Despite National Bank of Bahrain Loan, McLaren Needs More Money
2020-07-11 - 8:22 p
Bahrain Mirror: McLaren Group says falling sales of its vehicles means that it will need to raise further funds, despite securing a life-saving 150 million pound ($190 million) loan in June.
The UK-based supercar maker and racing team owner gets most of its revenue from sales of its expensive sports cars, but a slump in demand due to the coronavirus pandemic means deliveries will be sharply down in 2020.
"Additional financing will be required by the Group to meet its liabilities as they fall due over the next 12 months," the company said in its 2019 annual report, published June 30. However, the company won't need to raise more funds this years.
McLaren is looking at the possibility of selling a stake in its racing division as one possible source of funding, the spokesman said.
McLaren raised 300 million pounds from its shareholders in March to fund a revised five-year business plan, which began in the first quarter by cutting production to reduce the number of unsold McLarens at dealerships.
As the scale of the pandemic became clear and the company was forced to shut its production center in Working, England, in late March, McLaren embarked on a series of cost-saving measures, including a 110 million pound reduction in capital expenditure that saw some model programs cut.
The company also said it would cut 1,200 staff from its 4,000-person workforce.
McLaren's situation had become so desperate in June that the company was on course to run out of money by mid-July, the Financial Times reported.
The company was poised to go to court to allow it to raise funds using its headquarters and collection of heritage cars as collateral, against the wishes of existing bondholders.
A legal fight was averted after McLaren received a 150-million-pound loan from National Bank of Bahrain, which is 44% owned by McLaren's biggest shareholder, the Bahrain Mumtalakat Holding Company.
McLaren was already losing money going into 2020 after posting a loss before tax of 29 million pounds in 2019.
The company delivered 4,662 cars in 2019, which was down on the 2018 figures of 4,829 but a higher mix of more expensive models saw the company reduce losses from 69.5 million pounds in 2018.
McLaren said 84% of its revenue came from auto sales in 2019, with racing including its Formula One team accounting for 12% and 4% from its applied technology division.
McLaren has revised its seven-year Track 22 plan, enacted in 2015, which called for sales of 5,000 vehicles annually. The company has now downgraded that to 4,000 a year once sales return to normal after 2020, it said in its annual report.
The company forecasts it will sell just 1,500 cars this year, but noted the product mix will include models from its ultra-expensive Ultimate Series range, including the 1.75 million-pound Speedtail and the Elva, which costs 1.42 million pounds.
McLaren said it has postponed the launch of a new car on all-new platform from this year to 2021. This year's investment would still include the new platform but otherwise the company "would only invest in vehicles or projects that will deliver a return in 2020" it said in its first quarter results presentation.
McLaren said around 50% of its order book for 2020 were high-series cars, including the 765LT high-performance version of the 720S mid-range supercar.
The company is struggling to predict what the future market for supercars will look like in a world after coronavirus, McLaren Automotive CEO Mike Flewitt told the "Daily Drive" podcast in May. "This will have interrupted our momentum," Flewitt said.
"This will have cost us probably two years," he added. "[In] 2020, we're going to do very little. I think it will take us the whole of 2021 to climb back [to] where we are."