adrianjordan wrote:SidSidney wrote:Avocado wrote:Hilarious posts by SidSidney. Would laugh again.
I am not sure I understand your comment but in any case I am not saying they are in bad shape, just that the lack of major sponsor is a drain and that at some point somebody has to inject cash into the group.
Hence the instructions to Morgan Stanley to find an equity investor in March this year:-
http://www.ft.com/intl/cms/s/0/d8325610 ... z36uQYct00
F1’s McLaren revs up hunt for investors
McLaren boss Ron Dennis has instructed Morgan Stanley to search for new investors as he plots to revive the Formula One team’s ailing fortunes and expand its technology division.
Mr Dennis, 66, re-established control of the Surrey group last month, usurping team principal and chief executive Martin Whitmarsh. Mr Dennis is a 25 per cent shareholder in McLaren.
The team has held exploratory talks with Chinese investors. “The net is cast wide,” he said, when asked about the discussions. “It’s a question of the quality of the investor.”
Ron wouldn't want - or need - equity partners to inject capital if he had his usual sponsor cashflow. If he could retain his 25% he would, but he and the other shareholders will have to give up a chunk to get new money in the door, and he's going to be doing it at a time of weakness.
The fact they have set a theoretical budget is neither here nor there if they don't have the money.
I think the point is that they do have the money, it's coming out of the profits from the Automotive division.
That's not really possible, as Automotive is still in a 65M GBP hole itself. They only made their first profit last year, and that was only 4.5M GBP:-
"McLaren Automotive made both an operating and pre-tax profit
for the first time in 2013, during only its third year of car production."
2013 Profit before tax: £4.5m (profit)
2012 Profit before tax: -£10.9m (loss)
2011 Profit before tax: -£59.1m (loss)
Please don't think I am negative on McLaren, it's just the practicalities of cash. If Vodafone has gone, that is 50M GBP a year gone with them (source:Reuters & Vodafone). Mercedes has gone, and sold their equity back to the team by 2011, which will mean they are probably running the Merc engines at some kind of cost, rather than as a 100% factory-subsidized team (I am not sure on that one, depends on the contract). What has Honda paid in? No idea, but I don't think it is 50M GBP cash into McLaren's bank account; if it was, I think we would see more Honda logos around the place... So it is a minimum 50M GBP hit for 2014, maybe a lot more.
So, if I look around the 2012 (and probably very similar 2013) balance sheets, where can they find 50M cash by July 2014? It's not there, not unless they sell the heritage cars or the MTC, which is pretty much never going to happen while they run an F1 team.
And that's why they need an equity investor - not just for the Racing Group, but also to help re-finance the long term debt (and future growth) at Automotive.
And by the way, Automotive is a separate business, so even if it did have the cash it would either have to take an equity stake or loan the money to McLaren Group. It can't simply cross-subsidize as the racing-related businesses within Group do above, because they are not part of the same holding company.
I didn't post these to knock McLaren, just wanted to see what kind of impact a lack of main sponsor has on a team's cashflow.
UPDATE:
2010 Profit before tax: -£20.3M (loss)
2009 Profit before tax: -£43.3M (loss)
So that is actually a hole closer to £129M, probably more if I look back further....
How is that financed?
"The owners also provided over £60m of debt to McLaren Automotive in 2009 with its inter-company loans accelerating from £50.6m to £112.7m."
So the owners paid in more equity to close the financing gap, and they actually also borrowed a loan from McLaren Group, (as I said above it had to be a loan or equity as they are separate companies). Here is the entry from the McLaren Group accounts, showing a 52M GBP loan to Automotive:
And you can see how it is then counted in the current assets, which are inflated by a number close to that amount:
So you see, if the financing goes in any direction, it is from the Racing group towards the Automotive company, not vice versa. And because of that loan, the balance sheet of McLaren group is not as flexible or cash-rich as you might think on first inspection. That loan sits on McLaren's books as an asset, making that balance sheet look healthy but it is actually somewhat more risky - how can they collect that loan in a hurry if they need the cash back at Group? Answer: they can't. Automotive doesn't have it. And again, we are led to the conclusion that they may well need an new equity cash injection to maintain operational cashflow now that the headline sponsors have moved along.
And that was just to 2010 - they may have paid another £65M or more since then to support the Automotive losses, which will be in the as-yet-unpublished 2013 and 2014 accounts.
This signature is encrypted to avoid complaints, but it makes me laugh out loud:-
16S75 13E7K 41C53 7CT23 14O5O 67R32 76175 90B67 L4L42 41O63 72W56 98M10 52E87
