Q3 2017 Results December 15, 2017 0 C O N F I D E N T I A L One - - PowerPoint PPT Presentation

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

Q3 2017 Results

December 15, 2017

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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  Q3 2017 LTM normalized PF revenue: £1,099m  Q3 2017 LTM normalized PF EBITDA: £160m 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

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McLaren Senna & McLaren BP23 overview

Senna BP23

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Type Hyper-GT announced in 2016 Volume 106 # units sold Sold out Price N/A

• Exp. 1st delivery Early 2020

Type Ultimate Series car revealed in December 2017 Volume 500 # units sold Sold out Price £750k

• Exp. 1st delivery

Q3 2018

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Highlights

• Accelerating car volumes in Q3 2017 with full production ramp-up of 720S and 570S

Spider now complete as of Q4 2017

• Continued strong order book, with 720S and 570S Spider sold out into Q3 and Q2

2018 respectively

• Production run-rate of 375 and 430 cars built in October and November

respectively

• Exclusive new Senna model already sold out
• Q3 2017 group revenues of £244m (vs. £189m in Q2 2017), with the increase mainly

driven by continued ramp-up of production

• McLaren Automotive was ranked as the number one company overall in The

Sunday Times Top Track 250 league table

• Q3 2017 normalised EBITDA of £42m (vs. £23m in Q2 2017) and reported EBITDA of

£23m

• LTM normalised EBITDA of £160m
• McLaren Racing and Fernando Alonso extend relationship into 2018 F1 Season

following announced Renault engine supply partnership

• Large pool of active sponsorship leads and significant number in contract

negotiation

• Continued growth in Applied Technologies underpins disruptive technology offering in

attractive end markets

• Strong balance sheet and ample liquidity for future investment requirements

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Full year 2017 outlook

 Strong order book position as of 30 September 2017 reflects exceptional demand for 720S, 570S Spider and Senna  Modest impact on Q3 volumes from slower than anticipated production ramp-up of 570S Spider  Reduced full year volume guidance of c. 3,300-3,400 cars  Improved October and November production run-rate of 375 and 430 cars per month respectively  Run-rate achieved supports anticipated 2018 production levels  Significant Automotive volume growth expected in 2018 following full production ramp-up now achieved  2018 volumes expected to be >4,300 cars  Very strong product mix expected in 2018 with the Senna expected to impact margins positively  Racing and Applied Technologies expected to be broadly EBITDA neutral for FY 2017 assisted by a small number of heritage vehicle sales  No impact from termination of Honda partnership in FY 2017, with 2018 impact expected to be partially mitigated through increased sponsorship

revenues and reduced Racing cost base

 Expected FY 2017 EBITDA of £65-75m and normalised EBITDA of £160m

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Successful launch of Sports Series Spider

Sports Series

Sold out

into Q2 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

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BBC Top Gear: Performance Car Of The Year 2017 Road & Track: Performance Car of the Year 2018 Scottish Car of the Year 2017

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Octane Awards 2017: Supercar of the Year Women’s World Car Of The Year 2017 AUTOCAR 5-Star Car EVO: 5-Star Car Auto Express 5-Star Car

Successful product launches – sweep of awards for critically acclaimed 720S

CAR Magazine: Sportscar

• f the Year 2017

Sold out

Into Q3 2018

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Revealing the extraordinary new McLaren Senna

“It’s clear the Senna is something very special” EVO “A tremendous and savage presence in the metal” “This is McLaren's road-legal track monster” Pistonheads “There’s nothing about McLaren’s latest something more than a supercar that’s not astonishing” “The Senna really is a performance geek’s dream and it is all beautifully manufactured and assembled, as is the way with McLarens these day” Telegraph

Sold out

Revealed in December 2017

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735 728 898 914 185 2014A 2015A 2016A LTM 3Q17 Revenues Adjustments 99 119 148 72 88 2014A 2015A 2016A LTM 3Q17 EBITDA Adjustments

Historical financials overview

Automotive volume (units) Underlying net debt3 (£m)

Margin2 1,649 1,612 3,286 3,198 2014A 2015A 2016A LTM 3Q17 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 3Q17 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 £1,099m and £160m; LTM Automotive margin based on normalised automotive revenues and EBITDA of £791m and £140m 3 Reported net debt of £481m includes reported gross debt of £542m (underlying gross debt of £564m, £22m of capitalised fees, £7m of accrued interest and £6m of FX gains) and cash of £61m

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

24.0% 22.1% 21.8% 13.5% 16.3% 16.5% 14.6%2 18.9%2

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503 Sep 2017

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

(SAP implementation), anticipated gap in Super Series line-up and slower than anticipated production ramp-up of 720S and 570S Spider

 Continued growth in normalised EBITDA  Reduced Automotive margin reflects increased cost base to support

• perational ramp-up in production

 Racing margin impacted by increased cost of Formula 1 car driven by

regulation changes for 2017

 Strong volume performance despite 720S and 570S Spider not being

delivered until June 2017 and August 2017 respectively

 Full production ramp-up of 720S and 570S Spider now complete in Q4 2017  Net debt position reflects July 2017 bond issuance of £564m and £61m cash

position 1,099 160

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212 193 244 Q3 2016A Q2 2017A Q3 2017A 20 23 42 Q3 2016A Q2 2017A Q3 2017A

Q3 2017 summary

Automotive volumes Group revenue (£m) Group normalised EBITDA (£m)

 Strong volume performance despite slower

than anticipated production ramp-up of 720S June 2017

 Strong Super Series and Sports Series order

book and dealer allocations reflects exceptional customer demand

 720S sold out into Q3 2018  Stronger y-o-y Q3 Automotive revenues driven

by wholesale volume growth

 Continued revenue growth vs Q2 2017 reflects

continued ramp-of 720S production

 Growth in Racing revenues with increased

price fund partially offset by lower sponsorship revenue

 Applied Technology revenue up 28% y-o-y  Profitability in-line with plan driven by timing of

model launches and production ramp-up

 Sales mix impact driven by Super Series mix

changes, with sales of 720S only in Q3 17 versus 675LT only in Q3 16

 SG&A increase resulting from operational

ramp-up

 Racing EBITDA growth driven by increased

prize money for 2016 Constructors Championship supplemented by the profit on sale of a number of heritage cars, partially

• ffset by a drop in sponsorship income

804 727 834 Q3 2016A Q2 2017A Q3 2017A 9

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Normalised EBITDA bridge

LTM Q3 2017  Reported (and unadjusted) LTM Q3 2017 EBITDA Normalised EBITDA at LTM Q3 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 ramp-up effects in Q1, Q2 and Q3  Reflects impact of production gap due to timing of new 720S and 570S Spider launch compared to other models  Reflects McLaren transition to a complete product line-up following product portfolio build up during recent years 40

£72m £160m £16m £66m £6m Q3 2017 LTM EBITDA Impact of SAP implementation Impact of ramp up (Q1,Q2 and Q3) Cost synergies Normalised Q3 2017 LTM EBITDA

Developing Normalised EBITDA

Cost synergies in Q3  Representing 50% of £12m run-rate cost synergies to be achieved by 2018 mainly by removing duplicate cost post business integration

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 Strong customer demand with a 4% 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 allocations of 720S and 570S Spider from China, sales expected to re-

commence in China in March 2018

 APAC & China further impacted by longer production lead times

Global

2,091 2,020 YTD 2016 YTD 2017

Automotive volume by region (year-to-date)

North America (35%)

696 709 YTD 2016 YTD 2017

RoW (9%)

179 184 YTD 2016 YTD 2017

Europe (36%)

710 720 YTD 2016 YTD 2017

China (4%)

137 72 YTD 2016 YTD 2017

APAC (ex. China) (17%)

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Automotive Racing Applied Technologies

335 YTD 2016 YTD 2017 369

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3,300- 3,400 >4,300 FY2017E FY2018E

Production ramp-up now complete with run-rate levels of 375-400 cars per month

Automotive Racing Applied Technologies

SAP implementation 720S launch 570S Spider launch 720S ramp-up complete 570S Spider ramp-up complete 2017 average 4-week rolling production volume

1

 No new product launches in 2018 with the Senna being produced on a separate product line which will not impact overall production 50 100 150 200 250 300 350 400 450 Week 4 Week 8 Week 12 Week 16 Week 20 Week 24 Week 28 Week 32 Week 36 Week 40 Week 44 Week 48

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Renault partnership positions McLaren Racing for successful 2018 season

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Automotive Racing Applied Technologies

McLaren and Fernando Alonso extend relationship

 Alonso committed to McLaren team for 2018 FIA Formula 1

World Championship

 Underpins McLaren Group’s ambitions for future racing success  Competitive position further enhanced through Renault engine

supply partnership Early momentum in winning and re-signing sponsorships

 Several hundred active leads with a significant number of

sponsorship contracts under negotiation

 Further sponsorship announcements targeted ahead of 2018

season

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

New Contracts won

 Public Transport – Three new multi-year connected fleet contracts tendered

for

 Health – Human condition monitoring contract tendered for in Singapore  Motorsport – awarded standard supply contract of sensors for Formula 1 by

the FIA

 First McLaren Deloitte customer signed up to validate partnerships first proof

• f concept product

Operational progress

 Development of next generation Formula E Battery being validated ready for

manufacture of test products

 Development of 3rd generation Formula 1 Standard ECU, for race seasons

2019 to 2021

 Configuration of intelligent seat sensors for Virgin Trains East Coast rail fleet

Motorsport Automotive Public Transport Health & Wellness

[DUMMY DATA]

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Automotive Racing Applied Technologies

33 42 YTD 2016 YTD 2017

Revenue

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Q3 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 Q3 2017 Gross debt1 564 Cash & cash equivalents (61) Underlying net debt2 503 Underlying net debt2 / EBITDA 3.1x Undrawn committed credit lines 90 Total available liquidity 151

1 Reported gross debt of £542m includes underlying gross debt of £564m, £22m of capitalised fees, £7m of accrued interest and £6m of FX gains 2 Reported net debt of £481m includes reported gross debt of £542m and cash of £61m

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APPENDIX

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Q3 2016 – 2017 revenue bridge

 Automotive revenues driven by wholesale volume growth  Racing revenue driven by increased prize money for 2016 Constructors Championship supplemented by other revenues, partially offset by a drop in

sponsorship income

 Applied Technologies revenues driven by increased product unit sales made to Honda Motorsport on their Formula One programme, additional

sensor and ECU sales to other F1 customers and growth in service revenues

157 3 160 70 22 92 (14) (7) 212 244

Q3 2016 Automotive Racing & Applied Technologies Q3 2017

Automotive Racing and Applied Technologies Combination adjustments

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Summary Income Statement – Q3 2017

£m Q3 2017 Q3 2016 Turnover 244 212 Cost of sales (192) (146) Gross profit 52 66 Administrative expenses (36) (26) EBITDA 23 20 Depreciation & amortisation (22) (20) EBIT 1 23 Net finance costs (2) (25) Profit before tax (1) (2) Taxation (9) (1) Profit after tax (10) (4) 22

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Summary Income Statement – YTD 2017

£m YTD 2017 YTD 2016 Turnover 564 571 Cost of sales (457) (399) Gross profit 106 172 Administrative expenses (128) (117) EBITDA (8) 16 Depreciation & amortisation 55 57 EBIT (66) 6 Net finance costs (5) (53) Profit before tax (70) (47) Taxation 8 7 Profit after tax (63) (40) 22

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Cash Flow Statement – YTD 2017 vs. 2016

23 £m YTD 2017 YTD 2016 Net cash flows from operating activities 13 51 Net cash outflow from investing activities (138) (72) Net cash inflow from financing activities 157 11 Net increase/(decrease) in cash and cash equivalents 32 (10)

Group cash flow statement

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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 of open-air driving. The 570S Spider brings you closer to the elements in a design that’s equally stunning with the roof up or down The 570GT adds extra comfort and practicality to breath-taking performance. Every bit a McLaren, it’s

• ptimised 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

• pen 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 720S Senna

The McLaren Senna is the most track-focused road car we have ever built, and it will set the fastest lap times of any McLaren to date. One that is legalised for road use, but not sanitised to suit it. Nothing else matters but to deliver the most intense driving experience around a circuit

Presented Dec 10, 2017

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