You may have seen, but for those who haven’t, McLaren recently released their full year results. And good for them, the niche supercar-maker is speeding ahead with ambitious growth plans that are now reflected in their results. Compared to the previous year, car shipments increased 45% to nearly 5,000 in 2018. With an average selling price of well over £200,000 per car, this delivered remarkable revenue growth in the automotive division of 76%.
This growth looks set to continue, with a healthy pipeline of new models approaching the start line – the McLaren Senna GTR production run has already sold out. These new models will help inject even more power into McLaren’s earnings. Their new model, the Speedtail, is set to arrive in 2020 with a price of £1.75m (yes million). And like the Senna GTR, even this has also sold out. Never mind the fact they haven’t even announced the planned successor to the McLaren P1 yet…which will presumably cost even more. This success has driven EBITDA margins in the automotive segment of the business from 10% in 2017 to 22% this year.
In our view, over the next few years, McLaren’s automotive division is on a clear road to success. Some may worry that McLaren is the ‘old’ automotive industry, and that companies like Tesla and electric vehicles in general will position McLaren as a dinosaur. We disagree. McLaren has been using electric technology in its cars for years. The P1 was the world’s first hybrid supercar. The Speedtail will also have a petrol-electric powertrain. McLaren is the sole supplier of high-tech batteries for Formula E. This is a company delivering a niche, highly desirable product at the bleeding edge of engineering innovation. And besides, a car like this isn’t just about getting from A to B, it’s an experience and a trophy asset that the super-rich are clearly happy to pay for.
Here at Kames, the fixed income team seek to lend to businesses, such as McLaren, that demonstrate this solid risk-reward profile.
Disclaimer: Kames Capital holds bonds from McLaren within some of its fund portfolios