding luxury and technology group

Automotive Racing Applied Technologies

 Award winning high performance luxury cars  “Experience”-led customer proposition  Unique brand platform with global visibility  20 F1 World Championships  Cutting-edge tech solutions and data analysis  Track record of exceptional & profitable growth

2016 Revenues: £650m 2016 Revenues: £225m 2016 Revenues: £52m

North America 35% Europe 30% APAC ex. China 17% China 7% RoW 11% Automotive 70% Racing 25% Applied Technologies 5%

Sales and car volume split Highlights

Sales by division Car volumes by region 2016: 3,286 units 2016: £898m2

 Global leader in high-performance luxury and technology  55 year history dominated by technical excellence  Revenue visibility via automotive order book and F1 contracts  Q2 2017 LTM normalized PF revenue: £999m  Q2 2017 LTM normalized PF EBITDA: £167m 10

Notes: 1 Normalised pro-forma revenue is calculated using the same approach as normalised pro-forma EBITDA, adjusting for the impact of the SAP implementation, the 720S ramp-up and cost synergies. 2 Exclusive of intercompany transactions



2

C O N F I D E N T I A L

Highlights

• Individual McLaren businesses brought together under a single brand

with unified and supportive shareholders to create one outstanding luxury and technology group

• Accelerating car volumes from June 2017 following successful launches
• f iconic 720S and 570S Spider
• Continued strong order book, with both 720S and 570S Spider sold
• ut into 2018
• 720S production ramp-up complete, currently producing 40 cars per

week

• Q2 2017 group revenues of £189m (vs. £130m in Q1 2017), with the

increase mainly driven by continued ramp-up of 720S production

• Q2 2017 normalised EBITDA of £23m (vs. £11m in Q1 2017) and

reported EBITDA of £(3)m

• LTM normalised EBITDA of £167m
• Revenue and profitability in-line with plan driven by timing of 720S

ramp-up in H1 2017 and 570S Spider launch in June 2017

• New engine supply partnership agreed with Renault for 2018, 2019 and

2020 F1 seasons

• Continued growth in Applied Technologies underpins disruptive

technology offering in attractive end markets

• Optimised capital structure and strong liquidity supported by £650m

refinancing

8



3

C O N F I D E N T I A L

Unified McLaren Group under a simplified ownership structure

• Integration progressing well
• Areas for synergies identified
• Task forces established across

key disciplines

• On track to deliver announced

cost synergies of £12m in 2018

• £6m synergies already secured

New McLaren Group Structure

10 £564 million Senior Secured Notes £90 million Super Senior RCF Bahrain Mumtalakat Holding Company TAG Group Limited Minority shareholders

Shareholders McLaren Group Limited McLaren Automotive Ltd McLaren Technology Group Ltd McLaren Finance PLC McLaren Holdings Limited

63% 16% 21%



4

C O N F I D E N T I A L

Successful product launches – 720S already sold out into Q2 2018

“The 720S is magnificent, but also surprisingly nuanced for such an adrenalised proposition: it takes time to work out the full scale of its, and its creators, achievements” Top Gear magazine

720 PS engine, one-piece carbon fibre MonoCage and luxurious interior are class leading

341

km/h top speed

720

PS engine

Sold out

Into Q2 2018 “McLaren wants it all with the 720S: more power, more performance, smarter aero, better comfort, cooler gadgets and the moon on a stick. And you know what? Aiming high has paid off” CAR magazine “Yet another amazing leap for a brand that seems to have come a very long way in a relatively short space of time” Auto Express, 03/05/17 “The 720S is the clearest expression yet of McLaren’s approach to the art of the supercar” MotorTrend 02/05/17

13



5

C O N F I D E N T I A L

Successful product launches – 570S Spider getting stellar reviews Sold out

into 2018 Deliveries commenced in August 2017

“It’s the best sports car we’ve driven in a decade”. British GQ “More fun and engagement than 570S. No dynamic compromise.” EVO “The 570S has shed its roof, but its massive talent remains intact.” AUTOCAR

14



6

C O N F I D E N T I A L

99 119 148 97 70 2014A 2015A 2016A LTM 2Q17 EBITDA Adjustments

Historical financials overview

Automotive volume (units) Net debt3 (£m)

Margin2 1,649 1,612 3,286 3,184 2014A 2015A 2016A LTM 2Q17 Automotive margin2

Note: 1 Inclusive of intercompany transactions at revenue level for 2014 and 2015, exclusive of intercompany transactions for 2016 (c. £28m) and LTM normalised PF 2Q17 revenue (calculated using the same approach as normalised PF EBITDA, adjusting for the impact of the SAP implementation , the 720S ramp-up and cost synergies)

2 LTM Group margin based on normalised revenues and EBITDA of £999m and £167m; LTM Automotive margin based on normalised automotive revenues and EBITDA of £743m and £175m 3 Pro forma combined net senior financial debt represents the senior financial debt of the Group after giving Pro forma effect to the Transactions, less Pro forma combined cash at bank and in hand of £132 million, which

represents Pro forma combined cash at bank and in hand before the Financing of £29 million as adjusted for the Transactions, including all associated costs

Pro forma normalised Group Revenue1 (£m) Pro forma normalised Group EBITDA (£m)

24.0% 22.1% 21.8% 13.5% 16.3% 16.5% 16.7%2 23.6%2

39

432 June 2017

 Track record of sustained revenue growth  H1 2017 revenue impacted by planned shut down in automotive production

(SAP implementation) and anticipated gap in Super Series line-up

 Continued growth in normalised EBITDA  Reported profitability impacted in H1 2017 from drop-through of lower

automotive and sponsorship revenues

 Racing margin further impacted by increased costs of 2017 Formula 1 car

following regulatory changes implemented for 2017 season

 Strong volume performance despite 720S not being delivered until June

2017

 Strong sales of Sports Series maintained  720S ramp-up complete  Net debt position reflects July 2017 bond issuance of £564m and £90m RCF

(undrawn) refinancing 167 735 728 898 859 140 2014A 2015A 2016A LTM 2Q17 Revenues Adjustments 999



7

C O N F I D E N T I A L

193 130 189 Q2 2016A Q1 2017A Q2 2017A 15 (29) (3) Q2 2016A Q1 2017A Q2 2017A

Q2 2017 summary

Automotive volumes Revenue (£m) EBITDA (£m)

 Strong volume performance despite 720S not

being delivered until June 2017

 Strong Super Series and Sports Series order

book and dealer allocations reflects exceptional customer demand

 720S sold out into Q2 2018  Weaker y-o-y Q2 automotive revenues

impacted by shift in sales mix from Super Series to Sports Series

 Revenue growth vs. Q1 2017 reflects continued

ramp-up of 720S production

 Racing revenues and other revenues up 4% y-

• -y with increased prize fund partially offset by

lower sponsorship income

 Applied Technology revenue flat y-o-y due to

timing of project income, but up 28% in H1 2017

 Profitability in-line with plan driven by timing of

model launches and production ramp-up

 Q2 2017 EBITDA loss reflects reduced

automotive and sponsorship revenues, further impacted by increased cost of 2017 racing car

 Significant improvement in Q2 EBITDA

momentum vs. Q1 2017 (£(29)m)

733 453 727 Q2 2016A Q1 2017A Q2 2017A 9



8

C O N F I D E N T I A L

McLaren Automotive

Q2 2016 – 2017 EBITDA bridge

 Shift in Automotive sales mix from Super Series to Sports Series  Increased SG&A costs driven by timing vs. 2016 – flat for H1 2017 vs. prior year  Racing EBITDA affected by drop in sponsorship income and increased cost of 2017 racing car following regulatory changes implemented for 2017

season, partially offset by increased prize money for 2016 Constructors Championship

 EBITDA in Applied Technologies broadly stable

2

97 167 15 (7) (2) (10) (3)

Q2 2016 Sales Mix SG&A Racing & Applied Technologies Q2 2017 LTM LTM adjusted



9

C O N F I D E N T I A L

Normalised EBITDA bridge

LTM Q2 2017  Reported (and unadjusted) LTM Q2 2017 EBITDA Normalised EBITDA at LTM Q2 2017  Reflects Company’s underlying LTM performance

Normalised EBITDA bridge

SAP Implementation  Adjustment for lost volumes in January 2017 when a new SAP system was installed at McLaren Technology Centre, and production was shut down during the implementation period One-off 720S ramp-up in Q1 and Q2  Reflects impact of production gap due to timing of new 720S launch compared to other models  Reflects McLaren transition to a complete product line-up following product portfolio build up during recent years 40

£97m £167m £16m £49m £6m Q2 2017 LTM EBITDA Impact of SAP implementation Impact of ramp-up (Q1 and Q2) Cost synergies Normalised Q2 2017 LTM EBITDA

Developing Normalised EBITDA

Cost synergies in Q2  Representing 50% of £12m run-rate cost synergies to be achieved by 2018 mainly by removing duplicate cost post business integration



10

C O N F I D E N T I A L

Global

1,288 1,186 YTD 2016 YTD 2017

Automotive volume by region (year-to-date)

North America (35%)

451 414 YTD 2016 YTD 2017

 Strong customer demand with 8% reduction in YTD volumes reflecting lower supply driven by

production ramp-up following SAP go-live and 720S launch timing

 Regional sales mix in line with prior year  Legislative delays resulting in shift in the allocations of 720S and 570S Spider from China

RoW (8%)

121 100 YTD 2016 YTD 2017

Europe (36%)

421 430 YTD 2016 YTD 2017

China (4%)

81 46 YTD 2016 YTD 2017

APAC (ex. China) (17%)

11

Automotive Racing Applied Technologies

214 196 YTD 2016 YTD 2017



11

C O N F I D E N T I A L

Renault partnership heralds new chapter in the McLaren Racing story

15

Automotive Racing Applied Technologies

McLaren and Honda to part ways

 McLaren and Honda have mutually agreed to conclude their F1 partnership at the end of the 2017 FIA Formula One Constructors and

Drivers World Championship McLaren Renault partnership agreed

 Engine supply partnership agreed between McLaren Racing and Renault Sport Racing for the 2018, 2019 and 2020 F1 seasons  Renault to supply Formula 1 power units and establishing a close working relationship with McLaren’s engineers and technicians  Strategic agreement between two historic brands provides platform for McLaren to be a competitive force from 2018



12

C O N F I D E N T I A L

Cutting edge technology solutions gaining increased traction in large and diverse growth markets

New Contracts won

 Renault Sport Racing  new Formula E powertrain for 2018

season

 Rex Bionics  next generation exo skeleton development  Galvani  industrial design contracts for wearables  Virgin Trains East Coast  seat sensor development programme

Operational progress

 McLaren Deloitte partnership progressing well  Successful testing of Formula E battery development  C2C rail passenger Wi-Fi launched in Q2 with positive feedback

Motorsport Automotive Public Transport Health & Wellness

[DUMMY DATA]

16

Automotive Racing Applied Technologies

22 28 H1 2016 H1 2017

Revenue



13

C O N F I D E N T I A L

Q2 2017 Net debt / liquidity position

 Gross debt reflects $250m and £370m

5-yr Senior Secured Notes issuance in July 2017

 £90m undrawn RCF  Ample liquidity for future investment

requirements

19 Q2 2017 Gross debt 564 Cash & cash equivalents (132) Net debt 432 Net debt / EBITDA 2.6x Undrawn committed credit lines 90 Total available liquidity 203



14

C O N F I D E N T I A L

Full year 2017 outlook

 Order book of 2,4911 cars as of 30 June, 2017 reflects exceptional demand for 720S and 570S Spider  Slower than anticipated production ramp-up impacts full year volume expectations  Automotive performance expected to be weighted to Q4  Full year volume guidance of c.3,600 cars  Automotive volume growth expected in 2018 following full production ramp-up in H2 2017  2018 volumes expected to be >4,000 cars  Racing and Applied Technologies expected to be broadly EBITDA neutral for FY 2017 assisted by a small number of heritage vehicle

sales

19

1 Represents order book and dealer allocations for Super Series and Sports Series



15

C O N F I D E N T I A L

APPENDIX



16

C O N F I D E N T I A L

Q2 2016 – 2017 revenue bridge

 Automotive revenue impacted by shift in sales mix from Super Series to Sports Series with 720S deliveries only commencing in June 2017  McLaren Racing revenue broadly stable with increased prize money received from 2016 F1 Constructors’ Championship position and other

revenues largely offset by reduced sponsorship income

 Flat revenue growth in Applied Technologies due to timing of project income

133 (6) 128 66 2 69 (7) (7) 193 189

Q2 2016 Automotive Racing & Applied Technologies Q2 2017

Automotive Racing and Applied Technologies Combination adjustments

1



17

C O N F I D E N T I A L

Summary Income Statement – Q2 2017

£m Q2 2017 Q2 2016 Turnover 189 193 Cost of sales (144) (132) Gross profit 45 61 Administrative expenses (70) (66) EBITDA (3) 15 Depreciation & amortisation 20 18 EBIT (23) (1) Net finance costs (10) (26) Profit before tax (34) (27) Taxation 11 6 Profit after tax (22) (22) 22



18

C O N F I D E N T I A L

Summary Income Statement – YTD 2017

£m YTD 2017 YTD 2016 Turnover 319 358 Cost of sales (265) (252) Gross profit 54 106 Administrative expenses (125) (128) EBITDA (33) 19 Depreciation & amortisation 33 37 EBIT (66) (19) Net finance costs (16) (42) Profit before tax (83) (59) Taxation 19 12 Profit after tax (64) (48) 22



19

C O N F I D E N T I A L

Cash Flow Statement – YTD 2017 vs. 2016

23 £m YTD 2017 YTD 2016 Net cash flows from operating activities 21 31 Net cash outflow from investing activities (79) (71) Net cash inflow from financing activities 59 33 Net increase/(decrease) in cash and cash equivalents 2 (6) £m YTD 2017 YTD 2016 Net cash flows from operating activities 22 14 Net cash outflow from investing activities (5) 27 Net cash inflow from financing activities (19) (29) Net increase/(decrease) in cash and cash equivalents (1) (13)

MAL cash flow statement MTG cash flow statement



20

C O N F I D E N T I A L

McLaren model portfolio

570 GT

The McLaren 720S embodies our relentless quest to push the limits of possibility. Lighter, stronger, faster. It’s all of these and more. But how it makes you feel is altogether something else. Prepare to push the limits of what you thought possible in a supercar. All the performance of the Coupé plus the extra exhilaration

• f open-air driving. The 570S Spider brings you closer to the

elements in a design that’s equally stunning with the roof up

• r down.

The 570GT adds extra comfort and practicality to breath- taking performance. Every bit a McLaren, it’s optimised for the road and makes the ultimate sports car experience one that’s perfect for daily use, longer journeys and weekends away. It’s the ultimate sports car experience. Completely driver- centric and performance oriented, the 540C Coupé is equally at home on the track as it is on the open road. Being light weight with a high power to weight ratio, it delivers a super car punch that would shame many more expensive rivals.

540 C 570 S and 570 S Spider 720 S