Aston Martin Lagonda Global Stock

Good morning or good afternoon, all, and welcome to the Aston Martin Lagonda First Half 2026 Results Call. My name is Adam, and I'll be your operator today. [Operator Instructions] I will now hand the floor to CEO, Adrian Hallmark, to begin. So Adrian, please go ahead.

So good morning, everyone, and thank you for joining us today for Aston Martin's 2026 Half Year Results. It's a pleasure to be here alongside Doug Lafferty, CFO. Before Doug takes you through the financials in detail, I will provide a short summary of our performance in the first 6 months of the year with time for questions on the results at the end of the session.

As we outlined at the start of the year, 2026 was about delivering material improvement in financial performance driven by an enhanced product mix and benefits from the ongoing transformation program as well as embedding a more disciplined approach to operations. With that in mind, our H1 2026 results today demonstrate that we are on track to deliver material improvements. Key to this has been the delivery of over 220 Valhallas, our first mid-engine PHEV supercar. Alongside this, our expanded range of award-winning core derivatives has supported our performance.

Importantly, we have maintained a disciplined approach towards ongoing stock optimization as we move towards a more balanced core production cadence. As a result, our retail volumes significantly outpaced wholesales in the period. Alongside this, we continue to see benefits from the previous investment we made into quality and customer satisfaction with both measures trending hugely positively.

A key metric for us is free cash flow and continuing with the improving trend we reported at the Q1 results, this quarter's outflow has significantly reduced. We expect this positive trend to continue in the second half of the year.

Last week, we announced a new GBP 550 million debt financing. The key point that this significant liquidity injection provides us with both additional resilience and further flexibility to execute our current and future product plans.

Taking all of this together and looking ahead, we are on track to deliver our financial year 2026 guidance, and I remain confident that in delivering our strategy, we are positioning ourselves well for future success.

Undoubtedly, the highlight of last year was the commencement of Valhalla deliveries in quarter 4 2025. Valhalla has been a monumental project for Aston Martin, uniquely designed from the ground up. And as mentioned, over 220 deliveries have already taken place in the first half of this year. We've had an overwhelmingly positive reception from customers and press since it was launched with some of the many quotes on the slides that you can see in front of you.

The extensive customer drive events in quarter 2 are just one of the components of future demand creation for this amazing vehicle. Current orders are taking deliveries into the back end of quarter 4 of this year, and we'll have more still to come with the Monterey Car Week amongst those events when it takes place next month.

We have the autumn opening scheduled of the new London flagship store on Berkeley Square, which will further drive awareness in a prime location. Of course, Valhalla is our focus today, but we are uniquely positioned amongst a small group of brands that consistently design and develop exclusive limited edition high-margin Specials. These are and will continue to be a fundamental part of our future financial success, and we will update you when we have more exciting news on this front.

Finally, our range of exquisitely designed and handcrafted core vehicles. Today, we have one of the most thrilling and diverse lineups in our 113-year history. Since I joined Aston Martin 2 years ago, I've consistently spoken of the need continually to refresh and expand our core model range. We've now applied the S suffix to our high-performance derivative of core models, which we now have across our V8 range with Vantage S, DBX S and most recently, DB12 S. These models have all been highly acclaimed and underpin the stable order book that we have for these derivatives. Over time, I'd still like to see this improve, too.

The latest limited edition to be launched is the Vanquish 25, created to celebrate 25 years of the iconic V12 Vanquish. This is the ultimate expression, our flagship Grand Tourer. This particular derivative is commissioned through Q by Aston Martin, with availability limited to just 25 Coupe and 25 Volante on a global basis. Recognition for all the hard work and effort that goes into the craftsmanship design and engineering of these vehicles is always important.

And so to finish, I'll reference the most recent. Both Valhalla and Vanquish were named the Robb Report 2026 "Best of the Best" in their respective classes, something that I'm proud of, our people are proud of, and our customers expect. Long may those trends continue.

And with that, I'll hand over to Doug, who will take you through the financials. Thank you.

Thank you, Adrian, and good morning all. Before we move into the Q&A on the results, I'll take you through our financial performance for the first half of 2026 and our guidance for the remainder of the year.

As Adrian mentioned, overall, we saw a material improvement in financial performance in H1, reflecting over 220 Valhalla deliveries, an 11% increase in core wholesale volumes and certain transformation benefits.

Looking at the detail on the slide, total wholesale volumes increased 21% compared to the prior year to 2,331. Retail volumes outpaced wholesales by over 30% as we continue to maintain a disciplined approach to managing the balance between production and demand.

Revenue ended the period at GBP 629 million, a 38% increase compared to H1 2025, largely reflecting the increased total wholesales and an improved Specials mix driven by Valhalla. Total ASP increased by 17% to GBP 241,000, again benefiting from the higher Valhalla deliveries. Additionally, demand for unique product personalization continues to drive strong contribution to core revenue of 17%, broadly in line with the prior year period.

As a result of the increased gross profit, up by 68% from GBP 127 million to GBP 213 million, adjusted EBIT improved by 10% in H1 2026 to a GBP 109 million loss. The increase in gross profit was partially offset by depreciation and amortization increasing by 45% to GBP 172 million associated with the Valhalla deliveries.

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 year-on-year to represent 67% of the mix, reflecting next-generation models of DB12, Vantage and Vanquish as well as the new derivatives of Vantage S, DB12 S and Vanquish Volante. SUV volumes increased 7% during the first half of 2026 compared to the prior year at 23% of the mix. As mentioned, Specials increased significantly, driven by over 220 Valhalla deliveries in the first half, representing 10% of the mix compared with only 1% in the prior year period. For the full year, we continue to expect total wholesale volumes to be similar to 2025 levels, including around 500 Valhalla deliveries.

On the right-hand side of the slide, total ASP increased by 17%, again, reflecting increased Valhalla deliveries. Core ASP decreased by 5% year-over-year, reflecting targeted dealer support to reduce aged stock. As previously guided, this remained elevated during the first half of 2026, but we expect it to revert towards more normalized levels in the second half, which will support the anticipated further gross margin expansion in the second half of the year.

Overall, volumes remain well balanced across all regions in H1 2026, with the Americas and EMEA, excluding the U.K., collectively representing around 65% of wholesales. Volumes across all regions increased compared to the prior year period, reflecting our progress towards achieving a more balanced production cadence. That said, the automotive industry continues to face a challenging global macroeconomic and geopolitical environment. Most recently, this has included the conflict in the Middle East and the impact of U.S. tariffs. Whilst we have successfully navigated the quarter end process regarding U.S. tariffs, we continue to monitor the evolving Middle East situation, which to date, we have actively managed in order to limit the direct impact on the business.

As we turn to the next slide, the impact of Valhalla, increased core volumes, and the benefits from the ongoing transformation program drove an increase in gross margin to 34% from 28% in the prior year period. Transformation benefits included a reduction in investment in product quality and customer satisfaction year-over-year, whilst, as Adrian mentioned, driving improving trends in these key metrics. This was partially offset by the previously mentioned targeted dealer support, FX headwinds predominantly due to the pound strengthening year-on-year against the U.S. dollar and additional logistics costs associated with Valhalla deliveries. The first half of the year demonstrates positive progress towards our full year guidance of gross margin improving into the high 30%.

Adjusted EBIT improved by 10% year-on-year to a loss of GBP 109 million, primarily reflecting the impacts of Valhalla and core volumes. This was partially offset by a 16% increase in adjusted net operating expenses, excluding D&A, primarily relating to an GBP 11 million benefit from the revaluation uplift of secondary warrants associated with the sale of the AMR GP investment in the first half of 2025. This remains in line with our guidance for the full year as we focus on delivering improved operating leverage. Additionally, D&A increased 45%, primarily reflecting the higher deliveries of Specials year-over-year, again, in line with full year guidance.

As shown on the right-hand side of the slide, net adjusted financing costs increased to GBP 99 million from GBP 9 million, primarily due to an GBP 11 million loss from the impact of noncash U.S. dollar debt revaluations as compared to a GBP 72 million gain in the prior year period. Finally, H1 2026 adjusting items of GBP 53 million primarily relates to the gain on the previously announced Aston Martin F1 naming rights to AMR GP.

Turning to free cash flow, which materially improved year-on-year with an outflow of GBP 198 million compared with GBP 321 million in the prior year period. This reflects the improved cash inflow from operating activities, which includes a working capital outflow of GBP 45 million, in line with the prior year period and GBP 120 million capital expenditure, which reduced by GBP 50 million compared to the prior year, partially offset by an increased net cash interest paid of GBP 75 million.

As previously guided, free cash outflow is expected to materially improve in full year 2026 compared with the prior year with a cumulative year-on-year improvement from Q2 onwards. This is supported by improved EBITDA, lower capital expenditure and enhanced product mix and more balanced production cadence from Q2 2026 onwards. It's worth noting that after adjusting for Q2 2026 net cash interest paid of GBP 73 million, free cash flow, excluding net cash interest paid, approached breakeven for the quarter.

Moving to cash and debt. We ended the first half of the year with total liquidity of GBP 145 million. As announced last week, the group has significantly enhanced its liquidity position through a new debt financing of GBP 550 million. This moves the company's pro forma liquidity as at the 30th of June 2026 to around GBP 340 million, and we have revised our full year 2026 net cash interest guidance to around GBP 160 million from around GBP 150 million to reflect the impact of the new financing. Net debt increased to GBP 1.5 billion. Combined with the increase in EBITDA year-on-year, this resulted in adjusted net leverage ratio of 8.9x.

Finally, looking ahead to the remainder of 2026, our full year 2026 operational guidance and short to mid-term outlook remains unchanged, and we expect a material improvement in financial performance compared to the prior year. This will be driven by an enhanced product mix and benefits from the ongoing transformation program and a disciplined approach to operations. With that in mind, we will continue to monitor global macroeconomic and geopolitical events closely, in particular, relating to any impact they may have on consumer confidence, demand and supply chains.

Thank you all, and I'll now hand over to the operator to open the line for Q&A on the half year results.

[Operator Instructions] And our first question today comes from Henning Cosman from Barclays.

Firstly, perhaps on the free cash flow, right? It's really good to see underlying free cash flow, excluding the interest payment narrow towards breakeven. Doug, I wonder if there's anything at all you can help us sort of quantify a little bit for the second half, what you're expecting there.

Second question, also good to see guidance unchanged, especially on gross margin, EBIT margin, I suppose, now implies low 40% of gross margin in the second half. Can you just discuss there a little bit the sequential change, where the improvement comes from across volume, core ASPs and dealer support, more Specials transformation benefits, if you can help us quantify that a little bit, but perhaps specifically the core ASP, right? I think we had previously talked about plus 5% for the full year stood at minus 5% in the first half. So obviously implies quite a big swing if the plus 5% for the full year is sustained. If you could confirm if that's still valid.

And if I can squeeze a third one. Obviously, very pertinent refinancing last week, greater liquidity buffer, always welcome. But perhaps you could discuss in your words again, the rationale and the structure of the financing and perhaps what the significance is for your large majority shareholders, equity shareholders as well also the minority equity shareholders?

Yes. Thanks for those questions. So I think it's probably mostly for me. On the first one with regards to free cash flow, yes, look, it's good to deliver the free cash flow improvement that we expected in Q2. And I think that is in line with our expectations and pretty much in line with the expectations from our market. And obviously, we've guided to material cumulative year-on-year improvement from Q2 onwards, so off to a good start in that regard.

With regards to the remainder of the year, obviously, that guidance remains in place. I would expect the full year cash -- free cash flow position to not be a million miles away from the position that we've seen where we've landed at the half year would be a little bit of added color, I suppose.

On the second question, yes, we still expect an overall core ASP growth towards that level of 5%. I'll give you my view, and then I think Adrian can add a little bit more to it. But the drivers that will kind of facilitate that improvement from my perspective in H2 are we've got the product mix strengthening through the derivatives. There will be a normalizing in the level of dealer support that we've seen and that we guided would be heavier in the first half of the year versus the second half of the year.

I think similarly, in terms of cost of quality and warranty, that should normalize as we go through the second half of the year and some of the efforts that we've got underway focused on those 2 things. You can see the evidence of that as we've spoken about today in terms of the retail versus wholesales, obviously, that's getting stock in alignment. And once we've got that fully aligned, which we're very, very close to doing, I think you'll see -- we'll see a change in the level of dealer support.

And then, of course, we've got the remaining delivery of the Valhallas taking us to that sort of 500 level that we've talked about. So those are the things that are going to support the improvement across the second half.

But Adrian, do you want to add any color to the transformation parts?

Yes, absolutely. Thanks. I think there's 3 major influences that will start to really flourish in the second half of the year. The first is the reduction in variable marketing spend. You know that we had significant stocks ahead of retails in the past. We've made a significant step change this year already. We've sold 1/3 more cars to customers than we've sold to dealers, and you can see how that's flowed through the P&L. And the sell-down of some of those cars, especially in the States, has been slower than we'd hoped. Not dramatic. It's probably 70 to 80 cars less than we anticipated. But certainly, by the end of quarter 3, that will wash through. And beyond that then, most other models and most other countries are down to nominal levels of VM. So that will definitely help the margins and the bottom line as we move forward.

Quality, we've made huge strides in quality over the past 12 months. When we started the journey to bring down the cost of quality from those highs by investing in the campaigns and the improvement activities, we thought we'd already seen the peak of the issues that we were facing. We hadn't. We now have. And the work that's being done to transform the quality in the hands of the customer is quite breathtaking. And we're already seeing that in the 3 months indicators, 3 months in service with new cars. And that, of course, will wash through and reduce the actual cost and the future provisions during the second half of this year and certainly into next. So both the VM and the quality costs that we've incurred in the first half are on a significant downward trend because of the underlying performance of the business.

The other one thing I would add, we are seeing good option uptake, for example, on Valhalla and the retail orders that we're generating through the system. Because we still have some sell-down to do and because the dealers have been ordering some stock cars of the new models for prelaunches, we've not yet seen the full benefit of all of that new portfolio offering being applied to the majority of cars going through production. If you see in the case on Valhalla, it is the case on the 4 or 5 months' worth of orders that we've got on the core S models. But as we move through the back end of this year, that mix will richen, and you'll see that come through in the margin. So I would say those are the 3 key factors: quality, VM, and options uptake.

And then on your final question, Henning, yes, look, we're happy that we got the financing secured, the GBP 550 million financing that we announced last week. As a reminder, that transaction comprised the GBP 450 million senior secured term loan and GBP 100 million delayed draw term loan. As we also stated last week, we used the proceeds of the financing to repay the outstanding facility, so the RCF and the sort of Yew Tree Consortium facility that we spoke about earlier this year with pro forma liquidity, therefore, at the end of June standing at GBP 340 million.

So as you referenced, we've got more headroom, more liquidity. And as we said, it provides us with flexibility and resilience as we go ahead and execute the plan from here. Just to reiterate, the delayed draw term loan element of that is not included in that liquidity number.

Look, the Board sees the financing is important for the company as a whole, and I don't think there's any differentiation between major stakeholders or minor shareholders. So it's an important deal for the company. I would just add that all the information about the deal as we set out in our announcements that we made last week. So there's not really much more to add today.

The next question comes from Christian Frenes from Goldman Sachs.

I -- one of my questions was asked already, but [Audio Gap] in terms of digging into the components of that a little bit more, let's look at net working capital and CapEx. On net working capital, there was an inflow in the Q. Could you comment a little bit on your H2 outlook as it pertains to the cash flow statement?

And then on CapEx, I noticed that it seems to be more H2 weighted this year versus at least 2024 and 2025 when it was more balanced. And I'm wondering why is that?

And then I've got 2 more or 3 more questions, but should I ask them one at a time?

No, why don't you ask the other...

And then the other one was just on the aged stock realignment and dealer support. It seems it was supposed to be completed in Q2, but now it seems to continue into H2. Can you clarify, please, how much remains to be done? And once it's complete, let's think in 2027, where should the average selling prices for core settle, do you believe? That's the second question.

And then the third one would be just on the new financing facility. So that's great news. And you mentioned the GBP 100 million drawdown term loan, and I think there's an additional GBP 100 million on top of that. I just wanted to make sure that they are currently available? And if not, what's required to unlock them?

Thanks, Christian. If I can start, I'll do the easier one first, if I may, the aged stock question. You're absolutely right that the rundown of that stock was slower than we thought. And as I mentioned, I think globally, it's probably at the half year, 70 to 80 cars, worse than we had anticipated, but it's hundreds of cars better than it was at the beginning of the year. And you can do the calculation with 30% more retail than wholesales, that is a huge shift in the total number. So we missed by, let's say, 10% of what we plan to achieve.

As we move forward, as we get the stock in balance and as the retails and the wholesales come into balance in the second half of the year and through 2027, I can't give you an absolute prediction on what that will do to the ASP. But you can see what the VM is. You can see what normal VM or variable marketing looks like, and that peak will come down, and that will all go straight onto the gross margin of the future vehicles.

So from that point of view, we are a bit behind pace. Of course, we have been dynamic with this as well. The Middle East situation, not using that as an excuse for the 70, 80 cars, but that gave us, obviously, another challenge throughout the year as did the price increase effect from U.S. tariffs, but we've managed to balance stocks around the world so that we're pretty much even across models and across the world. It's just a quantum of DBX in the U.S. that is the residual issue that we're working with dealers to get through.

I'll let Doug talk in more detail about CapEx, but I will just make one comment. As we look at the year 2026, we are now accelerating our plans for the regeneration of our core product lines that starts in the next 3, 4 years. New technologies, revised body platform, new powertrains, electronic architectures, modules, systems, et cetera. We are now contracting for those major systems, and that really ramps up in the second half of this year and into '27. So we still anticipate to be in line with our previous forecast for CapEx. That's all included in the midterm plan that we've given that we've shown before, but it's a natural effect of contracting in order to be able to deliver cars in 3, 4 years' time.

Yes. And the only thing I'd add to that on CapEx was in the second half of the year, we'll make some one-off technology access fee payments that weren't in the first half. So that coupled with Adrian's comments is the reason why the CapEx is heavier in the second half of the year this year.

I think I'll just go back to the working capital point. So there was about GBP 20 million reversal of the Q1 outflow in the second quarter. So overall, the first half was around GBP 45 million outflow. I think the remainder of the year, we'll expect to be broadly flat, maybe a small outflow in Q3 as inventory builds ahead of Q4, but broadly in line with, I think, where we are at the half year.

And then on the final question, as I said, there's not much -- really much more to say on the financing. But the delayed draw term loan, the GBP 100 million is committed, subject to certain conditions, but we won't disclose what those conditions are. And then the junior GBP 100 million facility is effectively an available basket to us should we wish to utilize it in the future.

The next question comes from Harry Martin of Bernstein.

The first one I have is on the underlying core demand. You've given the numbers that allow us to see that retail sales in Q1 and Q2 were around 1,200 units. Is that a run rate you're happy with for Aston Martin in the midterm? Or maybe you could reflect on if this is a floor which with more variants, China coming back, a better luxury consumer Aston Martin in the midterm can grow from? And then I guess, in the second half of the year, if the retail sales grow year-over-year? Or are they fairly flat?

The second question on the Valhalla. It looks like Specials ASP stepped back in Q2 versus Q1. Is that just FX or lower option spec or something else? You mentioned good option uptake on the recent orders. So could you reflect on if there's anything in the mix of the order book from H2 that is different to the vehicles delivered so far?

And then a final question, just a follow-up on core ASP. Maybe I might turn out to be the bad cop among the analyst group and ask the question a bit more directly. What was core ASP in the second quarter, excluding dealer support?

Well, I'll answer that one first, Harry. So I'd say ASP in Q2 or H1 was broadly in line with last year if you exclude the variable marketing and maybe a little bit of impact from FX, but otherwise, broadly in line.

First of all, on core demand, just checking the figures on the wholesale, it was around 1,400 in total in quarter 2, less Valhalla. Clearly, quarter 2 is not the biggest quarter in the year. So if you look at the normal calendarization from a retail point of view, that means that we're still in line for our full year forecast, bearing in mind that Q4 will always be the biggest quarter.

[Technical Difficulty]

Sorry about that.

Alarm, hopefully. So quarter 4 will naturally be the biggest quarter, driven largely by the U.S., which is the big quarter of the year. So we're still on track for the total year number. And as we've mentioned, the balance between wholesale and retail should occur in quarter 3 and quarter 4, and we intend to maintain that going forward. Core demand is still as we expect.

The average selling price of Valhalla in quarter 2, I'm not exactly sure because we've not seen overall a drop in the average selling price. It's more likely to be regional mix than anything else. I can absolutely confirm that the average selling price of Valhalla is over GBP 1.1 million, about GBP 1.15 million. That's consistent all the way through the system. There could be some exchange rate or mix effects. There were a lot of cars went to the states in quarter 1 last year. But we see no downward trend. In fact, if I look at the cars that are going through the system now, we have some of the longest lead and highest priced cars that we've seen since the beginning. It's actually enriching as we get through the period. So nothing of concern to us there from our point of view.

Okay. Great. So we can maybe expect that Specials ASP to trend up over the next few quarters as well?

Absolutely.

The next question comes from Horst Schneider from Bank of America.

I have got 2 questions left. The first one relates again to this new financing structure and to the new term loan. You have established these 2 subsidiaries now, the asset holding subsidiary and the unrestricted subsidiary. I think the key question is what assets have been transferred to each of the subsidiary. So what is now the collateral also for the new loan? That's question number one.

Question number two, more a forecasting question. Could you provide any indication on split when I look at this GT and sports cars, what is Vantage, DB12 and Vanquish? And how is this split developing basically in terms of demand?

So I'll start with the sales split.

Sure.

So I think, first of all, on the sales split of the GTs and sports cars. Again, it's pretty much as per our expectation. DB12 is the highest volume car by a small margin, Vantage second, and Vanquish being the highest priced derivative that we have is clearly the lower volume of the 3 cars. It's about -- I haven't actually done the percentage calculation in my head. But the mix is as we expect. DB12 is particularly strong. And Vantage in the U.S. has really picked up traction too. And it's thanks to a lot of work that's been done on residual values around the S derivatives that's bringing the affordability and lease payments of those cars absolutely in line with competition and very competitive without the need for excessive VM. So I mean, all the figures are in the pack, but there's no big swing in the mix on the sports cars and GTs.

And Horst, on your first question, I don't think the answer is going to surprise you. But what I'll say is, as I said earlier, all the information relating to the transaction we've set out in our prior announcement, so nothing further to disclose today.

Can you maybe talk about the fees associated to the transaction? I'm not sure if you showed that in your reports.

No. And as I said, the pro forma liquidity takes into account the repayment of facilities and transaction costs, and the rest is for the company corporate purposes.

This concludes today's Q&A session. So I'll hand the call back to the management team for any closing comments.

So first of all, thanks, everybody, for joining. It's been an important quarter for us, and there's some definite progress that's being made. We're looking forward to the second half of the year and continuing to deliver on those systematic improvements that we're building into the business model.

Thanks for your time again. Thanks, Doug and the team for all the preparation. Looking forward to catching you in quarter 3.

Thanks, everyone.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Good morning or good afternoon all, and welcome to the Aston Martin Lagonda Q1 2026 Results Call. My name is Adam, and I'll be your operator today. [Operator Instructions] And I will now hand the floor to Doug Lafferty to begin. So Doug, please go ahead when you're ready.

Thanks, Adam. Good morning, everyone. Thanks for joining the call, as always, this morning for our Q1 2026 results. As ever, there'll be time for a few questions after I've provided a short summary of our performance for the first 3 months of this year. Overall, our Q1 2026 performance was in line with our guidance, and we maintain our full year outlook.

As you are all aware, we expected Q1 to be the smallest quarter of the year as we continue to focus on realigning stock levels through a disciplined approach to managing production and delivery. This was achieved with total wholesale volumes similar to the prior year period, whilst core retail volumes were significantly ahead of wholesales by over 50%.

As a result of the around 100 -- well, sorry, as a result of 102 Valhalla deliveries, total ASP increased 17% to GBP 252,000, driving total revenue growth of 16%. As many of you would have seen at the start of the month, the overwhelmingly positive Valhalla driving reviews were published with many giving it 5 stars and some labeling it the Best Aston Martin ever.

We're now building on this positive coverage with an extensive program of global customer driving events for this groundbreaking supercar through until the end of July. We expect the benefits of these to prove further boost to the order book in the coming months. Valhalla deliveries, in addition to the benefits from the ongoing transformation program drove an increase in gross margin to 35% from 28% in the prior year period.

This demonstrates positive progress towards our full year guidance of gross margin improving into the high 30%. Adjusted EBITDA increased year-on-year by GBP 28 million to GBP 23 million, reflecting the improvement in gross profit. Adjusted EBIT increased by 12% to minus GBP 57 million, with D&A increasing by 33% to GBP 80 million, reflecting the delivery of the Valhalla's.

Free cash outflow in Q1 2026 marginally improved compared to the prior year with the benefits from EBITDA and reduced capital expenditure largely being offset by the working capital outflow, which we expect to ebb and flow through the year. As guided at the full year results, we expect free cash outflow in 2026 to materially improve compared to the prior year.

This will be supported by an enhanced product mix and more balanced production cadence from Q2 '26 onwards as we benefit from our expanded range of core models and the reduction in aged stock, which was predominantly executed in the first quarter. Total cash and available facilities were GBP 178 million at the end of the first quarter, benefiting from the gross proceeds of GBP 50 million associated with the completed sale of the Aston Martin Formula 1 naming rights.

We've also proactively sought to enhance our liquidity position. And today, we're pleased to announce that we've agreed a new GBP 50 million committed facility with Lawrence and other members of the Yew Tree Consortium. This improves our pro forma Q1 2026 total liquidity to around GBP 230 million and provides us with additional headroom and flexibility should any unexpected headwinds materialize in the coming period.

With that in mind, we will continue to monitor global macroeconomic and geopolitical events very closely, in particular, relating to any impact they may have on consumer confidence, demand and, of course, supply chains. It's also worth quickly noting that Q1 was the first period in which the quarterly tariff quota mechanism was in operation in the U.S.A.

Our preparedness in terms of managing imports into the market was tested, and we had to carefully navigate the quota volumes based on limited data due to the ongoing impact from the Federal shutdowns that commenced in mid-February. I'm pleased to report, however, that all Q1 shipments to the U.S. were secured at the 10% tariff rate. We will continue to plan and monitor this closely as the remainder of the year plays out.

Finally, despite the heightened levels of macroeconomic uncertainty and with the Group currently experiencing no substantial direct impact from the Middle East conflict, we still expect to deliver materially improved financial performance in 2026 compared with 2025. And as such, our full year guidance and the short to mid-term outlook remain unchanged.

I'll hand back to Adam now so we can start the Q&A. Thank you.

[Operator Instructions] And our first question comes from Henning Cosman from Barclays.

Congratulations on what I think very solid first quarter, especially gross margin, really good and reassuring to see and also on the inventory reduction. So first question goes a bit in that direction. I suppose the retail run rate, especially you said 50% above wholesale. So retail run rate really bodes quite well for your full year guidance. Can you talk a bit to the convergence now of wholesale to retail that you're expecting in the further course of the year starting in Q2 and perhaps if you could a bit model-by-model dynamics as to what's driving the convergence.

The second point is on the [ RPU of ] ASP, as you call it. It was obviously still down in the first quarter because you have the dealer support payments in there. If I recall correctly, you're guiding for plus 5% ASP increase on a full year basis. So obviously, it implies a bit of a swing. I was keen to understand a bit more is that mainly just driven by the significant reduction or absence even of the support payments in the quarters as we go on or maybe you could talk to the new variants also contributing to the ASP increase as we go.

And perhaps a bit of a statement on the dealer support payments. Are they quite concentrated on the -- just on that aging stock that you pointed out, the roughly 400 units, I suppose, is what's implied? Because then I would think that they must be materially higher on those and just really quite marginal on the regular or the new deliveries. And finally, I have to ask on the cash burn, right? You said working capital would ebb and flow.

No particular commitment, I suppose, from your statement that some of that working capital outflow could reverse and support you in a positive manner. I guess you stuck with the statement that the majority of the outflow was still in Q1, right, which I guess means it's going to be significantly less in the 3 other quarters combined than the Q1.

But can you maybe, at this point, give us a bit more color as to the quantification of that outflow that we should still expect or if you're more comfortable to say maybe what kind of liquidity range by year-end we could be getting towards. That would be great. Sorry, it's quite long, but thank you.

Okay Henning, thanks. I'll try and unpick those. So we'll take them in order then, starting with the convergence, as you call it, on the wholesale and retail. So yes, look, I think we'll start to see those converge in Q2 during Q2, and we expect that by the time we get to the end of Q2, that sort of stock realignment will be largely complete. So there'll be a little bit of continuing retails running ahead of wholesales in Q2.

But then after that, it should become much smoother. So it's been quite a long time, certainly a good effort over the last 2 quarters on the aged stock and to improve the stock alignment with the dealers and get the pipeline in better shape, and we expect that to complete through Q2 so that as we enter the second half of the year, we're in a much more aligned position.

And then in terms of the mix, what I would say is that I think when you look at the mix in the first quarter, I would expect the SUV mix to get a little bit better as we move through the second half of the year. You'll probably start to see that reflected in Q2. And then I would expect that to stabilize in the second half of the year.

And then obviously, with the Valhalla, we continue to guide to delivering 500 Valhalla's for the full year with just over 100 of those being delivered in the first quarter means the Valhalla contribution, let's say, to the volume will continue to improve as we go through the quarters as well. So yes, look, I think we're pleased with where we've got to in Q1 with the stock realignment, a little bit more to do in Q2 and then H2 should be smoother.

Second question on ASP. So I think the first statement is, yes, we still expect around 5% core ASP growth for the full year. And then there was quite a lot to unpick in your question, but let me just try and sort of give you my steer on it, my view on it. Obviously, there's been some additional dealer support, incremental dealer support over and above what we would -- the levels that we would normally see. And you've seen that in Q4, and you've seen it again in Q1.

That has largely been focused on the aged stock and the outgoing or the sort of older models, if you like. So the new derivatives that are being launched and have been launched over the last few months don't attract any incremental support. So the support is focused on the cars that we're trying to tidy up from a stock point of view. So as we go through the year, the pricing improvement to get to that level of a 5% increase will be largely supported by coming out of that period of dealer support.

But equally, yes, the derivatives and yes, a continued sort of target to improve the options take across the core portfolio and the contribution from options should all contribute towards the improved ASP. And then finally, on cash flow, I guess you probably won't be surprised that I'm not going to get too much into the detail on it. But what I would say is that from a free cash flow point of view, we still expect the material improvement as we move through the year.

As we get to the end of the year and look at what the free cash flow position is, I still expect but Q1 will represent the vast majority of the free cash position at the end of the year. And I think you alluded to the interest. And yes, that includes obviously the interest payments as we go through. So we still expect to see a material improvement between Q2 and Q4 with the majority of the cash outflow by the time we get to the end of the year having been sort of seen in Q1.

The next question comes from Christian Frenes from Goldman Sachs.

I'll just ask 2. So I think the destock you mentioned already, it sounds like it's largely in line with prior commentary. So just to understand, the second half should then see higher ASPs, higher margins, improved free cash flow versus the first half, at least that's my understanding. Maybe you could confirm. And then also additional color maybe on this net working capital in H2, what to expect versus H1?

And then on a separate question, just the U.S.-U.K. quota mechanism. So it seemed to work out fairly well in Q1. As you look through to Q2, anything to call out? Any risks at this stage that are worth noting? And then my last question, just the financial facility. I think it makes sense to raise financial flexibility, so I understand. But any additional details you can give us at this stage regarding that facility?

Christian, thanks for the question. So I think the first one is probably a little bit of a repeat of one of Henning's questions. But again, yes, just to clarify specifically on your questions with regards to H2 on ASP. Yes, we expect it to be stronger in the second half for the reasons I've outlined. And obviously, that will lead to improved gross margins in the second half versus the first half.

So as we've guided to the high 30s, we're in the mid-30s in Q1. We expect to see that continue to improve towards the margin that we've guided to. And then obviously, all of that supports the sort of profitability and free cash flow position improvement that we've guided to for 2026. So all of that remains intact and yes, driven by a healthy sort of core ASP growth, but of course, also with the added contribution of the Valhalla, which will be there for the entire year.

And as I said, with volumes sort of growing into the full year guidance of GBP 500 million as we move through the quarters. I think you talked about CapEx and net working capital. So CapEx, we're still guiding to GBP 300 million for the year. Obviously, the run rate was a little bit below that for the first quarter, but we expect that to catch up.

And then with regards to net working capital, look, I think the -- if there's going to be an outflow for the full year, the majority of it is done in Q1 and ebb and flow, take what you think from that sort of statement. But I think we'll see small variances around where we are. Obviously, we'll be focused on trying to make sure that net working capital is as tight as possible.

And if we can get some of the outflow back during the year, then all efforts on that. But I think the position for net working capital will be broadly in line with where we see for Q1. So not too material movements as we go through the rest of the year. On the quota mechanism, it was an interesting kind of experience at the end of Q1. Obviously, we had cars on their way in the U.S. and obviously, some high-value cars.

A lot of the Valhalla's that were shipped in Q1 actually went to the U.S. So we have to keep a close eye on where we thought the quota was tracking for the quarter. And as you know, this year, the 100,000 cars that can be exported from the U.K. into the U.S. is split by quarter. So you've got 25,000 a quarter. And we were a little bit short of data because of the government shutdown.

But we managed to get some information towards the end of the quarter, which meant that we [ trot ] carefully over the last few days. But at the end of the quarter, we've managed to get everything that we wanted to get into the U.S. So it was interesting in terms of the way that the whole thing worked. I think the risks are the same as we move into Q2. For us, Q1 was a small quarter.

I can't speak for other companies, other manufacturers and OEMs who are shipping cars from the U.K. to the U.S. as to how their quarters are split. So we'll need to keep an eye on Q2. And the risks are the same. The risks are that the quota gets filled earlier than we've got our final shipments going into the U.S., and then we'd need to hold shipments. And to be clear, that is what we would intend to do because we don't want to ship any cars into the U.S. at a higher tariff rate and swallow the margin impact.

So it's the same risk that we'll manage over Q2, but hopefully, with access to more information should the federal shutdowns allow. And then the third question on the facility. Yes, so look, I completely agree with you, obviously, that it's helpful to have additional flexibility and headroom. More details on the facility, I guess, it is interest-bearing, but only if drawn, there's a small commitment fee, but it's a fairly simple structure.

And as you say, helpful to get us a little bit more headroom as we move into the remainder of the year. And look, I alluded to it in my little opening, we're not -- it's really to protect us against things that we're not expecting. And with the situation in the Middle East, we're not seeing any direct impact from that today. But the longer that goes on, the longer the risk is. So I think it's a prudent move to make sure that we've got appropriate liquidity to make sure that we can execute our plan.

The next question comes from Harry Martin at Bernstein.

So I wanted to ask first about the U.K. We talked a lot about China and the U.S. in the last 12 or 18 months. But can you touch on what's happening in the U.K.? Wholesale is down 25%. I think it's the lowest wholesale quarter for a long time as I look back. So is that just market weakness? Is that where a lot of this aged stock still needs to be cleared?

Any thoughts that you have there would be useful. And then the second question, just a couple on the Valhalla. What's the latest expectation you have around order book extension with some of the driver activation events that are ongoing?

And do we move back to net inflows rather than a net outflow on the deposits that we saw in Q1? And then if you can remind us of the broader strategy around Specials and what we can expect into the medium term, both from the Valhalla platform and from the core platform as well.

Thanks, Harry. Look, I wouldn't read too much into the U.K. on a small quarter. So there's nothing material happening in the U.K. There's no particular market weakness given the size of the volumes that have been sort of going in the U.K. in this Q1 and last Q1, I think it's a big percentage on a small number. So I wouldn't read too much into it. The U.K. is still pretty strong for us.

The stock is now in a very healthy position in the U.K. So we're confident that the U.K. will continue to support the overall volume for the year. So there's nothing really to talk about from a U.K. perspective. On the Valhalla, yes, look, I think we're really pleased with what's happened this year. So we've got -- obviously, we're into production. We've been delivering cars for 5 or 6 months.

They've been received very, very well by customers. The media drive event that we ran during March went incredibly well. And I think -- and I hope that all of you have seen the reviews that have come out since that. And we're very, very pleased, unsurprised, but very, very pleased with the positive reviews. And then we very, very recently, I think a couple of weeks ago, just started the activation on events where we now have Valhalla's in every region.

So customers can access the cars. Many of them will get to drive them, but certainly, an awful lot of people will get to see it in the flesh, which, of course, we built the initial order bank for the Valhalla without any of those tools. So we do expect these activities to act as a catalyst and boost the order book as we go through the next couple of months. It takes a little bit of time to get people through the process, but we will start to see an improvement.

And just from a sort of net inflow/outflow point of view, I think it's important to note but obviously, whilst there might be a net outflow from a deposit flow point of view in the balance sheet, we actually have taken more deposits than we've taken net new deposits by a fairly material number during the course of particularly March and into April. So we're pleased with the way it's tracking and very confident in the car.

And then obviously, with special strategy, you won't be surprised to hear me say that core Specials continues to be a big part of the cycle plan strategy going forward. They will offer accretive margin and fabulous customer experience and amazing cars that we can deliver like we did with the Valiant and the Valour and the DBR22's. So it's a kind of dual track on the Specials.

We'll continue to deliver special cars off core platforms, and we'll continue to deliver initially the first run of the Valhalla's and then I suspect that we'll maybe use that platform onwards as well like we did with Valkyrie. So I think it's a watch this space, Harry, but there's exciting things to come definitely from the Specials program.

Our final question today comes from Horst Schneider from Bank of America.

I've got a few questions left. The first one is on this GBP 50 million facility. So maybe you can provide some more details, especially if this loan is pari passu or if it's maybe subordinated or has got any other securitization. Then the second question is, from here, what is your additional debt capacity as of today pro forma for this loan?

So what could you raise on top of that maybe? And the last question is more industrially related. Given that the oil price increase, do you feel at the moment in discussions with customers that it's a disadvantage not to have yet a PHEV, take Valhalla aside, but that you have not yet hybrids on board. Also given that your peers are electrifying more, especially on the SUV side?

Thanks, Horst. Yes, I think I gave a little bit more color on the GBP 50 million facility. It is secured and secured against specific assets in the company. So I don't think there's much further to say on that one. And then with regards to further debt capacity, what you would expect me to say is that the company continues to keep under review its options.

But obviously, you've seen how additional liquidity is coming into the company over the last 12 to 18 months. So we always explore various different options, what's available to us. So we're not purely focused on what debt capacity there is. There is a little bit of remaining debt capacity, but -- we're not going to get into the details. And then on the final question was, I think it's an interesting question.

And obviously, we're going to need to monitor how things evolve from here on in with oil price and the impact it could have on inflation, the impact it could have on consumers. But I don't feel like we feel as though we've got a gap in our portfolio that might suffer as a consequence of not having a PHEV in the core portfolio.

So we're very comfortable with the cars that we've got in the market. We're very happy with the new derivatives that we're bringing to the market, and we think that provides differentiation for our customers and for customers who the brand and the cars might appeal to from other marks.

So we're confident in the portfolio, and we think it's the right portfolio for now. Obviously, we're focused on evolving it in the future. But today, we've got to back ourselves with the cars we have, the [ yes ] derivatives and derivatives to come.

For the time being, it's not -- there's no intention to electrify the DBX, right? So that's a little bit down the road.

Yes. It's down the road and those things take time. They certainly can't be done, as you know. It's not the work at the moment. So they need to be appropriate planned into the cycle plan, which obviously is a event.

So there were no changes to our cycle plan, I would say, over the last few months. Thanks everybody. Sorry, Adam, I'm just going to say a quick thank you for everybody for listening. Any further questions, you know where to find us. So thanks very much, and speak to you again soon.

That concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Good morning or good afternoon, and welcome to the Aston Martin Lagonda 2025 Full Year Results Call. My name is Adam, and I'll be your operator today. [Operator Instructions]. I will now hand over to Adrian Hallmark to begin. So please go ahead when you're ready.

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 U.S. 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 quarter 4 last year, our first mid-engine plug-in hybrid vehicle supercar.

Alongside this, we've expanded our thrilling core lineup 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 Robb 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 Yew Tree Consortium, and improved cash collections in quarter four 2025, resulted in a year-end total liquidity of GBP 250 million. Further enhanced by the proposed sale of Aston Martin naming rights to AMR GP for a consideration of GBP 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 midterm, 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 2025, 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. We celebrated the 60th anniversary of the iconic Volante 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 5 months for the core, and the average selling price has increased by more than 5% to GBP 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 Q4 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. 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 U.K., this supercar with hypercar performance is our first mid-engine plug-in hybrid. 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. 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 program, 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 U.S. 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. 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, while building on the success of our initial Valhalla deliveries. We passed through a second 3% price increase in the U.S. 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 the U.K. government regarding the first-come, first-served U.S. quota mechanism, with volumes allocated on a quarterly basis. This system creates uncertainty for our planning and forecasting. 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 GBP 300 million 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 Lawrence 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. 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 program 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 are 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, 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-luxury 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 personalization, options, and bespoke Q 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 organization, 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 optimization.

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 optimizing 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 utilization 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 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. 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 program, 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 color on our thrilling and innovative future product lineup, which puts customers' requirements at the heart of everything that we do. For now, thank you, and I would like to hand over to Doug, who will take you through the financial detail.

Thank you, Adrian. 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 U.S. 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 GBP 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 GBP 185,000, benefiting from our expanded range of derivatives, while total ASP was broadly flat due to the mix of specials. Demand for unique product personalization 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 GBP 189 million, with depreciation amortization decreasing by 16% to GBP 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 realize 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 Valhallas we expect to deliver, as well as the Valkyrie LM editions.

Overall, volumes remained similarly balanced across all regions in 2025, with the Americas and EMEA, excluding the U.K., collectively representing 63% of wholesales. This was despite the ongoing challenges related to the U.S. 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 U.S., volumes there and in the U.K. remained reasonably robust relative to overall group performance. 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 luxury car tariff effective from July 2025.

We continued 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 GBP 65 million. Additionally, gross margin was impacted by the U.S. 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. We expect a material improvement in financial performance in 2026, including gross margin, benefiting from our ongoing transformation program and continued disciplined approach to operations, new core derivatives, and the enhanced contribution from Valhalla. We remain steadfast in targeting a minimum 40% gross margin for all of our new vehicles. Adjusted EBIT decreased year-on-year to a negative GBP 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 D&A and adjusted D&A.

The decrease in adjusted operating expenses aligns with our focus on optimizing the cost base as part of our ongoing transformation program, and to drive operating leverage through disciplined cost management from 2026 onwards. It also includes the previously announced GBP 11 million benefit from the revaluation uplift of the secondary warrant options associated with the disposal of the group's AMR GP investment. As shown on the right-hand side of the slide, net adjusted financing costs decreased to GBP 109 million from GBP 173 million, primarily due to a GBP 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 GBP 18 million to GBP 410 million.

This reflects both the decrease in cash inflow from operating activities and increased net cash interest paid of GBP 143 million, partially offset by the GBP 60 million reduction in capital expenditure. As expected, working capital improved year-on-year to an inflow of GBP 6 million, compared to the GBP 118 million outflow seen in 2024. The key drivers here being the deposit inflow relating to Valhalla, with deposits held increasing by GBP 3 million, compared with GBP 187 million outflow in the prior year period, in addition to a GBP 2 million increase in receivables, compared to a GBP 107 million decrease in 2024, following improved cash collections at the year end.

Capital expenditure of GBP 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. 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 GBP 2 billion to around GBP 1.7 billion. This is through a continued focus on utilizing 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 GBP 250 million, flat on Q3, given the strong performance in Q4 2025, and improved cash collections at the year end.

Total liquidity reflects the GBP 410 million free cash outflow in the year, partially offset by the around GBP 106 million inflow of net proceeds following the completed sale of the AMR GP's shares, and the GBP 52.5 million investment from the Yew Tree Consortium. This has been further enhanced following our recent announcement of the proposed sale of the Aston Martin naming rights to AMR GP for a consideration of GBP 50 million. Net debt increased to GBP 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 U.S. tariff and quota mechanism uncertainty, which Adrian has already mentioned.

Taking this into consideration, we still expect to continue delivering year-on-year improved financial performance over the short to midterm, with a focus on margin expansion and cash flow generation, benefiting from the ongoing transformation program 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 program, 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 optimization and liquidity management. Thank you. I'll now hand back over to the operator to open for the Q&A.

Our first question comes from Henning Cosman of Barclays.

I have a few, but maybe start with three and get back in the queue afterwards. Maybe I can ask on inventory first. Perhaps for Adrian, if you could please comment on where the channel inventory stands now. I think you spoke to China and low stock at year-end in China specifically. If you could help us understand when you think wholesale and retail can start converging because you've reached a normalized stock level. In the context of that, the costs that you've had for support, mainly dealer support, in 2025, do you think they will be fully non-repeating in 2026? That is the first question.

Second question, perhaps on free cash flow and liquidity, maybe more for Doug. I don't know, Doug, if you're prepared to comment on a target liquidity level by year-end 2026, or alternatively, on a ballpark free cash flow corridor that you have in mind. Could you confirm perhaps whether GBP 50 million to GBP 100 million negative free cash flow corridor is that a realistic ballpark? And do I understand you correctly, therefore, a substantially neutral free cash flow development starting with the second quarter of 2026?

Finally, on free cash flow, would you entertain that you are targeting a positive free cash flow for 2027? Maybe just finally on volumes, back to maybe Adrian. Adrian, is there an updated volume target at all, perhaps for the core volume range? You re obviously guiding to sort of flattish volumes with higher specials, implying declining core volumes in 2026. Do you have an updated mid-term volume target in mind? What would be the key building blocks to get you there in terms of the things you can control outside of improvements in the macro?

Okay. Thanks, Henning. I'll do both the kind of demand questions first, then we'll finish with Doug on free cash flow. I think as far as inventory is concerned, we are -- we hoped to have got the inventory fully balanced by the end of last year, as you know, there were a few disruptions during the year that knocked us off track. I won't go through those. We ended up where we did. We've been, again, quite ruthless in the first quarter and in the first half of this year, replanning. We are destocking further in quarter one. Most of the destocking that we need to do for the year will be done in quarter one, it's already fully on track, both from the January performance and what we're seeing in February. What does that mean?

We've talked in the past about getting all models and all markets in balance. The aged stock profile is now radically improved compared with the beginning of 25 and even the end of 2025. By the end of Q1, we'll be into tens of units around the world, less than one per dealer, that is what we would define as aged, and that is more than six months since it was passed to sales. That includes shipping times as well, don't forget. It's not that they're really old, we just like to keep stock as fresh as possible. The aged stock profile is massively improved. The total stock by the end of March, in the major markets, will be balanced. From Q2, we should see retails matching wholesales. There's still a bit of overhang in China.

The aged stock is now -- is fully under control, the total stock, almost under control, and that will be end of April, approximately, by the time we get corrected in China, too. Overall, in the next one to two months, we'll be in a really good position. In terms of ongoing cost, it's -- there \'s no question that the quarter four last year, to accelerate the sale of those older cars in all markets, we did double down. That cost will not be recurring. We'll revert back to normal levels of support on lease programs, et cetera, after the first quarter of this year. We are in that cleansing phase of the stock, and as we get into the second quarter and the second half of the year, we'll start to see that normalize.

As far as volume is concerned, yeah, absolutely, as per the previous guidance, we don't see a path to 8,000 to 10,000 units a year. We -- sorry, in the near term. We've reset our expectations and then rightsized the business to meet that new business model structure. I won't give specific numbers, but the core models are selling 5,500, 6,000 a year, even in the current market conditions, with different levels of BM effort. We see that is a conservative and achievable level that we can continue with. The specials, depends on which year you look at, we should be in the 250 to 500 range with Valhalla, and then with other specials coming in over the next 3 years.

One thing I would say is that the derivative strategy, and there's other questions being raised about that, so I'll answer some of them preemptively. The derivative strategy is all about an opportunity to relaunch each nameplate every year, to improve the product offer and quality and optionality each year, and to destock the previous models and continually shift the mix of cars so that we support residual values. The good news is that the order cover for those S derivatives is much, much higher than the residual stock, which shows that it's worked, and the dealers are positive about them. That's part of the strategy for derivatives. 5,500, 6,000 is the core business that we expect in the midterm, and the specials on top, with a significantly improved revenue per car and margin.

With the cost structure measures that we've taken, the SG&A improvements that we've planned, we can see a way to that cash flow inflection and to profitable operations in the midterm.

Okay, nice segue. Morning, everyone. Morning, Henning, and thanks for sticking with us through the technical challenges this morning. Henning, I guess probably somewhat unsurprisingly, I'm not going to put a number on the free cash outflow that we expect in 2025, but obviously, we have stated that we expect -- sorry, 2026, we do expect a material improvement versus last year. I think linked very closely to what Adrian has just been describing in terms of the flow for the year, we've said that we're going to see the majority of the burn or the outflow in the first quarter of this year, and then a stabilizing through Q2 to the end of the year, in sync with that stabilization and transformation in the operation.

I fully expect us to have momentum as we exit 2026 into 2027. As we've also said today, from a short to midterm perspective, we do retain that focus on cash optimization, profitable growth, and the objective of getting the business into a form which generates its own cash as soon as possible. Sorry, I can't put any numbers on it or specific timing on it, but the sentiment and the message is still very much there, and the focus is on delivering exactly what I've just said.

Especially the granularity on the remaining stock is very helpful.

And the next question comes from Christian Frenes from Goldman Sachs.

Yes, I'll just kick off with deleveraging and free cash flow. You've talked about a material improvement in 2026 free cash flow. I think the CapEx is clear. You've also made comments on the top line. But in terms of the P&L improvement, can you comment a little bit on some of the key buckets that could drive the material free cash flow improvement? So for example, I think savings are talked about the nonrepeat of GBP 65 million is talked about. You alluded -- you commented just now on the dealer support. But if you could just walk us through some of those buckets and the cadence of that, including net working capital impact. And also if we should include any more assumptions on nonorganic deleveraging aside from the disposal of the Nemi rights? Maybe that's question number one. And then I'll ask question number two.

Okay. There's a lot of questions in question number 1, Christian, but, good morning. Let me have a crack at that. Yeah, look, I think the margin build, in 2026, we tried to illustrate, I think, in the final slide of the deck. Obviously, that is going to be largely underpinned by the fact that we have, you know, a strong sort of specials volume returning back to the mix in 2026. With the 500 Valhallas versus the number of specials that we delivered last year, and obviously that comes with accretive margin, and that will flow through. Specials is a big chunk of that.

Within core, you're right, we expect a stronger performance from the core perspective as well, because we don't expect to see a repeat of the full GBP 65 million of headwind that we suffered in 2025 on the things that we've already talked about, being the dealer support, obviously the investment that we've made in quality and the warranty costs. We'd expect, you know, to continue to invest in the quality of the products, of course, but not to the extent that we did it to last year, with things such as, you know, the big upgrade on thousands of cars on the software earlier in the year. Indeed, we'd expect some of those quality improvements to mean that the warranty costs start to come back down and normalize.

We will be sort of lapping, those as we go through the year. With regards to working capital, I think, relatively stable throughout the course of the year. We're definitely not going to see some of those big swings that we've seen in the last couple of years when it comes to deposit, outflow. We think that'll be much more, sort of normalized and neutral during the course of this year. Then look, as regards to, the F1 IP deal, we're delighted to get that done. I think, you know, it's a good deal for us and a good deal for them.

So GBP 50 million to sort of bolster liquidity to a certain extent as we go through the course of this year, but no further plans to announce at this point.

And just to clarify on your response there. So we should expect the full GBP 65 million incremental savings next year. And should we add savings of GBP 40 million, I think, there on top of that?

Well, we've guided to SG&A will be below GBP 300 million. That's how we guided SG&A this year. Don't forget that last year's SG&A benefited from an GBP 11 million uplift in the revaluation of the AMR warrants, which obviously won't repeat this year. So there's a couple of headwinds in SG&A, but we expect to remain below GBP 300 million. And on the GBP 65 million, as I said, we don't expect all of that to recur. In fact, I would expect the majority of it not to. But as Adrian said, we will still have a little bit of additional dealer support in Q1 before that sort of normalizes and there'll be ongoing incremental improvements in quality, but nothing like the extent to which we saw in 2025.

Okay, that is clear. Thank you. My second question is just on the Valhalla average selling price. If you could just comment on your expectations for that going forward. Should it be the same as we saw in Q4, or any change? Also specifically with respect to the U.S. market, where you talked about an October price increase. I'm just curious also how that applies to the Valhalla. Also, associated with this, the Valkyrie Le Mans edition in Q4, could you just comment on how many units you actually shipped in Q4 and what the implication for 2026 is?

First of all, on Valhalla pricing or Valhalla ASP, I think first of all, the retail base price of the car, we have listed from 1st of April in 2026. That will come into effect on the 1st of April '26 for orders thereafter. What we've seen on option uptake and specification of the first cars that have been delivered and are in the pipeline, is a significant uplift versus the base price. We expect the ASP to continue similar to quarter four as we get through this year. We've seen no fall off in the average value per car. That price increase should give us a little bit of a lift in the second half of the year or last quarter, because that is when it would be effective.

You can assume pretty much consistent with what you've seen on Q4, with a slight upside. In terms of overall pricing -- sorry, in terms of the Le Mans cars, we delivered two cars physically. The rest of those cars will be delivered this year.

The next question comes from Michael Tyndall from HSBC.

A couple of questions, if I may. One for Doug. Doug, Q1, you've been pretty clear about what's going to happen on cash flow. You've got the GBP 50 million in from the F1 naming rights. That puts you, I guess, at about GBP 300 million gross cash. Where are we -- I mean, without asking you for a number on Q1, but I mean, will you stay within that comfortable GBP 200 million to GBP 300 million range that you've spoken to before? I'll come back with the second one.

Okay. All right. Yes. Look, again, I'm not going to get into the specifics. I think we've been pretty clear on how we expect the shape of the year to be from a free cash flow perspective. For Q1, it's the majority of the burn. I'd like to think that we stay close to the range that we've talked about previously. So Q1 this year, we would expect to be an improvement on Q1 last year, but still the majority of the burn for this year.

Okay. And then the second question for Adrian. Just with regards to cyclicality, which I guess at least from where we sit, but I would imagine from where you sit, has been one of the burdens of the business, the cyclicality, which we are trying to kind of move out. I just -- I wonder a bit about why we've released all the specials broadly at the same time. Does that not exacerbate cyclicality? Is there a way that we can sort of start to space these things out? And is that in the plan?

Okay. Thank you, Michael. It's a dilemma, isn't it? Because we wanted to get the specials in because we want to support the life cycle volumes. And yes, there is always a trade-off to make. I don't think that the specials -- sorry, the derivatives, will increase the cyclicality. Why is that the case? They're designed to do the exact opposite. If you just think about DBX, I'll give you one simple example. What we've now done is evacuated the production pipeline of pretty much all non-S derivatives of DBX S, DBX. Which means if you want a non-S version, you buy a stock car. If you want an S version, you'll wait three to six to nine months before you get one, depends on which market you re in. What that does is pre-loads a pipeline with sold orders and encourages the sale of the cars that are in stock or a deposit for a future car.

Because we're doing them all at the same time, but they're all different, there's very few customers, I can't think of one that would come in and want a DBX, a DB12, and a Vantage all at the same time. They will be looking for one of those cars. They have the choice of a stock car, which is an older model, or a fresh car, which is a new model with a different price value proposition and a very different product proposition. We actually see it as a way of bolstering the future order cover and giving the customers a clear choice. When we get through the DBX S, for example, we'll be introducing another derivative for early next year.

Again, we'll back off the S production in the plan, ramp up that new derivative, and people can still order an S, but it will be to order. We get back to that order bank situation. The whole idea of this, again, is to smooth out the actual order profile and to give the customer a clear choice. We know it works from other brands; we just haven t done it before. We are now.

Got it. Got it. One last one, if I can, just for Doug. It's around the agreement with Lucid. You talk in this statement around a GBP 73 million cash liability, which is due in 2026 or later. I'm just curious to know what determines whether it happens in 2026 or later. The comments you made, Adrian, about the future for electric, you know, and this minimum spend of GBP 177 million, how does that work if electric is getting pushed to the right? Is that commitment still there, or is it negotiable?

Hi, Mike again. Yes, so let me take both of those in one sort of answer. You know, we made the initial payments to Lucid back in 2023 when we signed the agreement, I think obviously an awful lot has changed since 2023 with regards to, you know, the way the market sees the evolution to BEV and our transition. We've talked quite openly about the delays as we've gone through the last couple of years that we're expecting. We're in discussions with Lucid over, you know, the timing of those payments relative to when we now expect to start production. That is both with regards to the initial access fee payments and also the commitments on the volumes.

It's all a discussion to when are we actually going to start production on a BEV.

The next question comes from Horst Schneider from Bank of America.

Not many are left. The first one that I have is more on the details regarding the model mix in FY '25, but also in Q4 on the Range cars. Maybe you can provide more granularity on the split within sport cars, city cars. Here, the split between Vantage, DB12, and Vanquish. Regarding the outlook on model mix on the Range models in 2026, where do you expect overall, you expect these flat unit sales, flat wholesale, but within that and the Range models, where you expect the movements, what is going up, what is going down? In that context as well, you talked about this 5 months visibility order book.

What is the order intake by models that you are seeing? Is there any highlight you would point out? The last one is, if you could give any insight into your residual value development, because I think that is a key metric, and we hardly have good insight into that. Any insight into that would be appreciated.

Okay. Thanks, Horst. I'll start with -- going in reverse if I may, I'll start with residual values. I think the key message, as most of you will be aware, is that if we -- when we get supply and demand in balance, and when we get the derivatives launched and the pull from the market for those derivatives, our residuals will improve further. We've already done a lot of work in 2025 on residual values. I'll give you some examples. If you go back a year and a half, we were 5-10 points below the competition, as I say, a three-year period on leasing in the major markets on RVs. We're now much, much closer. I'll give you an example of Vantage without going through every single model in every market.

Specifically Vantage, Vanquish as well, are incredible in terms of the way that they've been set. We are absolutely on par with the strategic competition. The key to supporting residuals is making sure that we don't oversupply. Whilst we've had excess stocks, oversupply is inevitable. As we get through quarter 2 and quarter 3 this year, I already mentioned earlier, this will balance out. Together with those strong, third-party residuals offered on core models, we're heading in the right direction. I still think it's going to take another 3 to 9 months to properly stabilize all of the above, but we're good on track. Vanquish and Vantage are already strong. DBX -- sorry, DB12, just behind them. It's DBX where we need to do the work.

In the meantime, we subvent, marginally, those cars to make sure that they're competitive on the leasing rate. In terms of model-by-model description of order bank, we won't do that. To give you an indication, the S models are well over 50% order cover.

The rest of it, we've got about a five-month order bank on average, but the Ss are way stronger than the non-Ss. Valhalla, of course, is about nine months. If I look across the spectrum, it is improving. As we balance supply and demand, it will naturally improve even further. That s all the foundation for residual value improvements as we move forward.

Try and pick it up a little bit without going into, you know, vast details. Just try and give you a couple of soundbites. If I look at last year, you know, it was relatively stable from a mixed point of view through the year.

For that, Q4 was a little heavier on DBX, on the SUV, because of the launch of the S. Obviously Q4 benefited, obviously, from the strong mix of specials with 152 Valhalla deliveries. As we, as we go into this year, I mean, there's not really too much to highlight. It's relatively smooth, I would say. Q1, probably a little bit light on the SUV mix. We've said today that we expect up to 100 of the Valhallas to be delivered in Q1, so they'll be sort of reweighted Q2 to Q4, a little heavier. Other than that, it's just the ebbs and flows of when the derivative launches come, so nothing particularly special to remark on.

Okay. But in summary, I think the DBX is most critical model, right? So that's maybe where some weakness is. I think it's just the segment, the market, right? It's not the product.

Yes. I think -- well, if you look at the results of all the road tests that have been done on DBX S, it's incredible. I mean, a car that s been in the market a couple of years with some really solid technical improvements to create S, and some visual ones, has beaten Urus and Purosangue repeatedly now in different markets in road tests. The product substance and performance is tremendous. There is a sectoral issue. I mean, you'll probably know, most brands are seeing a shift in 2025 and 2026 compared with, say, '23 or early '24. The market has definitely changed. That said, if you look at the outlook, the macroeconomic rather than the geopolitical, the outlook going forward is, say, mildly positive. It depends which market you look at.

We don't expect a deterioration. We expect stability or slight improvements in conditions as we get through the year. We're well placed with those derivatives to take full advantage of any upside that occurs.

The next question comes from Philippe Houchois from Jefferies.

I've got 2 questions. The first one may be for Doug. is on the 40% gross margin. You reiterated it in your speech, that clears one hurdle. I'm trying to understand, with 29%, if I give you the benefit of the warranty span, we get to 35%, who is above 40%? It almost looks like from the outside that Valhalla could be diluted. Could you confirm that Valhalla gross margin is above group average, or is it below? If it is below, what gets it above? What are the hurdles to really get to 40%? The initial guidance was that it's going to be, you know, valid for all the vehicles range as well as specials.

If you can help me navigate that'll be very helpful.

Well, I can certainly confirm that Valhalla is accretive to the overall group margin, you know, significantly above the 40%. As I said earlier, the 40% remains the target on all new vehicles we're bringing to the market. I think, you know, we'll see an improvement in the margin for some of the reasons that we outlined earlier in terms of lapping some of the costs and investments that we made during the course of last year, and also as we continue to stabilize the operations. You know, we can see the path to the high thirties for this year, which is still the plan.

The target still remains to get every car at 40% or above as we move forward. Obviously, complemented by both the Valhalla being materially above that sort of margin level, but also, you know, a continuation, and I think this is an important point, a continuation of other special models that we will bring to the market that are out there today unannounced, that I think is important from a financial point of view, that you understand that program will continue. Cars like, you know, the Valour and the Valiant and the DBR22 that we've done in the past will continue as part of our cycle plan in the future. And obviously be accretive to margin on the go forward.

Yes. And we can assume those are effectively the most accretive because they leverage a Range car into a special. Is that a fair assumption?

I think we've talked about that in the past where we've looked at, yes, like the Valiant and the Valour, certainly in the era of the Valkyrie, those costs were materially more accretive to margin than the Valkyrie, yes.

Right. And can I get another question on -- I'm a bit confused right now between what we hear from you today. And by the way, a good presentation. I think you've reassured us in many ways. But then I guess stuff from the press, which is not part of your communication. We hear about 20% staff reduction, GBP 40 million savings. I don't see that in the release. Are you validating those numbers we get separately from you? Or what's going on? Where is the mismatch between what you're telling us and what the press is basically talking about right now?

Yes, I'll jump in. Adrian here. We have talked about that openly. That's not speculation. It's actually in the release. So the part of the SG&A push that we can't solve our right sizing or resolve our right-sizing needs purely through headcount, but it is an important part of the overall picture. We have said that we will -- there's already a process underway. We're in consultation. We will reduce the total people costs by circa 20%. It doesn't necessarily mean a direct 20% reduction in absolute headcount numbers, because of the mix of people, and we also account in that headcount cost for some contract and kind of contracted services resource. That is in the plan. It is part of that SG&A restructuring approach. It's not the biggest lever, but it's an important one in order to get us lean and effective for the future.

Let me just specifically pointing to where it is in the release on Page 4 paragraph. So it's all in there, and I guess just an indication of how other people pick up the news and what's important to them in terms of the story.

The next question comes from Nicolai Kempf from Deutsche Bank.

Well done on the 152 Valhallas delivered in Q4. And that's also my first question. The 500 you target this year, is that production driven? Or do you have clients backing all these 500 units? And my second one, just to get some color on the cash out in Q1. Do you have any magnitude how big that could be?

I'll start with Valhalla. We have -- first of all, we have a good order bank for Valhalla, which takes us through almost to the end of this year for delivery. We still have some to sell, but it's quite low numbers. So the build rate and the shipment rate in the next 6 to 8 months is more related to production capacity. This is a very complex car. It was a ground-up development, and we plan for certain capacities in our supply base, which are very difficult to increase. So we're pretty much fixed at the rate that we're currently at, plus or minus a car a week, something of that order of magnitude. So no major opportunity to do it quicker. We could always go slower, but no opportunity to go quicker. So that's the situation with Valhalla.

Yes. And then on the second one, I think, referenced earlier. So obviously, we've been quite clear that Q1 is going to be the biggest outflow. I don't expect it to be worse than the first quarter of...

This concludes today's Q&A session. So I'll hand the call back to Adrian and Doug for any closing comments.

I'd just like to thank again, everybody, for participating in the call today and apologize profusely for the technical issues that we had at the beginning. It may be bad for you, but we had to listen to ourselves twice, which was a great start to a Wednesday morning. So thanks for your time, everybody.

Thanks, everybody. Speak soon.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Good morning or good afternoon all, and welcome to the Aston Martin Lagonda Q3 2025 Results. My name is Adam, and I'll be your operator today.

I will now hand the floor to Adrian Hallmark to begin. Adrian, please go ahead when you're ready.

Good morning, and thank you, Adam. First of all, a warm welcome to everybody, and thank you for joining the call for the Aston Martin Q3 2025 results. Before we take questions on the line, Doug and I would like to provide a summary of our operational and financial outlook during the last -- sorry, review for the last quarter and outlook for the rest of the year.

Recognize that we already updated the market earlier this month, much of what we will share today, you'll be already aware of, but it is important that we focus now on what we're doing and building forward to highlight some of the actions that we've already taken in response to the challenges that we face.

Let's start with operations, the heart of our business, and that's essentially our cards. As we said at the beginning of this year, we remain focused on refreshing our core models available to customers. Aston has a long-standing tradition of using the S suffix for the high-performance derivatives of core models, and we've continued that tradition this year by adding the Vantage S, DBX S and most recently, the DB12 S.

We now also have the Valante or Roadster models available for all of our sports cars, and we recently celebrated the 60th anniversary of the iconic Valante name with the release of limited edition, Q by Aston Martin, DB 12 and Vanquish models. There will be much more to come in 2026 and each of these small product events providing an opportunity for communications, product relaunch and customer engagement on a global basis.

Valhalla has been a monumental and groundbreaking product for Aston Martin. It's our first mid-engine PHEV in series production, and it's set to transform the business. I'm delighted to confirm that this week, we commenced initial deliveries of Valhalla to Europe. We've achieved homologation there and the first cars have been shipped and will be ready to be delivered to customers in the coming days and weeks. So that's just the start. We will continue that process through the end of this year, and we expect to deliver about 150 cars before we close out 2025.

In parallel to this, there is an extensive customer driving program where some 600 customers, existing and new, are testing the vehicle around the world. This week, the team are in Miami and the feedback has already been incredible. I can only concur with the positive feedback that we've had, having driven the car myself, both on public roads around Warren Shire, but also at pace on the limit again, and the car is truly phenomenal, and that's the feedback we get from all participants in these events.

As you're probably aware, already more than 50% of these cars are already deposited and sold for the full lifetime of the vehicle. That means that any new orders that we generate over the coming days, weeks and months will be delivered successively towards the end of 2026. This level of direct customer engagement is the platform that we will use going forward for the rest of the core range.

We've seen fantastic response actually from these Valhalla supercar buyers when testing the advantage on the same tracks before they go in the high-performance car, we've actually sold core models as a result of them being tested before the main reason for those visits. A clear example, the getting behind of the wheel of the Aston makes a truly unique threading experience and surprises the unconverted.

However, as we flagged earlier this month, our performance this year from a financial and operational point of view has been challenged by some significant macroeconomic headwinds, sustained impact of the U.S. tariffs and continued weak demand in China, compounded by a change in luxury taxation in the second and third quarter of this year.

This trend has also been noted by other premium and luxury automotive peers, but obviously, we have to respond in our way to our specific situation. We've taken decisive and proactive steps to strengthen our position. First of all, we've passed through a second 3% price increase in the U.S. from the 1st of October to offset more of the impact that we've been absorbing due to the tariff increases announced earlier this year.

As we said at the half year results, we provided support to dealers in China in order to accelerate sales, clear stocks and get us ready for a strong '26. Unfortunately, this new luxury tax slowed that process down, but we redoubled our efforts, and we're making strong strides to ensure that we recover the situation by the end of '25 as originally planned.

What we're also doing is taking a long hard look at our OpEx and CapEx plans, both for '25 and in subsequent years. With that in mind, work is underway to review our future cycle plan with the dual aim of optimizing capital investment, while continuing to secure innovative products that meet customer demand in our plan and, of course, meet regulatory requirements. We will not mortgage the future. We will merely reprioritize, retime and refocus that CapEx to make it more efficient going forward.

We'll give you more details on that as we get to the full-year results, but you can expect that the 5-year CapEx envelope instead of the previously indicated GBP 2 billion range will be more in the GBP 1.6 billion to GBP 1.7 billion range, a significant shift, but without damaging our future prospects.

We'll continue to build on our current strengths of exquisitely designed high-performance cars, GTs and SUVs, together with V8 and V12 engines. This is at the heart of Aston Martin's strategy, and we need to embrace this and ensure that we have a business fit for today and the future.

With that overview, I'd now like to hand over to Doug, who will take you through the key financials before we take questions from the invited guests. Thank you. Doug?

Thanks, Adrian. Good morning, everybody. Overall, our Q3 performance reflects the position that we announced earlier in the month and really predicated on the lower-than-expected wholesale volumes. Our Q3 wholesale volumes of 1,430 were down 13% compared to the prior year period and below our previous guidance of expecting Q3 to be broadly in line with the Q3 of last year.

This volume performance reflected the heightened challenges in the global macroeconomic environment, including the ongoing effects of tariffs, weak demand in China and the planned delivery of fewer specials versus last year. Year-to-date revenue and total ASP also reflected the lower specials volumes, when compared with the prior year period.

As a result, revenue decreased by 26% and total ASP decreased by 22%. However, year-to-date core ASP increased by 4%, driven by improved mix, including both Vanquish and Vanquish Valante as well as continued strong options contribution stable at around 18% of core revenue. Core ASP was lower sequentially in Q3 compared to Q2 this year due to the additional dealer support, including in China that we mentioned earlier, foreign exchange and mix within the sports car portfolio.

The fewer special deliveries and to a lesser extent, the lower core volumes also impacted year-to-date gross profit and gross margin. The margin also reflected the impact of the previously communicated warranty costs and other investments made in product quality earlier in the year as well as the elements impacting the core ASP I've just mentioned.

We expect to deliver an improved gross margin performance in Q4, benefiting from additional core derivatives and the contribution from around 150 Valhallas. Year-to-date adjusted EBITDA decreased against the prior year period by GBP 105 million to GBP 8 million, reflecting the gross profit movement. This was partially offset by a 24% decrease in adjusted operating expenses, excluding D&A, as we continue to focus on optimizing our cost base and to drive operating leverage.

Here, we've taken further action and now expect to reduce full-year 2025 adjusted operating expenses, excluding the D&A, to around GBP 275 million from GBP 313 million in 2024. Year-to-date adjusted EBIT decreased by 42% to minus GBP 172 million, with D&A decreasing by 23% to GBP 180 million, primarily reflecting the lower specials volumes ahead of Valhalla deliveries commencing in Q4.

Capital expenditure of GBP 254 million was below the comparative period, and we've taken action to further reduce full-year 2025 CapEx to around GBP 350 million, down from the initial GBP 400 million guidance at the start of the year and the GBP 375 million referenced at the Q3 trading update.

Free cash outflow in Q3 was GBP 94 million, and from a liquidity perspective, and as previously announced, we received the net proceeds of GBP 106 million for the sale of the shares in AMLGP, which resulted in total liquidity at the end of Q3 of GBP 248 million. Whilst we announced at the beginning of the month, our expectation that we'd no longer be free cash flow positive in H2 2025, we do expect to deliver an improved sequential Q4 performance for the reasons already outlined.

As we move into next year, we expect to complement the current core portfolio with additional derivatives and to deliver around 500 Valhallas with our production and delivery cadence established at the end of 2025. This, in addition to driving further operating leverage and being disciplined in our approach to CapEx supports our outlook for materially improved financial performance in 2026.

With that, I'll hand back to Adam, so we can start to take some questions in the time we have remaining.

[Operator Instructions]. Our first question today comes from Henning Cosman from Barclays.

I have 3, please, if I may. Really good to see the further action on CapEx and OpEx, but I have to ask, how do you manage to do that with no effect to cycle plans or so on? Obviously, you're telling us the cycle plan is under review, but do you have that leeway headroom to cut these costs? Perhaps, in other words, why wouldn't you have done that anyway? That's the first question. What are the effects?

Second question, it's also great to see these new variants come through, S variants across the model range, but what levers do you really have to stimulate demand because I believe these variants, they tend to take up quite a large share of the overall model mix and don't really tend to be that incremental over and above the existing unit sales. Perhaps, you could remind us, what levers you're foreseeing to increase overall unit sales?

Finally, third question on the liquidity. I don't know, Doug, if you can give us a feel for where you think you might be ending the full-year '25 in terms of liquidity? Perhaps, also a feel beyond 2025, perhaps not the time to talk about whether you're foreseeing free cash flow breakeven next year or not. If you could just give us a bit of color if you think you can stay well within that GBP 200 million to GBP 300 million liquidity range without any need for further debt or equity, that would be great.

Adrian here. I'll kick off, and I'll pick up on the demand and variance and their influence, and then we'll come on to the financials. I think, first of all, the idea of the variance without giving a detailed forecast of next year's volume, even without incremental volume, the variances are a better average selling price and a different product proposition to the products that we've sold in 2025.

The levers that we have are they're new models. They offer new performance, new features and a different price value relationship. They give us some reason to go back to existing customers, which is clearly a significant opportunity for resell and upgrading through their life cycle, but also an opportunity in a platform to recommunicate the nameplate because there's still people that don't know every model that we do in the world and get new business to. It's an ASP activation. It's an existing customer repurchase opportunity. Of course, it's comms up to get more awareness for each nameplate and keep the brand salient in between the big life cycle changes on new product launches, so that's the basis of those.

Just in terms of the mix of them, to clarify that point, as we move through the year, we intend to essentially switch most production to these new models so that the existing core range is ordered on demand and is a much smaller percentage of our total mix. That also helps the residual values.

Okay. I'll pick up on the questions 1 and 3, Henning, which I think was kind of linked to be honest with you. Obviously, from a cost and CapEx point of view, you can see that we're taking the action that we outlined that we would when we updated the market early in October, and indeed, on the cost front, so on SG&A, it's really a continuation of the action that we've been sort of taking all year. I think you can expect SG&A at the end of this year, as I said, around GBP 275 million. Hopefully, a little bit improved versus what we previously indicated. Then our job is to try and obviously offset the impact of any inflationary or other impacts on the SG&A cost base as we move into next year and try and make sure that we do deliver operating leverage.

From a CapEx perspective, it's really about having a really good long hard look at the product cycle plan, making sure that we do it in the most efficient way that we possibly can, a little bit of rephasing with the benefit of electrification moving to the right, as we've already outlined earlier in the year. We're already running at the kind of rate that I would expect CapEx to be in the window of next year, so we're guiding to circa GBP 350 million this year. I think next year, it's probably likely to be somewhere between GBP 300 million and GBP 350 million. We're focused on ensuring that we don't impact any near-term revenue-generating products with the rephasing of the CapEx plan. That's how we'll go about doing that.

Of course, those 2 things are then linked to your third question around liquidity. Of course, we're absolutely laser-focused on ensuring that the company has the liquidity it requires. That GBP 200 million to GBP 300 million window that I've talked about previously remains the sort of goal and the avenue that we're operating within. We were around GBP 250 million of liquidity at the end of Q3. Look, we're targeting to make sure that we stay in that window as we move through next year.

The next question comes from Harry Martin at Bernstein.

I have 2 questions on the Valhalla to start with. The first one, with the activation going on right now and in the coming months, would you expect to be fully sold for the 2026 build slots by the year-end of this year? What is your updated expectation for the full 999?

Then the second question on the Valhalla is just how many of the 150 deliveries in the guide for this year are earmarked for the U.S. if we do get an ongoing government shutdown there?

Okay. Harry, so I'll start with the easy one first. The number of cars going to the states is around 40 in the final quarter of this year, 4-0. In respect to the government shutdown, the certification process that we have to run is complete. The documentation is all being submitted. Until about 10 days ago, we were still getting responses from them until they ran out of funding, so it is tight. We no longer have a significant risk on quotas.

We're not belieful about this, but the unfortunate and critical situation that JLR found themselves in has probably taken significant pressure off the quota allocation risk for quarter 4. So yes, you're right, we now just still face the certification risk, but until a few days ago, we were still in active contact. The work has been done. The documents are submitted. We're cautiously optimistic that, that will flow, and we should know in the coming weeks how that looks.

In terms of the sellout of Valhalla, I mean, it would be great if we could sell them all tomorrow. By the year-end, I think certainly, we will have sold the majority that will be available in 2026 because we've already sold most of them as we sit here today, if you add the total numbers up.

Yes, and in terms of the 999, that's still a plan over the 2-year period or the bit year period while the car is in the marketplace. We are encouraged by the fact we've got more than 50% -- we had more than 50% of those sold before anybody saw the actual car or drove it, so we have a high number of people that are currently specing, negotiating and finalizing arrangements for the car. I won't predict exact numbers and exact dates, but it's looking positive as we open up the marketing channel.

Then I wondered Adrian, if I could just ask for an update on some of the strategic agenda. It's totally acceptable with a lot of the market issues hitting demand for the luxury manufacturers out there, but when you came in, you highlighted opportunities versus peers in terms of option availability and more personalization revenue and also on optimizing manufacturing and supplier processes. I wondered if you could share any data points that you have, maybe the personalization rates on those new S variants or any other data points that you have on some of those strategic goals that you had when you came in?

Yes. I think if we start from the really good news, if you think of, I don't know, 6 or 9 months ago, the condition that we were in operationally as a company was pretty dire. The first-time or right first-time performance in manufacturing was nowhere near industry norms. I think we quoted 55%, 65% of vehicles being right first time out of the factory, massive shortages from suppliers, problems with production and launch of cars, etc., some of which is caused by external and some by internal factors.

The good news is we fixed all of that. If you were to sit in the regular reviews that we have on a weekly basis, supply stability, manufacturing KPIs are normal, 96% to 98% right first time and 4 or 5 suppliers that we are monitoring or working with on a weekly basis to ensure that things move smoothly compared with 30, 40 critical ones going back a year. I call that business as usual.

The quality process at the end of the line, the quality flow to dealers, we've seen massive reductions in demerits and in issues in that part of the process. From an industrial operational point of view, I would say, we have done the turnaround. We have a balanced production system and it works. We've also taken huge cost out of it.

We mentioned the transformation program, which covers cost of quality, material costs, etc., all of the 39 fields of action that we've defined are well underway with huge amounts of energy and effective activities going on across the company. That's partly the reason why we've been able to cap the SG&A this year, and we're, again, quietly confident that we can sustain similar levels of SG&A next year despite the inflationary effects. The underlying efficiency and capability of the company, we have made a step change with.

If I look at the external side and the added-value and incremental value per car, I have to be honest that the rate of development and launch of those incremental options to catch up with competition has been slower than we originally planned, and it's for 3 reasons. One, these derivatives that we've launched, bear in mind, we didn't have any of these assets, all of them take time and effort. They didn't have -- or sorry, they took a lot of the resource effort that we had in engineering and in the whole process chain last year, and we, I guess, underestimated the effort that would take.

Together with the significant quality improvements that we've made during the period, it meant that there was more limited resource to be able to really boost those options. We have added circa 15, but we didn't add the circa 40 that we wanted. The derivatives have been done, body styles as well as these performance and character models. Options, that will continue, and it will ramp up during this year and watch this space for that. Operationally, strengthened market ASP and customer attractiveness, derivatives are very successful. About 1/3 of the incremental options that we wanted this year have been delivered, but we will play catch-up next year.

The next question is from Michael Tyndall from HSBC.

Just the one for me. If I look at your guide for shipments, it feels like we are again expecting a very strong Q4. I guess the concern in my head, I can see that Valhalla is incremental, and that's part of why we're going to see that sequential lift, but it also feels like there's a big lift in the core volumes. What confidence do you have that we don't end up in the same situation we were this year where first half of next year, you are then trying to unwind that inventory?

Okay, Michael, thanks for the question. The first thing I would say, if you look at the inventory development through the year this year, we've also been pretty effective at bringing that down significantly. As we get towards the year-end, you're right, we have a disproportional reliance on Q4 for various historic reasons, but the market is also stronger in Q4 than other quarters and particularly December. If I separate 2 elements, if I look at the retail rate for this year, we will see a step-up in retail rate in quarter 4. That's predicted, and we're again, quietly confident that, that will occur.

As we stand today from the low point that we've seen in stocks, we do and can imagine that by the year-end, that total stock in the pipeline will go up again to somewhere between the low point and the start of the year, but not at the level of the beginning of the year. That's based around the combination of retails and the phasing of those wholesales. You're right that those late Valhallas in particular, we will be able to invoice them, but some of them will be so late that maybe some customers won't take delivery in this year, so the wholesale will happen, but the retail may be held off until the 1st of January for residual value reasons.

Looking forward and part of our planning that we've done for the CapEx, OpEx and outlook, we have made sure that for next year, we have an even more balanced approach throughout the 4 quarters and that we continue this trend to bring the stock down in line with norms and market expectations. Final thought, we have been quite prudent, at least on the baseline planning for next year. on core models, and we have already preplanned production, sales and stocks accordingly.

[Operator Instructions]. The next question comes from Akshat Kacker from JPMorgan.

Akshat from JPMorgan. Two quick ones, please. The first one, coming back to the core portfolio. Given the product cycle plan review, and as you mentioned, electrification is moving to the right, could you just give us some more insight on what that means for the core portfolio going forward? How are you thinking about powertrain derivatives or probably if there's a new generation of core cards that is within that CapEx plan of GBP 1.7 billion over 5 years?

The second question is on the underlying demand trends. I see you have talked about an order book that is still at 5 months of sales. Could you just give us more insight on the regional demand that you're seeing, specifically in the U.S. as you have implemented a second price hike in the region? Also, if you could talk about some demand trends in Europe?

Thanks for the questions. I think first, powertrains, it's pretty consistent with what we said in that we will be predominantly between now and in 2035, if you use that time window, we will be predominantly combustion engine and electrified combustion engine dominated. We will have BEVs in the first part of the 2030s, but it will be -- in total, it will be a low proportion of the volume over that 10-year run. We believe high-performance ICE and ever more efficient EU7 engines, both V8 and V12 should be our foundation stones for the future.

Between now and the relaunch of the current core models, we will also be launching a number of specials based around the various technology stacks that we have available to us. Without going through those today, each of them sequentially and well timed will give us an ASP and a cash boost each year between '26 all the way through to 2030, 2031. That's as far as we planned the specials at this stage.

In respect to the core programs, which is key, I can absolutely confirm that the period between late 20s and early 30s in the next 5 years, we will refresh all of our core nameplates with new models that are both exterior, interior and powertrain and e-architecture and technology renewed from the ground up. That is secured within the CapEx plan that we've indicated in this GBP 1.6 billion, GBP 1.7 billion range that we've now defined. As Doug mentioned, how we've done that is ruthless prioritization of the specials and efficient use of technologies across all programs, SUVs and sports cars and changing the way that we buy and create that platform in the next generation of cars.

I think in terms of demand and the outlook, the U.S. is interesting. Overall, we definitely can see there's a little bit of holdback or more competition because of tariffs. It has created inflation and it's created a bit of macro uncertainty, which is making customers slower to make decisions. We still have good footfall. We still have great interest in the products and helped massively by the great press that we get on everything that we launch, including DBX S being ranked better than the Purosangue, which was fantastic. The general demand is strong, but the conversion rate is slower than we would normally expect and competitors are working a lot harder to keep their customers.

China is very difficult and remains very difficult. U.K. is pretty strong. Europe is in line with our expectations. Between the 2, we're slightly above. Middle East remains an area that we want to develop in the future, but there's particular reasons why we can't fully activate the brand potential there, but that will be an area of focus for us in 2026. Finally, India, with a trade deal at least highlighted or outlined, we're working with government and within the team to look at what can we do to get ready for that opening up of India, which could be quite significant as a result of the drop in import tariffs on cars built in the U.K. is a significant opportunity. That's the outlook for the next 12 months.

We have no further questions. I'll hand the call back to the team for any closing comments.

Just thank you for your time and the clear questions and look forward to seeing you for the year-end call. Thank you, very much.

Thanks, everyone. Have a good day.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.