Aston Martin Lagonda Global Holdings plc

Good morning or good afternoon all and welcome to the Aston Martin Lagonda 2025 Full Year Results School. My name is Adam and I'll be your operator today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand over to Adrian Hallmark to begin, so please go ahead when you're ready. We'll be right back.

Good morning, everyone, and thank you for joining us today for Aston Martin's 2025 full-year results. It's a pleasure to be here alongside Doug Lafferty, CFO. And before Doug takes you through the financial performance in detail, I'm going to provide a summary of our key achievements and areas of strategic focus during 2025, followed by a review of the work we have done on the future product lineup. As we've outlined throughout the year, we have navigated a highly challenging trading environment, an unprecedented backdrop of geopolitical uncertainties and macroeconomic pressures, including heightened tariffs in the US and China weighed on our performance and ability to execute our plans effectively. Despite this, we have delivered some critical milestones, none more so than the commencement of Valhalla deliveries in Q4 last year, our first mid-engine plug-in hybrid vehicle supercar. Alongside this, we've expanded our thrilling core line-up with high-performance derivatives such as the Vantage S and the DBX-S. voted the super suv of the year by top gear magazine and the vanquish volante with the vanquish also being recognized as car of the year by rob report just last month Whilst maintaining a disciplined approach to balancing production with demand throughout the year, with retails outpacing wholesales, we also took the necessary proactive actions to invest in quality, lower our operational costs and find ongoing capital expenditure efficiencies. Along with other transformation initiatives, these actions have benefited our performance in 2025, but very importantly will support enhanced delivery over the coming years. Finally, we took action during the year to strengthen our balance sheet. Proceeds from the sale of shares in the Aston Martin Aramco Formula One team, investment from Lawrence Stroll and his Utrecht consortium, and improved cash collections in Q4 2025 resulted in a year-end total liquidity of £250 million. further enhanced by the proposed sale of Aston Martin naming rights to AMR GP for a consideration of £50 million in this quarter 2026. Taking all of this together and looking ahead, I remain confident that our strategy and upcoming products will position us strongly for future success. In the full year 2026, we expect to deliver a material improvement in our financial performance and continue to delivering year on year improvements over the short to mid term with a focus on margin improvement and cash flow generation. Let's begin with a review of what's at the beating heart of Aston Martin and core to our DNA. That's our range of exquisitely designed and handcrafted vehicles. Today, we have the most thrilling and diverse lineup of models in our 113 year history. As we said at the start of 25, our focus was on continuing to refresh and expand the core model range Aston Martin has a long-standing tradition of applying the S suffix to special high-performance derivatives of core models, which we've continued with the introduction with the Vantage S, the DBX-S and most recently the DB12-S. We now have convertible models available for all of our core range of sports cars. and we celebrated the 60th anniversary of the iconic Vellante name with the release of Limited Edition Q by Aston Martin DB12 and Vanquish Models. As I previously mentioned, the awards and recognition for these vehicles were a consistent theme throughout the year and have continued into 2026. As a result of the extensive range of new core models, the order book for these vehicles extends for up to five months for the core and the average selling price has increased by more than 5% to £185,000. A trend we expect to see continue into 2026 with more Aston Martin versions to come as we keep the core range fresh for our future and current customers. Now undoubtedly, the most anticipated highlight of the year was the start of production and deliveries of Valhalla in quarter four 2025. Valhalla has been a monumental project for Aston Martin, with the first 152 units produced and wholesaled in 2025. A further circa 500 units will be delivered in 2026, and the current order bank takes us through to the fourth quarter of this year. Uniquely designed from the ground up at our Gaydon headquarters in the UK, this supercar with hypercar performance is our first mid-engine plug-in hybrid, and it's an important component of our future plans. The financial benefits have already been evidenced in our quarter four 2025 performance. Reception from customers and the media to driving the prototype has been overwhelmingly positive. and following extensive global driving events during the second half of 2025, we have much more to come in 2026, beginning with over 50 global journalists joining us in Spain next week to drive the first full production versions of the car. Expect to see the reviews of this by the end of March. With our product portfolio now well established, let's turn our focus to the current market environment and how we are refining strategy, transformation programme and our future product plans to best position Aston Martin for success and solid financial performance in the future. During my first full year as CEO in 2025, the global luxury automotive market faced one of its most turbulent years in recent times. Consumer demand has been impacted negatively by escalating geopolitical uncertainties and macroeconomic challenges. The most notable being the introduction of tariffs in the US and in China. We were forced to navigate an unpredictable policy landscape and manage supply chain issues that ultimately impacted our volumes, our efficiency and our margins. In response, we have taken and will continue to take proactive steps to strengthen our overall position by maintaining a disciplined approach to balancing production and demand. This has been key to this year's performance and how we've planned for 2026. It includes establishing a more balanced production cadence through each quarter whilst building on the success of our initial Valhalla deliveries. We passed through a second 3% price increase in the US from the 1st of October to offset more of the impact we've been absorbing due to the tariff increases announced earlier this year. We continued to engage with UK government regarding the first come, first served US quota mechanism with volumes allocated on a quarterly basis. this system creates uncertainty for our planning and forecasting. So where possible, we will try to optimize production schedules to reduce this risk associated with the quota mechanism and prioritize working capital management. As we said at the half year results, we provided support for our dealers in China with the intention of positioning us strongly to enter 2026 from a low stock perspective. We continue to build more robust relationships and management across our supply chain, including proactively mitigating risks with some of our partners. We're taking immediate and ongoing action to reduce our cost base in order to deliver operational leverage. Simultaneously, we reviewed our future cycle plan to ensure we meet the needs of our customers as regulators and priorities shift. This resulted in a capex reduction of about 300 million pounds over the coming five years. 12 months ago, I communicated a strategy that built on the foundations laid by the industrial scale turnaround undertaken by Laurence Stroll and the team since 2020. This strategy seeks to turn this high potential business into a high performing one. Underpinning this strategy are our unique strengths, namely our iconic global brand, our uncompromising customer focus, the relentless pursuit of innovation and technical advancement, and the license to operate in the high performance sector through our F1 association, which feeds into the exclusive limited edition high margin specials. And finally, and most importantly, our highly skilled and capable and loyal workforce. Building on these unique strengths, we took proactive steps and advanced our transformation programme in 2025, anchored around our six strategic focus areas. As we look ahead, we will continue to operate with a laser focus on these six areas. because they're the way to achieve our high performance and create value for our stakeholders and shareholders. Many of the achievements this year I've already referenced, but I'd like to call out just a few more over the coming moments. As we seek to drive market demand, we've recently established a private office which ensures our top 500 clients are assigned a primary Aston Martin contact supported by head office VIP specialists with a dedicated 2026 events plan. This will be further supported by the opening of the Q London flagship in Berkeley Square later this year, adding to the ultra-electric flagship store at New York and at the Peninsula in Tokyo. In terms of product creation, we were the first global automotive manufacturer to integrate Apple CarPlay Ultra into all of our models. Additionally, we're expanding our range of personalisation, options and bespoke queue offerings, giving our customers even more choice when it comes to curating their unique Aston Martin. Culture and change management is critical at a time when we are right-sizing the business to align with our future plans. To demonstrate that we're making changes throughout the organisation, My executive committee a year ago comprised of 11 members and we will be nearly half that size by the end of this quarter in 2026. Our focus on quality has seen us make additional investments which are delivering ongoing benefits. the Valhalla program has established a new benchmark for Aston for product launches. And our customer satisfaction scores have rocketed compared with the previous year across all new models. Whilst we are instilling a disciplined approach across our operations, it's important that we don't ignore other key factors like the health and safety of our colleagues. This is of paramount importance and I'm pleased to report that our reduced accident frequency rate in 2025 is another step change. Finally, cost optimisation. As you know, this has been a constant theme throughout the 2025 period and will continue to be so in 2026. One of the benefits of having a more disciplined approach to our operations with a smoother production cadence is that we can deliver greater efficiency. As such, I expect us to drive operating leverage in 2026 that will support our improved financial performance and profitable growth. As we look ahead to the future, the key to success of this business will be the next generation of vehicles that we develop. We announced in October that a review was underway of our future product cycle plan with the dual aim of optimising capital investment whilst continuing to deliver innovative products that meet customer demands and regulatory requirements. We now have a clear roadmap that will ensure our product proposition builds on the strong foundations we have established over the past five years. For the remainder of this decade, we will initially focus on extending existing core model lines before the next full refresh commences. This is a capital efficient approach and the best utilisation of funds whilst being able to offer new and exhilarating products that meet our customers' needs and beat the competition. The derivative approach of the past year is a great example of what to expect over the next three years. We will then gradually start shifting from pure combustion engine powertrains to incorporating electrical assistance. That doesn't mean full electric yet. That strategy will continue to be reviewed and subject to further communications. We don't believe our customers want that technology right now and we won't be pushed down that path by regulation either due to the changes that have occurred. What it does mean is hybrid technology alongside ever more efficient and compliant combustion engines will be the core part of our business going forward. This will be complemented by our continued specials programme, a fundamental part of our future financial and competitive success. As we look further into the following decade, that's when we plan to incrementally add all electric drivetrains that will incorporate the latest innovative battery technology at a time when customer demand has likely shifted to be more closely aligned with regulatory requirements. I'm really excited by what we have to offer in the years to come. At the appropriate time, we'll provide more colour on our thrilling and innovative future product lineup, which puts customers' requirements at the heart of everything that we do. But for now, thank you. And I would like to hand over to Doug, who will take you through the financial detail.

Thank you, Adrian, and good morning all. Before we move into the Q&A, I'll take you through our financial performance for 2025 and our guidance for 2026 and onwards. Overall, our full-year 2025 performance reflects, as we guided, fewer specials deliveries and the disciplined approach we took to operations as we navigated the heightened challenges and uncertainty in the global macroeconomic and geopolitical environments, particularly in relation to tariffs and the quota mechanism in the US. Looking at the detail on the slide, wholesale volumes were down 10% at 5,448%. Retail volumes outpaced wholesales as we continued to maintain a disciplined approach to managing the balance between production and demand. As expected, Q4 was the strongest period in 2025, benefiting from our planned expansion of the core derivatives and the first 152 deliveries of Valhalla, supporting marginally positive free cash flow in the quarter. In terms of revenue, at £1.26 billion, this reflected a 21% reduction compared to the prior year, largely as a result of the core volume decline and the guided fewer specials deliveries, compared to 2024. Core ASP increased by 5% to £185,000, benefiting from our expanded range of derivatives, while total ASP was broadly flat due to the mix of specials. 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, dealer support to reduce aged stock, increased warranty costs and other investments made in enhancing product quality, as well as the impact of tariffs in the US and China, adjusted EBIT decreased to a negative 189 million, with depreciation amortisation decreasing by 16% to 297 million, also primarily driven by fewer specials. The split of our wholesales for 2025 is shown on the left-hand side of the slide. Core volumes for Sport, GT and SUV were down in line with the overall trend, whilst fewer specials were due to the timing of the Valhalla deliveries commencing only in Q4. As expected, Q4 wholesales increased sequentially, up 47% on the previous quarter, benefiting from both the expanded range of core models, including the DBX-S, Vantage-S and Volante 60th Anniversary Limited editions, as well as initial Valhalla deliveries. As Adrian has mentioned, we expect to continue to realise the benefits of our full range of new core derivatives through 2026. On the right-hand side of the slide, total ASP decreased by 15%, again reflecting the fewer specials deliveries and the mix compared to the prior year, while core ASP, as I've already mentioned, increased by 5%. On a constant currency basis, I would expect to see a similar improvement in core ASP in 2026, whilst total ASP will benefit from around 500 Valhalla's we expect to deliver, as well as the Valkyrie Le Mans editions. Overall, volumes remained similarly balanced across all regions in 2025, with the Americas and EMEA, excluding the UK, collectively representing 63% of wholesales. This was despite the ongoing challenges related to the US tariff implementation. In addition to the reasons previously outlined, the timing of various model transitions and deliveries across the regions impacted volumes compared to the prior year. The movements in volumes across EMEA and APAC were weaker due to market conditions and destocking activities. Despite tariff-related volatility in the US, volumes there and in the UK remained reasonably robust relative to overall group performance. And while China is a market with long-term growth potential, demand there remained extremely subdued in line with other luxury automotive peers due to weak macroeconomic environment and changes to the luxury car tariff effective from July 2025. We continue to support our China dealer network through 2025 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, the impact of fewer specials deliveries is reflected in the decline in gross margin year over year. The impact of core wholesales, despite a slight improvement in the mix from the next generation of derivatives, was also diluted to gross margin as a result of the previously communicated additional warranty costs, increased dealer support and other investments made in product quality, which amounted to an increase on the prior year of around £65 million. Additionally, gross margin was impacted by the US tariff increases. Q4 2025 gross margin improved sequentially to 31% from 29%, supported by core volumes and specials, whilst ongoing warranty costs and dealer support to reduce aged stock still impacted the period. I'll come on to guidance shortly, but we expect a material improvement in financial performance in 2026, including gross margin, benefiting from our ongoing transformation programme and continued disciplined approach to operations, new core derivatives and the enhanced contribution from Valhalla. We've remained steadfast in targeting a minimum 40% gross margin for all of our new vehicles. Adjusted EBIT decreased year on year to a negative £189 million, primarily reflecting the gross profit movement and foreign exchange, which were partially offset by a 16% decrease in both adjusted operating expenses excluding DNA and adjusted DNA. The decrease in adjusted operating expenses aligns with our focus on optimising the cost base as part of our ongoing transformation programme and to drive operating leverage through disciplined cost management from 2026 onwards. It also includes the previously announced £11 million benefit from the revaluation uplift of the secondary warrant options associated with the disposal of the Group's AMRGP investment. As shown on the right-hand side of the slide, net adjusted financing costs decreased to £109 million from £173 million, primarily due to a £71 million year-on-year gain of non-cash US dollar debt revaluations resulting from a weaker US dollar. Turning to free cash flow, the year-on-year outflow increased by £18 million to £410 million. This reflects both the decrease in cash inflow from operating activities and increased net cash interest paid of £143 million, partially offset by the £60 million reduction in capital expenditure. As expected, working capital improved year-on-year to an inflow of £6 million compared to the £118 million outflow seen in 2024. The key drivers here being the deposit inflow relating to Valhalla, with deposits held increasing by £3 million, compared with an £187 million outflow in the prior year period, in addition to a £2 million increase in receivables, compared to a £107 million decrease in 2024, following improved cash collections at the year end. Capital expenditure of £341 million was below the comparative period in line with the Group's revised guidance, reflecting the initial benefits from the immediate actions announced by the Group at Q3 2025 to reduce both cost and capex. Additionally, as Adrian has mentioned, we have completed a review of the Group's future product cycle plan, resulting in the five-year capex plan reducing from around £2bn to around £1.7bn. This is through a continued focus on utilising existing platform architecture for internal combustion engine vehicles in line with regulatory trends and customer demand. To finish with cash and debt, we ended the year with total liquidity of £250 million flat on Q3, given the strong performance in Q4 2025 and improved cash collections at the year end. Total liquidity reflects the £410 million free cash outflow in the year, partially offset by the around £106 million inflow of net proceeds following the completed sale of the AMRGP shares and the £52.5 million investment from the Utrecht Consortium. This has been further enhanced following our recent announcement of the proposed sale of the Aston Martin naming rights to AMRGP for a consideration of £50 million. Net debt increased to £1.38 billion, reflecting a decrease in the cash balance and increased drawing on the RCF. Combined with the decline in EBITDA year-on-year, this resulted in an adjusted net leverage ratio of 12.8 times. As we prepare to deliver the material improvement in 2026, and through disciplined strategic delivery and profitable growth in the future, we expect this ratio to materially improve over the coming years. Finally, and looking ahead, as Adrian has outlined, we expect to deliver a materially improved financial performance in 2026. As the indicative EBIT walk on the right hand slide highlights, key to this improvement is our enhanced product mix, including the 500 Valhalla deliveries that we expect and benefits from the ongoing transformation program and a disciplined approach to operations. We continue to acknowledge that the global macroeconomic and geopolitical environment impacting the wider automotive industry remains challenging. This includes the US tariff and quota mechanism uncertainty, which Adrian's already mentioned. Taking this into consideration, we still expect to continue delivering year-on-year improved financial performance over the short to mid-term, with a focus on margin expansion and cash flow generation ahead. benefiting from the ongoing transformation programme initiatives and an enhanced product mix from the future portfolio of both core and special models. You can see the Group's detailed 2026 guidance on the left-hand side of the slide. What I would highlight is that we have planned carefully for 2026 to align production with retail demand and expect a much smoother delivery cadence from the second quarter onwards. This will support more efficient delivery of our plan, which in addition to the ongoing benefits from our transformation programme, will generate operating leverage. We expect the adjusted EBIT margin to materially improve towards breakeven. Free cash outflow is similarly expected to improve, and following the majority of the cash outflow occurring in Q1 2026, we expect a cumulative year-on-year improvement from Q2 onwards. As you would expect, we remain laser-focused on cash optimisation and liquidity management. Thank you, and I'll now hand back over to the operator to open for the Q&A.