Aston Martin Lagonda Global : H1 2021 Results - Transcript

Aston Martin H1 2021

Results - Q&A

Wednesday, 28th July 2021

Aston Martin H1 2021 Results

Wednesday, 28th July 2021

Tobias Moers: Hello everyone, and welcome to Aston Martin's first half 2021 results Q&A. I'm Tobias Moers, CEO, and I'm joined by Ken Gregor, CFO. I hope you have had the chance to see our H1 2021 results accompanied by our pre-recorded video, which can be found in the results section on our corporate website.

In summary, I'm pleased with the good progress we have made and that we have delivered results in line with our plans, with both revenues and wholesales trebling in the half compared to last year. We also reached a double-digit EBITDA margin at 10%.

In the statement, you can see some notable milestones we've achieved. I'm particularly pleased with the healthy demand we are seeing for our products and the strong pricing dynamics we are achieving. This is the result of operating as a luxury company with the right supply to demand balance, which we achieved in quarter one, earlier than we had originally expected.

As well, we have made excellent progress on Project Horizon. All of these actions are aimed at transforming Aston Martin into a world-class, as well performance-oriented,ultra-luxury automaker. And we are right on track with that.

Now, we're happy to take your questions and thanks very much for joining us.

Charles Coldicott (Redburn): Good morning. Thanks for taking my questions. I have two please. First, as you mentioned there, the average selling price for your core models has gone up a lot. It's pretty much the highest it's ever been. And obviously there's a few moving parts in there including the regional mix, the higher option rates, I guess, the DBX and clearly lower dealer incentives as well. So, can you give us an idea of what's really driving the higher ASP for your core models and how much of it is sustainable?

And then my second question is on electrification. Mercedes revealed that it is developing a new dedicated electric platform for its sports cars last week called AMG.EA. Can you confirm whether your agreement with them, which I think extends to 2027, includes access to that platform? And if so, when we should expect the first product on it?

Ken Gregor: Maybe I'll take the ASP question first. Charles, you're right that the strong ASP for the core vehicles does reflect the factors you mentioned. We've got DBX, but the biggest driver of the year-on-year improvement is the significantly lower customer and retail financing support we have been pursuing as a strategy for Aston Martin with some success this year.

The core ASP is always going to ebb and flow by quarter because of regional and seasonal mix, we do expect it to continue strongly through the second half of the year.

Tobias Moers: The thing with ASP and I think it pays off is that we've cleared the stock for the sports cars.

Coming to your second question with electrification. Yes, I saw what Mercedes announced, AMG.EA. I always said Mercedes has more than one platform in place for the future because I knew that. It's a bit too early to talk in detail about what we will be taking but expect something. We will certainly be partnering with Mercedes as part of our technology transfer agreement and we're in discussion on what technology to use. So now everybody has an understanding what is possible. But I don't want to talk too much into detail at the moment.

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Charles Coldicott: Okay. Thank you.

Tobias Moers: You're welcome.

Henning Cosman (HSBC): Hi. Good morning, Tobias and Ken. My first question is on the Nebula impact. My understanding is that in 2022, you said in the press release you can manage the impact within current expectations. And my understanding was that it was in reference to the roughly £250 million EBITDA consensus at the time. So, I'm wondering if you can share a little bit more colour on that. What would it have been without the Nebula effect? And ultimately, what I'm getting at is that you're suggesting it's a net positive over time, so I'm wondering when the £15 million from this year and also the additional impact in 2022, where is the inflection point and how much comes on top of your original expectation then reversing the negative effect that you're seeing over the next couple of years? That's my first question, please.

The second question is on the mix between GT, sports and DBX. It's good to see that DBX is now more than half of the volume. If I recall correctly, the waitlist for DBX were a little bit shorter at the Q1 stage than they were for GT and sports. Could you update us on that? Is that still the case? And I understand with your suggestion that DBX will remain more than 50% of the mix, so are you deliberately producing more DBXs and deliberately managing so that the waitlists for DBX are shorter? And can you just discuss the rationale of that again a little bit? Thank you.

Ken Gregor: I'll take the Nebula Project point. At this point in time, there is no update on what we can say. The financial impact I expect for 2021 remains as we disclosed. And including that we did take the £5 million provision for doubtful debts in the first half of the year in these results. For 2022, it remains the case that the next year financial impact is containable within the current consensus and I don't have anything to add to that.

The Nebula contract that we had was a multiyear contract, so it's beyond that point for several years that the balance of it being net positive over time takes place. But right now, because the matter is subject to action in the courts on a number of different fronts, we really can't say any more about this at this time.

Tobias Moers: Regarding DBX and sports cars, order intake for both carlines is in line with our expectations and both order books reach out into quarter four for both carlines, very important for us. Retails are stronger than wholesales for us in the first half, which is very good and is a part of that ASP improvement. This is the strategy for the future, and we keep going with that. Expect DBX and sports cars to be a 50-50 mix this year.

We'll be bringing out derivatives to increase the portfolio of DBX for this year and next year. Too early to talk about next year numbers, but DBX is going to see some expansion in the portfolio for 2022.

Henning Cosman: Okay. Thank you. And just two clarifications, if I may. So, on Charles' question from earlier, you expect the core ASP to remain relatively stable in H2? Did I understand that correctly?

Ken Gregor: Look, as I was hinting at, if you like, it ebbs and flows by quarter because of regional mix, seasonal mix. But broadly, it's in a strong zone and we expect it to continue to show improvement in the second half, driven by similar factors, driven by the fact that we

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continue to maintain the strategy of balancing supply with demand and keeping the level of customer and retail financing incentives low.

Henning Cosman: Yeah, understood. And sorry, just to also clarify on Charles' second question. I don't want to go away and feel less certain about your Mercedes agreement. My understanding was that the agreement is such that it would include state-of-the-art technology from Mercedes whatever it is over the length of the contract. So now I understand that that's additional conversations to be had whether it does include AMG.EA or not? Or is that a wrong interpretation? Is it fair to go away and say, well, whatever is state-of-the-art for Mercedes, you're going to have access to that?

Tobias Moers: You probably know my roots, okay? So I think - I always put a bit in a direction of more than one variant and one platform to come. I cannot disclose too much at the moment but we're going to have access to the right technology our needs.

Henning Cosman: That's helpful. Thank you, Tobias.

Tobias Moers: Okay.

George Galliers (Goldman Sachs): Thank you for taking my question. First question that I have is on volume guidance. Obviously, you're seeing a very nice sequential development on your volumes and you mentioned retails are outpacing wholesales. With that in mind, would you be prepared to go materially above the 6,000 wholesales that you're targeting this year if the retail demand is there? Or are you planning to keep that as a cap and happy to see the waitlist build as the retail demand comes in?

The second question I have is on Valhalla deposits. Obviously, you unveiled the Valhalla and it's an extremely exciting prospect. Could you give us insight into what deposits were taken historically on the Valhalla? And when do you plan to start taking deposits from the product now that you've unveiled it?

Then finally a question on the EU proposal around the CO2. Obviously, they're proposing an end to the small vehicle manufacture exemption from 2030 as well as zero emissions from the tail pipe in 2035. But do you see that as having a major impact on your strategic planning over the next decade? Or is that something that won't have a big impact over the next five to seven years but it's something you'll have to take into consideration with, I guess, the next generation of planning? Thank you.

Tobias Moers: Let me take the first question. Is the 6,000 a dogma? No, it's not. If retail demand picks up, we have some expectation for retail demand for the future and you saw our projection of the 10,000 cars. We are always able to improve or increase our performance on the manufacturing side. So, we are really flexible now. There was part of Project Horizon figures. They are flexible and agile situation and the manufacturing. And we are now there.

So it is likely to help us in order book which in the luxury segment is a positive as retail should be at a minimum the same level as wholesale if not more. Now with the stock clearance of sports cars, it was clear that retail is going to be overachieving the wholesale.

Valhalla is we have a certain level of down payments from 2019 onwards. With unveiling the new Valhalla, we've seen an overwhelming response of everybody who placed a deposit.. We are starting to sell the new Valhalla now, just yesterday we had a few customers here in Gaydon. Everybody has been positive - even more than positive, surprised about what we

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unveiled as the new Valhalla regarding the performance level of the car and that it will be a plug-in hybrid.

We're going to take it to Pebble Beach in two weeks to three weeks. It's actually had such a good response that we decided to build a second show car. I think that speaks for itself.

For the third question, if you look at strategy for a company, and this is what we did, and you don't consider the electric drive future, is it the wrong strategy? Yes. Our strategy is not impacted by that or compromised by that. There is no need for adjustment of our strategy as we have an electric strategy within our plan.

George Galliers: Okay. Great. Thank you very much.

Akshat Kakkar (JP Morgan): Thank you. Two from my side, please. The first one on DBX and China. Are you generally happy with the sales momentum that you're seeing in the region for the SUV? And how are you doing versus competitors like Lamborghini, Bentley and Rolls- Royce in China? And also, how the customer feedback and this point to the new derivative going into production in Q3, how has that been so far?

The second one is a follow-up on the deposits balance. Deposits were up £7 million in the first half of '21. How do you expect this to trend by year-end and into 2022 as you deliver the Valkyrie and the AMR Pro, please? Thank you.

Ken Gregor: Maybe I take the second question first. On the overall deposit balance, our plan is to more or less maintain that deposit balance through the year. Yes, we'll see some unwind relating to Valkyrie deliveries in fourth quarter this year and in relation to Valkyrie deliveries next year. But at the same time, as Tobias was just saying, we've just launched the new Valhalla and we have other plans not yet announced yet that will offset the outgoing deposits. So, our target is more or less to maintain that deposit balance over the next year or two, although it will always ebb and flow.

Tobias Moers: On DBX, it's in-line with expectations, so we're doing well. You can see different patterns in the different regions but DBX is for us, at the moment, in line with the expectation. We haven't unveiled the derivative what we're going to bring into quarter four to customers. So that's too early to talk about.

Akshat: Thank you.

Horst Schneider (Bank of America): Yeah. Good morning all. I have got a few follow-up questions. Want to get back again to pricing because in your presentation we just see the year-on-year impact. Obviously, it has been sequentially better quarter-on-quarter in terms of the earnings contribution, but it seems to me that the price impact on earnings sequentially was rather limited. Would you agree to that, so that we have kind of stable price in Q1 versus Q2, or would you disagree to that?

The second question that I have relates to your comment in the release that you have good visibility on GT, sport and DBX, so maybe you can provide more details again on the waiting times for the various models. It seems to me that the GT line is selling a little bit worse than sports. So, I want to know if that impression is right. And the last one is going back to EU Fit for 55 question because it says basically there will be an ICE car ban as of 2035. Does that imply for you that you plan not to sell any ICE car in Europe in 2035, or are there any exemptions that I'm not aware of? Thank you.

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