Aston Martin Lagonda Global Holdings plc

Good morning, everyone. Thank you for joining the Aston Martin Quarter 1 2025 results call. I'm Adrian Hallmark, CEO of Aston Martin Lagonda. Alongside me today, I have Doug Lafferty, CFO, who will shortly take you through the Quarter 1 financial headlines. As I outlined at the four-year results in February, we have undertaken a disciplined approach to production and stock reduction at the start of this year. This is reflected in our Quarter 1 performance, with the wholesale broadly in line with the prior year as guided, but it's worth noting that the retail sales to customers significantly outpaced wholesale volumes by around 50%. We expect this positive trend to continue through the first half of 2025 as we destock and balance the supply with the underlying demand for our ultra-luxury high-performance cars. Over the last couple of years, Aston Martin has been through an extremely intense period of product development and launch. And as a result, we can now offer our customers a fully reinvigorated core product portfolio, benefits of which are demonstrated by the circa 10% increase in our quarter one core average selling price. But that's just the start. Our production innovation focus, which will support sustainable, profitable growth in the future, has already resulted this year in the launch of three new derivatives of our core models. These include the Vantage Roadster, the Vanquish Volante, in addition to today's announcement of the new DBX-S model, which from quarter four of this year will deliver even more power, reduced weight, and offer a more assertive and sporty design to complement our SUV product. The S name and the S range has long been associated with Aston Martin, and today's news highlights this remains very much part of our strategy going forward. And there's more to come from this limited, or sorry, derivative approach. One of the key milestones for us this year is delivering our ground-bake braking supercar Valhalla. We're now in the final phase of testing for this mid-engine PHEV, ahead of deliveries commencing in the second half of this year. Executing this product launch to plan will further demonstrate our improved operational executional focus, one of the key four areas that are highlighted at the four-year results earlier this year. Alongside the launch of the three new core derivatives already announced, this will support the growth both for this year and also into 2026 and support our financial targets. And as a reminder, they are, for this year, to be EBIT positive for the full year and free cash flow positive in the second half of this year. We remain firmly focused on continuing our transformation from a high potential business to a high performing one. We're making progress in all key areas of our transformation, such as cost optimization, productivity improvements, and quality enhancements. Work to date has identified a number of opportunities, and I expect to be able to share more color on these later in the year as they mature. And finally, like everyone in the global automotive sector this week and beyond, we've been monitoring events linked to the recently announced U.S. tariffs. The additional 25% tariff imposed on the automotive sector for imports into the U.S. creates a high degree of uncertainty. and makes planning and forecasting somewhat more challenging. But we had already prepared for the worst case, and given the phasing of our wholesales at the start of this year, we were able to limit imports of new cars into the US during April and May. This provides us a window of time in which we can refine our strategy, watch the reaction of competitors and any changes to policy, and take full consideration for all of our steep key stakeholders before making a commitment and communication. Our initial analysis, which we communicated at the end of March, has already resulted in us making a slight reduction to our 2025 wholesale volume guidance. So we're largely prepared. We're now looking at the number of measures that we may implement to seek to reduce the impact to the business of the US tariffs, and we'll outline these including any updated pricing strategy at the appropriate time in the coming weeks and months. We strongly welcome the UK government's efforts to engage with the US administration on negotiating a trade agreement that would benefit all stakeholders. Given the scale of tariffs on the UK car industry, getting an agreement in place for UK makers as soon as possible is and should be a top priority for government and the industry. Whilst acknowledging that the ramifications on our business, the automotive sector and the global economy from the tariffs may make things harder going forward, we continue to expect to achieve our key financial targets for the year, being the delivery of positive adjusted EBIT for the full year and positive free cash flow generation in the second half. And on that note, to take us through the detail, I'd like to hand over to Doug to talk about the quarter one financials.

Thanks, Adrian. Good morning, everyone. I know it's a busy morning for you all, so thanks for joining. As Adrian's mentioned, overall, our Q1 performance was in line with the guidance that we provided you in February, with our guidance for 2025 remaining unchanged since our update in March, where we made that slight reduction to our wholesale volumes linked to the imposition of the additional US tariffs. Revenue and total ASP were impacted by fewer specials deliveries in Q1 as we near the completion of the Valiant deliveries. As a result, revenue decreased by 13% and total ASP decreased by 15%. However, core ASP increased by 10% driven by our next generation range of vehicles including Vanquish and a continued strong options contribution at around 18% of core revenue. With Q2 in mind, we expect a similar trend with total volumes broadly in line with the prior year with the same impact on the financials from the mix of fewer specials. This also reflects our planned ERP rollout at Gaydon, which will impact production for around three weeks in Q2. The fewer specials deliveries are also impacting gross profit and gross margin, as expected. Additionally, we chose to invest around £15 million in delivering on our excellence in product quality and customer satisfaction. The investment predominantly relates to enhancing the software of all next-generation cars in the market to ensure optimal user experience. We continue to target over 40% gross margin from all new products and expect benefits from increased personalization opportunities with an enhanced range of options becoming available to customers from the second half of 2025 onwards. As we ramp up production in H2, benefiting from additional derivatives and the contribution from Valhalla, we expect to deliver a circa 40% gross margin for the full year. Whilst adjusted EBITDA decreased year-on-year by 24 million to minus 4 million, reflecting the gross profit movement, this was partially offset by a 13% decrease in adjusted operating expenses, excluding DNA, as we continue our focus on optimizing our cost base and driving operating leverage. Adjusted EBIT decreased by 13% to minus 65 million, with DNA decreasing by 22% to 60 million, reflecting the lower specials volumes. The company's previously announced organizational adjustments to ensure the business is appropriately resourced for its future plans are progressing as planned, and we remain on track with our full year guidance to deliver a reduction in adjusted operating expenses, excluding DNA, to around 300 million pounds. With CapEx broadly in line with the prior year and a reduced net cash outflow from operating activities, largely driven by a guided reduction in working capital outflow, free cash outflow in Q1 2025 decreased by £70 million. As mentioned at the full year results, compared to 2024, we expect a working capital benefit from Valhalla deposit collections through the course of the year ahead of deliveries commencing. This was evidenced in Q1 with a net deposit inflow of £18 million compared with a £33 million outflow in the prior year. Q2 2025 free cash outflow is expected to be broadly in line with the prior year, despite including the semi-annual loan note interest payment, which in the prior year was paid in Q1 as part of the refinancing exercise. Liquidity, as we'd guided, was around £400 million at the end of the first quarter, and this is before the expected liquidity benefit of over £125 million associated with the proposed investment from the Utrecht Consortium and the proposed sale of our investment in AMR, which we announced on 31 March. Finally, and just to reiterate what Adrian's mentioned, we'll continue to monitor global events very closely, in particular relating to the impact of the recent US tariffs, and we'll try to remain as agile as we can be as the external environment continues to evolve. Despite the increased levels of uncertainty, we still expect to make significant improvements across all key financial performance metrics in 2025 as compared to 2024, including our expectation of delivering that positive adjusted EBIT for the full year and free cash flow generation in the second half. So with that, I'll hand back to the operator so that we can take some questions in the time that we've got remaining.

Thank you. If you'd like to ask a question on today's call, please press star followed by one on your telephone keypad now to enter the queue. When preparing to ask a question, please ensure you are unmuted locally. That's star followed by one. Now our first question today comes from Harry Martin at Bernstein. Harry, please go ahead. Your line is open.