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Old 26 May 2020, 14:55 (Ref:3978433)   #31
Richard Casto
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in f1 terms the 3 smaller teams going under was the kickstarter for several of the big teams to do "we'll have them so nobody else will" recruitment.
Interesting point. One way to remain competitive is to deny your competition and prevent access to skilled staff, even at the risk of being overstaffed yourself. This it the benefits of deep pockets.

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Old 26 May 2020, 17:13 (Ref:3978457)   #32
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Interesting to see the news today when you look at the upbeat investors report -2019.

https://investors.mclaren.com/sites/...on-q3-2019.pdf
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Old 26 May 2020, 20:00 (Ref:3978480)   #33
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Interesting to see the news today when you look at the upbeat investors report -2019.

https://investors.mclaren.com/sites/...on-q3-2019.pdf
I think this is where glossy presentations hide the gory details. These may look pretty optimistic in language, but the devil is in the details.

First, these aren't official financials so it's fair to be suspect of them.

While the language is upbeat, look at net leverage and remember, EBITDA is a squishy number subject to so many assumptions. It's a yellow flag.

Also, notice that "racing" income improved by 20M from (85) to (65). 12.5 of that was from sale of heritage assets. Now, as racing fans, we can see the rationale in that, but as financially interested people, that illustrates using non-repeatable income to offset losses.

Also notice Net Cash Flows from Investing Activities got worse. Seems to highlight paying more in interest expense as well.

In fact, most telling is page 21. Look at free cash flow to firm...that's how much money they have left over to reinvest in the business at the end of the day. This is capital they can dump back into the business by either expanding capacity, improving efficiency, paying off debt...this is real money that shows real business value when a firm is running well. Guess what....it worse too. Temporarily, firms can issue debt or equity to fill the lack of Free Cash Flow to the Firm and in fact in low rate environments when a company is healthy many companies are doing just that. Many capital intensive companies have been doing that over the past month. McLaren appears to be attempting to pledge assets twice so they can issues debt to address liquidity concerns.

But now they get to hide behind COVID and Budget Cap to lay off ~30% of their workforce. Rest assured my friends, they are doing so because each of these things lay bare their horrible financial state caused by mismanagement. They are laying people off under the guise of COVID and cost caps, but to say this firm was bleeding money hand over fist would not be much of a leap. For those of you following the Aston Martin story, McLaren is NOT that much different except Aston was further along in their liquidity crises with fewer options than McLaren.

The one thing Aston Martin did right? They got someone with a vested interest in the sport to buy into them before the crisis hit...otherwise, my suspicions are they'd be taken out to the woodshed and shot if COVID had his this time last year.

What also appears to be the case is the Multalakat (spelling) isn't the sugar daddy that some people assumed and/or hoped. As a result, I suspect that they layoffs may portend further issues. Layoffs buy them time, but a firm that lumbering along like this needs a turnaround. Sometimes that turnaround means being segmented into profitable and unprofitable companies to third parties with more interest or more expertise in running them.

Sorry for the bit of a rant, but I loved McLaren as a racing team.

Last edited by mogwai; 26 May 2020 at 20:22.
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Old 26 May 2020, 20:31 (Ref:3978483)   #34
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Sorry for the bit of a rant, but I loved McLaren as a racing team.
Great post. All of it was interesting.

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Old 27 May 2020, 05:19 (Ref:3978497)   #35
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Agreed, great analysis, thanks.
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Old 28 May 2020, 00:09 (Ref:3978811)   #36
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What also appears to be the case is the Multalakat (spelling) isn't the sugar daddy that some people assumed and/or hoped. As a result, I suspect that they layoffs may portend further issues. Layoffs buy them time, but a firm that lumbering along like this needs a turnaround. Sometimes that turnaround means being segmented into profitable and unprofitable companies to third parties with more interest or more expertise in running them.
I think you're spot on with Mumtalakat, they're a investment company supporting the interests of Bahrain. Bahrains top two exports are Refined Petroleum and Crude. That's 58.3% of their total exports. http://www.worldstopexports.com/bahr...op-10-exports/

With the enormous downturn of oil worldwide due to the pandemic, investing in McLaren may not be in their best interests at time.


Remember it wasn't too long ago that Crude was selling at a negative.

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Old 28 May 2020, 04:21 (Ref:3978823)   #37
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Sorry for the bit of a rant, but I loved McLaren as a racing team.
No need to apologise. That was really well written. And a fair amount of truth. In the automotive part they make good cars but the business isnít doing well financially for a number of reasons. Covid isnít the blame as these issues existed beforehand and the events of 2020 will just accelerate the fallout from these issues.

As weíve just seen 1200 people are out of a job. Thatís massive to lose 1/4 to a 1/3 of the workforce like that. If the company doesnít make some much needed change in how it operates itíll become the next Aston indeed.
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Old 28 May 2020, 04:31 (Ref:3978824)   #38
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Remember it wasn't too long ago that Crude was selling at a negative.
Minor point, but the Bahrainis certainly werenít.
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Old 28 May 2020, 06:39 (Ref:3978832)   #39
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Minor point, but the Bahrainis certainly weren’t.

I can't speak for what or what the Bahrains did or did not sell. I can only speak for world wide markets.


On 4/20 they (the markets) actually went into the negatives.


Currently they are at ~32.50 which is about half of what they were at in April of 18. A peak in Oct of 18 gave it at 74.29.

And a side note for why I pay attention? I live in the state with the largest shale well oil production. I've seen it blitz our economy, and sadly have seen it tank our economy. I tend to pay attention to it, even if it doesn't have a direct impact on my life.
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Old 28 May 2020, 06:57 (Ref:3978834)   #40
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I can't speak for what or what the Bahrains did or did not sell. I can only speak for world wide markets.


On 4/20 they (the markets) actually went into the negatives.
No, only one US market went negative. Every other world oil index remained positive.

And the one only went negative because of a lack of empty storage.

My point is that the Bahraini oil price never went anywhere near negative so while their oil revenues are down they certainly still exist.
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Old 28 May 2020, 07:19 (Ref:3978841)   #41
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No, only one US market went negative. Every other world oil index remained positive.

And the one only went negative because of a lack of empty storage.

My point is that the Bahraini oil price never went anywhere near negative so while their oil revenues are down they certainly still exist.
I didn't know that - as I said, I'm fairly local when it comes to crude prices.

So just what did the Bahrains do with their oil? Store it? Sell it? Regardless if they didn't go negative they're still half of the value it was a year ago, right?


You can't just shut down a oil well on a whim and fire it up 2 weeks later. It's a gigantic expensive process on both ends. How did they accommodate that?
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Old 28 May 2020, 07:34 (Ref:3978845)   #42
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Oil was around $30 pbl for many years before a spike in 2018. In the US it led to a more efficient fracking system hence the Permian basin is one of the most productive worldwide. So this is not uncharted territory. What is causing difficulty is the lack of transportation which in turn is reducing requirement. Which is where the storage issues arise. Hence the use of super tankers, many of which are still moored of Singapore, as temp storage.
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Old 28 May 2020, 08:01 (Ref:3978852)   #43
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No problem at all DiMaestro!

The Middle East was sold as futures months before.

The US storage was full due to lack of use during lockdown.

Hence the ships are coming with nowhere to put the stuff, which was going to cost the traders massive $$$.

Hence they would pay you to take it off their hands. The short-term negative price.
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Old 28 May 2020, 08:32 (Ref:3978859)   #44
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No problem at all DiMaestro!

The Middle East was sold as futures months before.

The US storage was full due to lack of use during lockdown.

Hence the ships are coming with nowhere to put the stuff, which was going to cost the traders massive $$$.

Hence they would pay you to take it off their hands. The short-term negative price.

Thanks, as I said I'm rather parochial on oil.


How did that effect their income? I mean, if a country requires a certain percentage of income to operate efficiently - how did the lack of income effect them? I'd assume they have reserves for it, but do they have enough reserves to actually wait this out? I think it's going to be a lot longer than anyone believes to be honest. Bahrain is a wealthy country, but at what point does the devaluation of their wealth actually impact their citizens?
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Old 28 May 2020, 08:41 (Ref:3978861)   #45
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It was the secondary traders who lost out there, not the producers.

The producers problem is that now they’re aren’t selling much into the future.

So they have to reduce supply to maintain prices.

They do have reserves and have long been diversifying for the day their black gold finally loses its shine and we treat them like **** again.
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