Aston Martin Lagonda Global Holdings plc

Good morning, everyone, and thank you for joining us today for Aston Martin's Half One 2025 results. It's a pleasure to be here alongside Doug Lafferty, CFO, and James Arnold, Head of Investor Relations. Before Doug takes you through the financial performance in detail, I'm going to provide a summary of our key achievements and areas of focus during the first half as we prepare for a planned increase in volumes which will drive enhanced financial performance in the second half of 2025. This includes the expected delivery of positive free cash flow generation in the second half and a 2025 adjusted EBIT improving towards breakeven. As we outlined at the 2024 results, following an intense period of product development, our focus has shifted from pure volume orientation to value-driven growth in order to create a sustainably profitable business model. And I'm delighted to report that we're progressing well with our operational and cost transformation program, details of which I'll share with you shortly. Our first half performance, as guided, reflected our disciplined approach to production and deliveries. This resulted in retail volumes outpacing our wholesale volume by over 40%, as we seek to optimise our stock levels around the world by model. We're already seeing the benefits from the investment in our next generation of core models through strong ASP growth up 7% to £192,000. and this will further improve as we continue to launch new derivatives including the recently announced Vantage S, DBXS, Vantage Roadster and Vanquish Volante and drive further option sales. Supported by robust demand and a disciplined supply policy, once these core models become established across our markets, I expect to see our forward order book improve beyond the current five-month horizon. As we look at the broader global operating environment, tariffs imposed by the US government have been a particular issue for us to deal with, adding a degree of uncertainty to global trade and economic performance. While the UK government moved quickly to secure a trade agreement with the US, announcing this on the 8th of May, the scheme only became operational on the 30th of June. This left us with 24 hours to invoice the entire quarter worth of vehicle sales in the US. I'm pleased to say, thanks to the planning and preparation that our teams achieved, we worked tirelessly with US Customs and we were able to execute this mammoth task. The deal agreed by the two governments is a quota-based mechanism under which the first 100,000 UK-made cars imported into the US each calendar year qualify for a reduced tariff of 10%. And any UK-made cars sold beyond the 100,000 units will attract the higher rate of tariffs of 27.5%. We thank the UK government for their efforts in negotiating this preferential rate, which currently puts the UK car makers at a better position than those in many other countries. But at the same time, let's not forget the 10% rate remains far higher than the previous rate of 2.5. As a consequence of these changes, we have already implemented a dynamic pricing strategy, announcing in June an initial 3% increase in the US as we seek to mitigate the financial impact of the 10% tariff. We continue to engage with the UK government regarding the first-come, first-served quota mechanism, This is due to the uncertainty that it creates in terms of planning and forecasting the current financial year and then quarterly planning from 26 onwards. We have been assured that government understands our concerns and we will await further clarification on how we will ensure that there is a fair allocation within this US quota providing the whole UK car industry with the ability to access this 10% rate on an ongoing basis. Also, when we look at the global operating environment, the market for luxury vehicles in China remains extremely subdued. As such, we're taking further action to support our China dealer partners to reduce their stock levels, and this will help us to benefit from their next generation of cars and improve market conditions that we expect to emerge in the beginning of 2026. Finally, I'm pleased to announce today that we shortly expect to complete the sale of our shares in the Aston Martin Aramco Formula One team. This follows the announcement in March this year of our intention to enhance liquidity through the sale alongside further investment from the Utrecht Consortium. In total, these combined activities will exceed our guided liquidity enhancement of £125 million. with the gross proceeds alone from the AMR GP sale expected to be around £110 million. Adjusting for the forthcoming sale, total liquidity at the end of the period will have increased to circa £340 million, positioning us well ahead of our expected free cash flow generation in the second half of this year. Now moving on to recent exciting developments across our core product range. Our product innovation focus, which will support sustainable profit growth in the future, has seen the launch this year of four new derivatives as promised. These include the Vantage Roadster and Vanquish Volante convertibles, in addition to the new performance-focused DBX-S and the Vantage-S. As I mentioned in the Q1 results, the S brand has a long association with Aston Martin. and remains very much a part of our strategy moving forward to introduce derivatives through the lifecycle and across the whole product range. This keeps our models fresh and continues to offer customers a growing range of choice with greater focus on personalization and options. I'm confident these derivatives will support a strong ramp-up in volumes and financial performance in the second half of this year and beyond. As I've mentioned previously, Aston Martin is fortunate to be one of a few global brands who can successfully deliver ultra-exclusive specials. These models epitomize the innovation and performance at the beating heart of the Aston Martin brand. Continuing with this momentum in specials, a key milestone for 2025 is the eagerly awaited delivery of Valhalla, our first mid-engine plug-in hybrid electric vehicle, and it's a game-changer for the brand. bringing hypercar performance to a supercar price segment. We expect it to be a significant contributor to our financial performance over the next two to two and a half years. Valhalla will mark our entry into a new segment of the market for Aston Martin, as well as a step forward in our commitment to hybrid and electrified technologies, with performance at the core of their purpose. With the initial low-volume production now underway, deliveries are expected to commence in the fourth quarter of 2025, and we have been advancing customer specifications for around one-third of the vehicles already ordered and scheduled into production. We plan to build just 999 units over a two-and-a-half-year period, and we already have a 12-month order book in place. This impressive order book is prior to customers even driving the vehicle, and in the coming weeks we will have prominent dynamic and static displays following the great experiences we already delivered at Monaco and Goodwood Festival. Looking ahead to the third quarter of this year, media and customer drives will be happening on a global basis to further develop the awareness of this vehicle. As we enter the final stages of the project, one of the key outstanding processes is the timely completion of certification and homologation across our key markets. We're currently working successfully and tirelessly to ensure that we meet all of those timelines, and it looks today like we're fully on track. Following the return of Aston Martin to the pinnacle of endurance racing with the Valkyrie hypercar, and its recent participation at Le Mans and the World Endurance Championship, we announced the launch also of 10 track-only Valkyrie Le Mans specials. We expect about half of these to be delivered in 2025, with the remainder in 2026. Now moving to a key focus for us this year, our transformation program. This forms part of the journey as we transition from a high-potential to a high-performing company. At the 24 financial year results, I took you through the reposition of the business based on the unique foundations of Aston Martin, underpinned by the strategy and investment in recent years of Lawrence Stroll, the Utrecht Consortium, and all of our strategic investors. I want to introduce the same passion and energy that we've brought to our brand and products into how we operate as a business. And we'll do this alongside instilling operational excellence and discipline. Shortly after I joined last year, we've been analyzing all areas of the company to identify how we benchmark and where significant improvements can be made. And I'm delighted to say that there are many areas and opportunities, as you'll see in the coming slides. And we're already starting to demonstrate real progress, which in the years to follow will enhance our performance as we realize the full potential of this iconic brand. Starting with brand awareness and demand generation. which should enhance the quality of our order book. We set out clear plans this year to operate with a disciplined approach to production and to supply, that position us strongly as we enter 2026. In 2026 we will have our enhanced range of core models and new derivatives, and in addition to these we're seeking to maximise the value of every vehicle, which is why we're continuing to deliver additional options to offer customers and meet the desire for even greater personalization. We've maintained a stable rate of contribution to core revenue at about 18%, and in the future we'll look to build on this. Customer loyalty and retention is another key factor that will underpin our future success. We have a great opportunity with the upcoming Valhalla, with over 50% of the orders to date from customers new to Aston Martin. Not only does this demonstrate the power and awareness of our brand, but it also provides us with the opportunity to showcase our core range of cars to circa 500 new customers. From a cost base and productivity point of view, we've continued to work with our colleagues across the business to deliver on the previously announced headcount reductions. In line with guidance, the operational cost savings from this will start to be realised in the second half of this year with a circa £25 million annualised rate of savings just from this single activity. But that's not the end. There are other savings that we're activating across the business through a disciplined approach, and we expect to deliver operating leverage with a 25 financial year SG&A falling well below the £300 million that we saw in 24, supporting our goal of improved effectiveness. We also successfully completed the rollout of our new ERP system in our production sites. The rollout at Gaydon in quarter two was executed with minimal interruption to the business, thanks to careful planning and intense execution. We've progressed to modern, integrated and efficient cloud-based systems that will drive greater operating efficiencies across the supply chain. A key to product innovation through lifecycle is offering our customers the most relevant, exciting and compelling vehicles in the sector. We've clearly demonstrated that already with the derivatives I've outlined, we can assure you that we'll have more to offer in the future as we progress towards hybrid electrified performance technology. And finally, delivering excellence in quality and product launch cycles, here we plan to build on the significant learnings from the intense period of new launches that we've been through over the past couple of years. in particular ensuring that we provide sufficient capacity and time between launches to be able to deliver programs and ramp-ups effectively. And Valhalla now remains our key focus, as I mentioned, and we are on track for the first customer deliveries in the last quarter of this year. We also need to deliver the highest standards and consistency across our portfolio. We've already seen significant improvement in cars completing production process right first time, from about 65% during the second half of 2024 to 95% today, as I previously indicated was our target. This has huge benefits across the organisation, removing unnecessary costs and efficiencies and delays. Also benefiting the business is the decision that we announced in quarter one this year to invest in software and infotainment system improvements in our cars. This, in addition to some further warranty cost increased spend, circa £20 million in half one compared to last year, but already we are seeing the benefits from this program with improved customer satisfaction scores, a trend I would expect to see accelerate as we move into the second half of this year. So, lots of positive developments as we aim to get the business consistently performing and becoming sustainably profitable for the future. With that, I'd now like to hand over to Doug so he can take you through the financial results in detail as well as the outlook for the rest of the year. Thank you.

Thank you, Adrian, and good morning, everyone. Before we move into Q&A, I'll take you through our financial performance for the first half of 2025 and our guidance for the remainder of the year. As Adrian mentioned, overall, our first half performance was largely in line with guidance. reflecting fewer specials deliveries and the uncertainty we and many of our peers have experienced in relation to changes in US tariffs and the wider macroeconomic environment. Looking at the detail on the slide, wholesale volumes were broadly in line with the prior year at 1922, as we followed a disciplined approach to production and deliveries in support of stock optimisation. This resulted in retail volumes outpacing wholesales by over 40% as we prepare for growth in the second half of the year, particularly in Q4, driven by our new core derivatives and specials. In terms of revenue, at £454 million, this reflected a 25% reduction compared to the first half of 2024, largely as a result of fewer specials delivered as we prepare to commence Valhalla deliveries in Q4 2025. Looking at our core performance, ASP increased by 7% to £192,000, benefiting from our next-generation models, including the flagship V12, Vanquish. Additionally, demand for unique product personalisation continued to drive strong contribution to core revenue of 18%, broadly in line with the prior year period. As a result of the lower specials volumes, increased warranty costs and other investments made in enhancing product quality, adjusted EBIT decreased by 22% in the first half, to a £122 million loss, with depreciation and amortisation decreasing by 27% to £119 million, also primarily driven by the fewer specials. As we turn to our first-half performance in more detail, the split of our wholesales is shown on the left-hand side of the slide. Sport and GT volumes increased slightly year-on-year to represent over 70% of the mix, reflecting next-generation models of DV12, Vantage and Vanquish. SUV volumes remained in line with the first half of 2024, at just over 25% of the mix. As Adrian has mentioned, we expect to realise the benefits of our full range of new core models and derivatives, including Vantage Roadster, Vanquish Volante, DBX-S and Vantage-S, as we ramp up deliveries through the second half of the year. Specials reduced by 100 units to just 18 deliveries in the first half, reflecting the completion of previous programmes ahead of the commencement of AHALA deliveries expected in Q4 this year. For the full year, we continue to expect to deliver modest total wholesale volume growth when compared to 2024. On the right-hand side of the slide, total ASP decreased by 25%, again reflecting the fewer specials deliveries compared to the prior year period, while core ASP, as I've already mentioned, increased by 7%. Overall, volumes remained well balanced across all regions in H1 2025, with the Americas and EMEA, excluding the UK, collectively representing 62% of wholesales. This was despite the challenges relating to the US tariff implementation, which only came into effect on 30 June 2025. The movements in volumes across the UK and EMEA reflected the timing of model transitions and deliveries into these markets. Volumes in APAC decreased by 9%, with volumes in China remaining broadly flat compared with the first half of 2024, reflecting ongoing macroeconomic weakness continuing to impact demand, a trend we expect to continue, at least in the near term. As Adrian has outlined, we are taking further action to support our China dealer network to help position them well to benefit from our next-generation core model range when the market conditions improve. As we turn to the next slide, as expected, the impact of fewer specials deliveries is reflected in the declining gross margin year on year. The impact of core wholesales, despite a slight increase in volumes and improved mix from the next generation of models, was also dilutive to gross margin as a result of the warranty costs and other investments made in product quality. This includes the previously communicated investment in software and infotainment enhancements, which has resulted in recent improvements in customer satisfaction. Additionally, gross margin was impacted by the US tariff increases. As Adrian has mentioned, we have implemented a dynamic pricing strategy, announcing in June an initial 3% increase in the US, as we seek to mitigate the financial impact of the additional tariff. As we ramp up production in H2, benefiting from additional derivatives and the contribution from Valhalla, we now expect full-year 2025 gross margin to improve from current levels to be broadly in line with the prior year. Adjusted EBIT decreased by 22% year-on-year to a loss of £122 million, primarily reflecting the gross profit movement, which was partially offset by a 24% decrease in adjusted operating expenses excluding DNA, with DNA also decreasing by 27%. The decrease in adjusted operating expenses aligns with our focus on optimising the cost base as part of our ongoing transformation programme. It also includes an £11 million benefit from the secondary warrant revaluation uplift associated with the forthcoming sale of our investment in AMRGP. Our previously announced organisational adjustments are progressing as planned, and we are on track to deliver a reduction in adjusted operating expenses, excluding DNA, in the full year 2025, now expected to be below £300 million. With updated DNA guidance of circa £340 million, adjusted EBIT is now expected to improve towards break-even. This also reflects the impact from foreign exchange rate movements, the additional investment in software and infotainment enhancements, and the support for our China dealer network. As shown on the right-hand side of the slide, net adjusted financing costs decreased £9 million from £88 million last year, primarily due to a £78 million year-on-year impact of non-cash US dollar debt revaluations resulting from the weaker US dollar. Finally, the first half of 2025 adjusting items excluded the redemption premiums associated with the refinancing of our senior secured notes in H1 2024, though included the expected costs associated with the organisational adjustments. Turning to free cash flow, which was broadly stable year-on-year, with an outflow of £321 million. This reflects the lower EBIT, in addition to higher net cash interest paid, of £69 million. As expected, working capital improved year-on-year to an outflow of £45 million, compared to the £119 million outflow in the first half of 2024. The key driver here being the deposit inflow relating to Valhalla, with deposits held increasing by £28 million compared with an £84 million outflow in the prior year period, relating mainly to the delivery of Valor and Valkyrie specials. Capital expenditure of £171 million was slightly below the comparative period, with investment focused on future product pipeline, including Valhalla. In H2, we will accelerate our investment in new product developments, which will support our growth strategy. CAPEX for the full year is still expected to be around £400 million. As we ramp up deliveries of our new derivatives and specials through the rest of the year, we still expect to deliver positive free cash flow generation in H2, driven by performance in the fourth quarter. To finish with cash and debt, we ended the first half of the year with total liquidity of £228 million, We expect to enhance liquidity with the gross proceeds of around £110 million in Q3 2025 from the forthcoming completion of the sale of our investment in AMRGP. Net debt increased to £1.38 billion. Combined with a decline in EBITDA year-on-year, this resulted in an adjusted net leverage ratio of 6.7 times. As we prepare to deliver a significantly stronger second-half performance, and through disciplined strategic delivery and profitable growth in the future, we expect to deleverage in line with our medium-term targets. Finally, looking ahead to the remainder of 2025, we continue to closely monitor global events and will remain agile in responding to changes in the external environment. That said, we continue to expect to deliver a significantly stronger performance in the second half of the year compared with the first half, commencing with Q3 improvements, but primarily driven by Q4. This is due to the benefits from initial Valhalla deliveries, in addition to the contribution from our full range of core models, including first deliveries of Vantage Roadster, Vanquish Volante, the DBX-S and the Vantage-S. As I've already mentioned, and as shown in detail on the slide, we've slightly revised some of our guidance for 2025. Additionally, the impact of the recently announced US tariffs on the global economy remains uncertain, and whilst we now have clarity on the 10% tariff rate for the UK automotive manufacturers, we continue to monitor the current quota mechanism and how this will impact our deliveries, especially for the higher price specials, including Valhalla, towards the end of the year. Thank you.

And I'll now hand over to the operator to open for the Q&A. Thank you.