Annual Financial Report

RNS Number : 9725R

Aston Martin Lagonda Global Hld PLC

11 March 2021

 

11 March 2021

Annual Financial Report

Aston Martin Lagonda Global Holdings plc (the "Company") announces that it has today published its Annual Report and Accounts for the financial year ended 31 December 2020 (the "2020 Annual Report") online and it can be viewed on the Company's website  www.astonmartinlagonda.com/investors/annual-report.

In accordance with Listing Rule 9.6.1R, the 2020 Annual Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .  The 2020 Annual Report will be dispatched to shareholders in due course.

The date for the Company's Annual General Meeting (AGM) and the Notice of AGM will be published on the Company's website and distributed to shareholders in due course.

In compliance with Disclosure Guidance and Transparency Rule ("DTR") 6.3.5, the information in the Appendix below is extracted from the 2020 Annual Report and should be read in conjunction with the Company's Preliminary Announcement issued on 25 February 2021, which can also be viewed at www.astonmartinlagonda.com/investors/results-and-presentations. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the 2020 Annual Report in full and page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the 2020 Annual Report.

For further information, please contact:

Investors and Analysts
Charlotte Cowley, Director of Investor Relations	[phone] [e-mail]
Media Kevin Watters,    Director of Communications Grace Barnie, Corporate Communications Manager	[phone] [e-mail] [phone] [e-mail]
Tulchan Communications Harry Cameron and Simon Pilkington	[phone]

 

APPENDIX: ADDITIONAL INFORMATION REQUIRED BY DTR 6.3.5

AUDIT REPORTS

The Preliminary Announcement includes a condensed set of financial statements. Audited financial statements for the financial year ended 31 December 2020 are contained in the 2020 Annual Report and Accounts. The Independent Auditors' Report on the Group financial statements and the parent company financial statements is set out in full on pages 87 to 95 of the 2020 Annual Report.  The audit report is unmodified and does not contain any statements under section 498(2) or section 498(3) of the Companies Act 2006.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The following information is extracted from page 85 of the 2020 Annual Report.

Each of the directors, whose names and functions are listed on pages 41 to 43 confirm that, to the best of their knowledge:

• that the consolidated financial statements, prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs adopted pursuant to Regulation (EC) 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

• the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

• that they consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

PRINCIPAL RISKS

The following information is extracted from pages 33 to 37 of the 2020 Annual Report.

The most significant changes to the Group's principal risks in the year were:

· INSUFFICIENT LIQUIDITY - Risk reducing following the successful capital raises and refinancing of the Senior Secured Notes in the period.

· COMPETITIVE POSITIONING - Risk reducing following the completion of the Strategic Cooperation Agreement with Mercedes-Benz AG and the successful launch of the DBX.

· PROGRAMME DELIVERY - Risk reducing as a result of the successful commissioning of the St Athan facility and commencement of DBX production.

· ACHIEVING TARGET COST REDUCTIONS - Added as a new principal risk. The Group's ability to achieve targeted cost reductions (e.g. material cost, fixed and variable marketing, fixed manufacturing) may be inhibited by the Group's low volume strategy to maintain exclusivity and luxury positioning.

· MACRO-ECONOMIC AND POLITICAL INSTABILITY - Impact has reduced as the 2021 budget and business plan have been created after consideration of the recent macro-economic impacts of key factors such as Brexit and COVID-19.

· SUPPLY CHAIN DISRUPTION - Risk reducing due to the measures the Group has deployed in response to managing its risk suppliers, critical suppliers and Brexit. These include planning for alternative ports of entry for imports and increasing inventory levels for critical parts.

The emergence of the COVID-19 pandemic in Q1 2020 had a significant impact on the business with the temporary closure of our dealerships and factories. In response to this the Company reassessed each of its principal risks in light of the pandemic and established a COVID-19 Task Force, comprising senior management from each function, to manage the specific risks associated with the pandemic. Key activities included undertaking COVID-19 specific risk assessments, promoting and facilitating safe and secure remote working, creating Return to Work Guidelines and deploying social distancing measures in accordance with government guidelines for our operational sites. This Task Force remains in place and continues to prioritise the safeguarding and wellbeing of our employees, contractors, suppliers, customers and their families. Furthermore, each of the principal risks has been re-assessed to specifically consider the impact of COVID-19.

OUR PRINCIPAL RISKS

Our risk management system is designed to identify a broad range of risks and uncertainties which could adversely impact the profitability or prospects of the Group. Our principal risks are those which could have the most significant effect on the achievement of our strategic objectives, our financial performance and our long-term sustainability.

The following pages set out the Group's principal risks,
how these risks are linked to our strategy and the primary mitigating actions implemented for each risk during the year ended 31 December 2020. Our principal risks change over time as some risks assume greater importance and others may become less significant.

We categorise principal risks within one of the following four areas: Strategic, Operational, Compliance and Financial, and link each risk to one or more of the key strategies that underpin our business plan.

PRINCIPAL RISK SUMMARY

Strategic Risks

Macro-economic and political instability Exposure to multiple political and economic factors could impact customer demand or affect the markets in which we operate.
Risk movement Down	Link to Strategy Core product offering: three pillar strategy Control volume growth and personalisation Develop Specials pipeline Enhance strategic partnerships Cost and investment control	Risk tolerance Moderate
Potential Causes · Global economic slowdown due to COVID-19. · Unfavourable movement in exchange rates. · Adverse economic global conditions could adversely impact our dealer network or supply chain.
Mitigating activities · Operational and financial review of the business undertaken to align to the new business plan. · Monitoring global market trends to target areas for future growth. · Volume planning actions to optimise dealer network stock levels.

Competitive positioning Maintaining our competitiveness in the high luxury segment car market is critical to achieving our strategic growth objectives.
Risk movement Down	Link to Strategy Core product offering: three pillar strategy Control volume growth and personalisation Develop Specials pipeline Enhance strategic partnerships	Risk tolerance Low
Potential Causes · Failure to maintain leading design which customers value. · Inability to produce cars that are competitive in terms of performance, aesthetics and quality. · Competitor pricing activity resulting in the need to increase retail and customer financing expenditure to support retail sales.
Mitigating activities · Expanding product portfolio to produce incremental new core models. · Maintain a regular pipeline of Special Editions and offer fully bespoke customisation offer through the 'Q' division. · Strategic Cooperation Agreement with Mercedes-Benz AG to provide access to advanced technologies.

Brand/Reputational damage Our brand and reputation are critical in securing demand for our vehicles and in developing additional revenue streams.
Risk movement No change	Link to Strategy Core product offering: three pillar strategy Control volume growth and personalisation Develop Specials pipeline Enhance strategic partnerships Cost and investment control	Risk tolerance Low
Potential Causes · Product recall or late delivery could impact customer confidence and loyalty. · Dealer network may not be effective in raising, maintaining and promoting brand awareness. · Inadequate dealer training in new products and technologies could impair the customer experience.
Mitigating activities · Standardised embedded quality procedures (e.g. Customer Perception Audit, Parts Approval Process) to maintain focus on vehicle quality. · Customer satisfaction audits and assessments performed and monitored by the Client Services Team. · Expanded dealer network and improved training to ensure delivery of a luxury customer experience.

Technological advancement It is essential to maintain pace with technological development to meet evolving customer expectations and remain competitive.
Risk movement No change	Link to Strategy Develop Specials pipeline Enhance strategic partnerships Cost and investment control	Risk tolerance Low
Potential Causes · Reliance on third parties to support development of new and emerging technologies. · Competitors may have better access to funding to develop new technology faster and be first to market. · Changing and more stringent regulations may make current technology obsolete and increase the risk of future non-compliance.
Mitigating activities · Strategic arrangements with key partners, including the Strategic Cooperation Agreement with Mercedes-Benz AG, to provide powertrain, electrical architecture and entertainment systems. · Commodity strategy plans developed. · Development of modular architecture "Carry Over - Carry Across" approach for key systems and components.

Operational Risks

Talent acquisition and retention We may fail to retain, engage and develop a productive workforce and to develop key talent.
Risk movement No change	Link to Strategy Control volume growth and personalisation Develop Specials pipeline Enhance strategic partnerships	Risk tolerance Low - moderate
Potential Causes · Failure to build the right capabilities and behaviours in our leadership team. · Key contractors leaving the business and the impact of IR35 on our contractor population. · Failure to engage or equip our teams to deliver our strategy or address key capability gaps.
Mitigating activities · Remuneration Committee oversight of senior leadership remuneration to ensure it is aligned to the strategy and appropriate for staff retention. · Regular review of talent and resource risks leveraging succession plans and employee engagement survey results. · Benchmarking of remuneration and bonus packages to drive employee performance and behaviours.

Programme delivery Failure to implement major programmes on time, within budget and to the right technical specification could jeopardise delivery of our strategy and have significant adverse financial and reputational consequences.
Risk movement Down	Link to Strategy Control volume growth and personalisation Develop Specials pipeline Enhance strategic partnerships Cost and investment control	Risk tolerance Low
Potential Causes · Insufficient funds to support programme investment requirements. · Inability to manage third-party delivery in line with programme timelines and milestones. · COVID-19 related issues may impact our ability to conduct testing or engineering development within required timescales.
Mitigating activities · Deployment of an established Programme Delivery Methodology (Mission 1.3) and regular Executive Committee status reporting and oversight. · Restructure of the business including engineering and project management functions. · Focus on increased levels of "Carry Over - Carry Across" to leverage existing core architecture across multiple applications to expedite delivery.

Achieving target cost reductions The Group's size and low volume strategy may inhibit its ability to deliver targeted cost reductions, or work within budget constraints whilst delivering the planned vehicle programme.
Risk movement New	Link to Strategy Core product offering: three pillar strategy Control volume growth and personalisation Develop Specials pipeline Cost and investment control	Risk tolerance Low
Potential Causes · High levels of complexity across car lines can drive increased engineering requirements with associated increased resource and cash requirements. · Increasing material costs. · Inertia to new ways of working may inhibit our ability to deliver against agreed targets and budgets.
Mitigating activities · CFT transformation activity to agree a cost target process with regular CEO led cost reviews. · Restructuring of the Engineering and Procurement functions to align accountability and operational procedures. · Establishment of bi-monthly cost and cash focused Executive Committee meetings.

Cyber security and IT resilience Breach of cyber security could result in a system outage, impacting core operations and/or result in a major data loss leading to reputational damage and financial loss.
Risk movement Down	Link to Strategy Cost and investment control	Risk tolerance Low
Potential Causes · Cyber attack resulting in denial of service, loss of data or other business disruption. · Legacy systems reaching end of life may no longer be supported and become more susceptible to failure of breach. · Insufficient investment in systems and resource may result in control deficiencies or vulnerabilities not being addressed in a timely manner.
Mitigating activities · Project initiated to implement a new ERP system to transition away from end of life legacy systems and drive efficiency within the IT infrastructure. · Enhanced IT general controls for access management, perimeter security, remote access (e.g. multi-factor authentication) and password management. · 24/7 vulnerability monitoring using Darktrace and security incident response procedures.

Supply chain disruption Supply chain disruption could result in production stoppages, delays, quality issues and/or increased costs.
Risk movement Down	Link to Strategy Enhance strategic partnerships Cost and investment control	Risk tolerance Low
Potential Causes · Suppliers may be unable to meet delivery schedules due to being in financial distress. · COVID-19 enforced closures, or customs clearance procedures impacted post Brexit, could result in disruption to delivery schedules. · Deterioration in the Group's credit rating may lead to supply restrictions or more stringent terms and conditions.
Mitigating activities · Critical supply risk assessments performed to identify where additional stock holding or alternative sources of supply may be required. · QCDDM supplier performance metrics being developed to manage under-performance within the supply base. · Supplier financial strength and performance assessments undertaken prior to engagement.

Brexit uncertainty Delays in customs processing and the interpretation and implementation of the trade deal with the EU could impact the Group's financial position, supply chain and people.
Risk movement Down	Link to Strategy Develop Specials pipeline Cost and investment control	Risk tolerance Low
Potential Causes · Additional costs associated with increased customs duty and tariffs. · Extended supply lead times leading to increased working capital investment requirements. · Exchange and interest rate volatility impacting Group revenues, profits and cash flows.
Mitigating activities · Establishment of Brexit Steering Committee with regular reporting to the Executive Committee. · Consistent regular engagement by the Group with UK and EU Government and Trade Bodies. · Steps taken to prepare the supply chain and dealer network for various Brexit scenarios.

Compliance Risks

Compliance with laws and regulations Non-compliance with local laws or regulations may damage our corporate reputation and subject the Group to significant financial penalties.
Risk movement Down	Link to Strategy Core product offering: three pillar strategy Control volume growth and personalisation Develop Specials pipeline Enhance strategic partnerships Cost and investment control	Risk tolerance Zero
Potential Causes · Non-compliance with emissions regulations could inhibit our ability to trade in certain markets. · Non-compliance with labour, human rights and environmental standards could result in financial penalty and/or brand / reputational damage. · Rapidly evolving climate and environmental regulations could result in areas of non-compliance where not addressed in a timely manner.
Mitigating activities · Vehicle safety certification achieved for all markets and "Small Volume" Derogation status for EU emissions compliance. · Standards of Corporate Conduct define our activities in relation to key compliance areas (e.g. anti-bribery and corruption, whistleblowing, data protection, equality and diversity, business ethics). · In-house legal and compliance team that manages ongoing investigations. · Enhanced GDPR and IT General Controls.

Financial Risks

Insufficient liquidity The Group may not be able to generate sufficient cash to fund its capital expenditure and debt or sustain its operations.
Risk movement Down	Link to Strategy Core product offering: three pillar strategy Control volume growth and personalisation Develop Specials pipeline Enhance strategic partnerships Cost and investment control	Risk tolerance Low
Potential Causes · Significant leverage levels may inhibit our ability to raise additional capital. · COVID-19 impact could result in reduced demand and a reduction in available cash to support the product development plan. · Significant debt servicing requirements reduces cash available to support other operational needs.
Mitigating activities · Raising of additional capital through equity issue and refinancing activity. · Daily management review of cash balances and establishment of bi-monthly Executive Committee focusing on cash and cost performance. · Ongoing transformation activity to deliver targeted cost savings and efficiencies.

Impairment of capitalised development costs The value of capitalised development costs continues to grow as we expand our product portfolio.
Risk movement No change	Link to Strategy Cost and investment control	Risk tolerance Zero
Potential Causes · Vehicle sales volumes fall below lifecycle plans and targets as a result of the impact of COVID-19 or other macro-economic factors. · Vehicle pricing and contribution reduce to levels which no longer support the carrying value of the attributable capitalised costs. · Uncertainty of "Carry Over - Carry Across" utilisation on future vehicle models and derivatives.
Mitigating activities · Capitalisation policy and procedures reviewed annually. · Impairment reviews performed where triggering events have been identified. · Regular vehicle line reviews undertaken to monitor sales volume and contribution performance for all car lines with any concerns communicated to finance for consideration of potential impairment.

RELATED PARTY TRANSACTIONS

The following information is extracted from pages 83, 141 and 142 of the 2020 Annual Report.

During the year ended 31 December 2020, the significant shareholder groups agreed to subscribe for shares in the Company as follows:

  Number of Shares

Significant Shareholder Group	June 2020 Placing	October 2020 Placing
Yew Tree Consortium	75,999,277	40,000,000
Adeem/PW shareholder group1	9,000,000	None
Prestige/SEIG shareholder group2	23,662,788	N/A

1   The Adeem/PW shareholder group ceased to be a related party for the purposes of the Listing Rules during the year ended 31 December 2020.

2   The Prestige/SEIG shareholder group ceased to be a related party for the purposes of the Listing Rules during the year ended 31 December 2020.

Other related party transactions are detailed in note 31.

NOTE 31

Transactions between Group undertakings, which are related parties, have been eliminated on consolidation and accordingly are not disclosed. The Group has entered into transactions, in the ordinary course of business, with entities with significant influence over the Group. Transactions entered into, and trading balances outstanding at each year end with entities with significant influence over the Group are as follows:

		Salesto related	Purchases fromrelated	Amounts owedby	Amountsowed torelated
Relatedparty-Group		party £m	party £m	relatedparty £m	party £m
EntitieswithsignificantinfluenceovertheGroup	31December2020	1.4	2.7	-	1.3
Entitieswithsignificant influenceovertheGroup	31December2019	1.1	4.0	0.2	0.6

TRANSACTIONS WITH DIRECTORS

During the year ended 31 December 2020, an agreement was signed with a former director of the Group for the sale of a vehicle at an expected discount of £0.3m.  In addition to this, a former Director of the Group purchased a vehicle at a discount of less than £0.1m in line with the employee purchases policy then in effect.

In the year ended 31 December 2019 no cars were sold to any Directors.

TERMS AND CONDITIONS OF TRANSACTIONS WITH RELATED PARTIES

Sales and purchases between related parties are made at normal market prices. Outstanding balances with entities other than subsidiaries are unsecured, interest free and cash settlement is expected within 60 days of invoice. Terms and conditions for transactions with subsidiaries are the same, with the exception that balances are placed on intercompany accounts.  The Group has not provided or benefited from any guarantees for any related party receivables or payables.

 

END

 

 

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