David McFadyen, High Yield Investment Analyst at Kames Capital, compares like with unlike…
McLaren released their full year results for 2018 today. The niche supercar maker is speeding ahead with ambitious growth plans that are now coming through in their results. Compared to 2017, car shipments have increased 45% to nearly 5,000 in the year. 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 almost at 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 will have a price of £1.75m (yes, million). And like the Senna GTR, it’s already 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% last year to 22% this year.
In our view, McLaren has a clear road ahead of it over the next few years to success in its automotive division. Some may worry that McLaren is the ‘old’ automotive industry, that companies like Tesla and electric vehicles in general will leave 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 is more than just what gets you from A to B, it’s an experience and a trophy asset that the super-rich are clearly happy to pay for.
So while Tesla might get all the attention, compare Tesla’s latest results with McLaren’s. We know which company we’d rather lend to.