REG - Aston Martin Lagonda - Final Results
27/02/2020 07:00
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RNS Number : 3203E Aston Martin Lagonda Global Hld PLC 27 February 2020
27 February 2020
Aston Martin Lagonda Global Holdings plc
Preliminary results for the 12 months to 31 December 2019
A challenging year resulting in revised business and funding plans
Focus now on execution in FY 2020
£m 31-Dec-19 31-Dec-18 % change
Total wholesale volumes(1) 5,862 6,441 (9%)
Revenue 997.3 1,096.5 (9%)
Adjusted EBITDA(2) 134.2 247.3 (46%)
Adjusted operating profit(2) 5.4 146.9 n.m.
Adjusted diluted EPS (pence)(2,5) (32.1) 27.5 n.m.
Total adjusting items before tax (48.7) (136.0) -
Operating (loss) / profit (36.7) 72.8 n.m.
(Loss) before tax (104.3) (68.2) (53%)
Diluted EPS (pence) (49.6) (31.0) (60%)
Net debt(2,3) 876.2 559.5
Adjusted leverage(2,4) 7.3x 2.3x
(1)Number of vehicles including specials; (2)Alternative performance measures
are defined in the Appendix; (3) 2019 Net debt including £111m lease
liabilities following the adoption of IFRS 16 was £988m (4) 2019 adjusted
EBITDA included in the adjusted leverage calculation excludes the £15m
benefit from first time adoption of IFRS 16; (5)( )2018 Adjusted diluted EPS
is presented on a normalised basis
Results
· Revenues fell to £997m due to wholesale volume (sales to
dealers) declines, coupled with the impact of retail and customer financing
support, required to drive retail growth, and the shift in core mix to Vantage
weighing on average selling price (ASP); in addition, there were fewer
Specials year-on-year.
· Core(1) retail sales (dealer sales to customers) rose 12%
year-on-year, ahead of wholesales in unit terms leading to reduced dealer
inventory (down c.190 units); starting to reverse the position from the prior
year.
· Core(1) wholesales were down 7%; total down 9%, with planned
lower Specials volume (64 vs 185)
- Americas (+16%), APAC (-6%; with China +28%), UK (-21%) and EMEA (-28%).
· Operating profit declined primarily due to the revenue decline,
higher depreciation and amortisation and increased marketing costs; in
addition to a £19m provision for doubtful debt relating to the sale of legacy
Intellectual Property in the prior year.
· Adjusting items pre-tax of £49m (2018: £136m) are principally
due to impairment of assets associated with the Rapide E programme (£39m)
which has been paused as announced on 31 January; and the one-off £7m
adjusting finance expense item recognised in H1.
· Net debt was £876m with adjusted net leverage of 7.3x adjusted
EBITDA (December 2018: £560m, 2.3x); movements driving the increase included
operating cash generation of £19m (2018: £223m), continued investment in the
period (including capex of £310m) and the placement of $340m of bonds and
£39m of inventory repurchase arrangements.
(1 )Core is total excluding specials
Reset business plan and proposed £500m equity raise
· Reset of business plan to manage medium-term investment, improve
cash generation and rephase product cadence to deliver long term profitable
growth
- Mid-engined portfolio remains a key focus starting with Valhalla in 2022;
investment in electric vehicles no earlier than 2025.
· Proposed equity raise of c.£500m, subject to shareholder
approval to improve liquidity, finance the ramp up in production of DBX and
start to turnaround the Company's performance
- Strategic equity investment of c.£182m (the "Placing") by a consortium
led by Lawrence Stroll (the "Consortium").
- Fully underwritten rights issue of c.£317m (the "Rights Issue") supported
by Prestige/Strategic European Investment Group (SEIG) and Adeem/Primewagon
(the "Major Shareholders") further details of which have been separately
announced today.
Operational updates
· Achieving operational milestones ahead of DBX planned launch in
Q2 2020; DBX has received extremely positive media reviews and the order book
built rapidly since opening in November 2019, with total orders now taken in
excess of the planned retail target for FY 2020.
· Relaunching Vantage (at Geneva motorshow), including the Roadster
derivative with deliveries to start in Q2 2020.
· Delivering Aston Martin Valkyrie and Goldfinger DB5 Continuations
from H2 2020.
· Production of V12 engines will move to the UK from 2021,
increasing domestic content and generating cost benefits.
Board changes
· Separately announced today, following discussions and by mutual
agreement Mark Wilson will step down as Chief Financial Officer and as an
Executive Director of the Company no later than 30 April 2020. He will
remain available to the Company to assist with transition in the period
through to 30 June 2020.
· As a condition of the Consortium's investment, Mr. Stroll will
join the Board and become Executive Chairman and Penny Hughes will step down
as a Director and the Chair on 7 April, following the completion of the Rights
Issue.
· As detailed in the Rights Issue Announcement, Richard Solomons,
Imelda Walsh and Tensie Whelan have notified the Company that they do not
intend to stand for re-election at the Annual General Meeting, currently
planned for 3 June 2020. In the meantime, they will stay to support the
Company and Lawrence Stroll as he transitions to the role of Executive
Chairman during their period of notice.
Outlook
· 2020 is the year in which the business will be reset in order
that it can start to operate as a true luxury car brand. This process is
absolutely necessary for the long-term performance and value of the Company.
· The uncertainties and risks to the financial performance in 2020
will include:
- Sports car wholesales for 2020 are planned to be materially lower than in
2019 as the Company focuses on further reducing dealer inventories to a luxury
norm. The Company is planning to control and align shipments to dealers with
customer demand in order to build a stronger order book and regain price
positioning.
- DBX and Aston Martin Valkyrie are key launch programmes for the business.
Both currently remain on plan. At St Athan the DBX production trial to test
line and suppliers at run-rate and to ensure that the final build quality
meets required standards has started. Initial deliveries are scheduled for
Summer 2020, subject to any Covid-19 impact on the supply chain and completion
of quality maturation. The Company's management will be fully focused on
overseeing the delivery of these programmes.
- Adjusted EBITDA in FY 2020 is expected to be almost entirely H2 weighted
due to initial deliveries of the DBX and Specials and as H1 revenues are
expected to decline as wholesales are managed. The final outcome for the
year will be significantly dependant upon the successful execution of model
rollouts and Specials in H2. Operational cost savings are expected to yield
£10m of annualised savings with £7m delivered during 2020 after one-off
costs, broadly offsetting expected cost increases due to the opening of the
new plant in St Athan.
- In light of the ongoing evolution of Covid-19, the primary concern remains
the health and safety of colleagues and their families, business partners and
the local communities and the Company continues to provide all the support
possible. Public health measures advised by governments are being followed in
support of their efforts to contain the spread of the virus.
- Covid-19 has the potential to impact both the supply chain and customer
demand in China and other markets. China was the Company's fastest growing
market in 2019 and represented 9% of total wholesales. None of the Company's
Tier 1 suppliers manufactures in China. The supply chain is being proactively
managed in China and other markets. Despite some disruption to supply of some
components from China, there has been no impact on production. Supply is
secured until at least end March.
· FY 2020 Capex is expected to be c.£285m, with about half of this
investment in Q1 and two-thirds in H1 reflecting final St Athan and DBX
development costs. Depreciation and amortisation is expected to be c.£220m
and net interest c.£90m (P&L charge assuming current exchange rates
prevail for 2020). Working capital outflow of about £100m is expected for the
year; in H1 up to £100m of incremental inventory for DBX is expected to be
partially offset by receivables unwind and deposit inflows.
· The Company's focus is on the successful completion of the
Placing and Rights Issue and the delivery of key model roll out milestones.
The Company will continue to update its guidance to the market as the year
progresses. The Company confirms its belief in the longer-term opportunity for
significant growth and recovery of margins in order to achieve a path to a
cash generative, global luxury car brand through the resetting of the business
during 2020.
Dr Andy Palmer, Aston Martin Lagonda President and Group CEO said:
"2019 was an extremely challenging period for the Company. While retail
sales grew, we were unable to generate the revenue and profits we had
originally planned and today report a 9% year-on-year revenue decline
alongside an operating loss of £37m. This performance led to severe liquidity
pressures, higher year-end net debt of £876m and significantly increased
adjusted leverage to 7.3x.
As announced last month, we are proposing an equity fundraising of £500m to
improve liquidity, stabilise the balance sheet and provide a platform for the
future. The equity raise includes a proposed investment of £182m from a
consortium led by Lawrence Stroll. Further, we have revised our business plan
to reset, stabilise and de-risk the business, positioning it for controlled,
long-term profitable growth. We are focused on turning around performance,
restoring price positioning by operating a pull vs push model, reducing dealer
inventories to a luxury norm and delivering a more efficient operational
footprint.
This year, in Q2 we plan to launch the DBX and Vantage Roadster; and Aston
Martin Valkyrie deliveries are set to start in H2. DBX and our entrance into
the luxury SUV market is a key moment for us, therefore it is crucial that it
is delivered to customers with the highest quality standards. We always
maintain our quality assurance and testing standards and will continue to do
so through the third production trial that has just started at St Athan and
once full production has started.
With our revised plan and appropriate funding in place, I believe we will have
the building blocks in place to secure the necessary financial turnaround of
the business consistent with our position as a luxury automotive company."
All metrics and commentary in this announcement exclude adjusting items unless
stated otherwise and certain financial data within this announcement have been
rounded.
Enquiries
Investors and Analysts
Charlotte Cowley Director of Investor
Relations +44 (0)7771
976764
charlotte.cowley@astonmartin.com
Media
Kevin Watters Director of
Communications +44
(0)7764 386683
kevin.watters@astonmartin.com
Toby Bates Senior
Adviser, Financial Communications +44 (0)7584 773837
t (mailto:toby.bates1@astonmartin.com) oby.bates1@astonmartin
(mailto:toby.bates1@astonmartin.com) . (mailto:toby.bates1@astonmartin.com)
com (mailto:toby.bates1@astonmartin.com)
Grace Barnie Corporate
Communication Manager +44 (0)7880 903490
grace.barnie@astonmartin.com
Brunswick
Dan Roberts, Andrew Porter, Diana
Vaughton
+44 (0)20 7404 5959
astonmartin@brunswickgroup.com
(mailto:astonmartin@brunswickgroup.com)
· There will be a meeting for investors and analysts today at
09:00am at Deutsche Bank, Winchester House, 75 London Wall, EC2N 2DB
· The conference call can be accessed live via a dial-in facility
on +44 (0) 203 0095710; PIN: 7286519#, please find more details on the
corporate website: www.astonmartinlagonda.com/investors
(http://www.astonmartinlagonda.com/investors)
· Results for the first quarter of 2020 will be released on 13 May
2020
No representations or warranties, express or implied, are made as to, and no
reliance should be placed on, the accuracy, fairness or completeness of the
information presented or contained in this release. This release contains
certain forward-looking statements, which are based on current assumptions and
estimates by the management of Aston Martin Lagonda Global Holdings plc
("Aston Martin Lagonda"). Past performance cannot be relied upon as a guide to
future performance and should not be taken as a representation that trends or
activities underlying past performance will continue in the future. Such
statements are subject to numerous risks and uncertainties that could cause
actual results to differ materially from any expected future results in
forward-looking statements. These risks may include, for example, changes in
the global economic situation, and changes affecting individual markets and
exchange rates.
Aston Martin Lagonda provides no guarantee that future development and future
results achieved will correspond to the forward-looking statements included
here and accepts no liability if they should fail to do so. Aston Martin
Lagonda undertakes no obligation to update these forward-looking statements
and will not publicly release any revisions that may be made to these
forward-looking statements, which may result from events or circumstances
arising after the date of this release.
This release is for informational purposes only and does not constitute or
form part of any invitation or inducement to engage in investment activity,
nor does it constitute an offer or invitation to buy any securities, in any
jurisdiction including the United States, or a recommendation in respect of
buying, holding or selling any securities.
Nothing in this announcement should be interpreted as a term or condition of
the rights issue. Any decision to purchase, subscribe for, otherwise acquire,
sell or otherwise dispose of any nil paid rights, fully paid rights or new
shares must be made only on the basis of the information contained in the
prospectus related to the rights issue once published. Copies of that
prospectus will, following publication, be available from the registered
office of the Company and on its website at www.astonmartinlagonda.com
(http://www.astonmartinlagonda.com) .
This announcement does not contain or constitute an offer for sale or the
solicitation of an offer to purchase securities in the United States. The
securities referred to herein have not been and will not be registered under
the US Securities Act of 1933, as amended (the "Securities Act"), or with any
securities regulatory authority of any state or jurisdiction of the United
States, and may not be offered or sold in the United States absent
registration under the Securities Act or an available exemption from, or
transaction not subject to, the registration requirements of the Securities
Act. There will be no public offer of the securities in the United States.
None of the securities, this announcement or any other document connected with
the Rights Issue has been or will be approved or disapproved by the United
States Securities and Exchange Commission or by the securities commissions of
any state or other jurisdiction of the United States or any other regulatory
authority, and none of the foregoing authorities or any securities commission
has passed upon or endorsed the merits of the offering of the securities or
the accuracy or adequacy of this announcement or any other document connected
with the Rights Issue. Any representation to the contrary is a criminal
offence in the United States.
This announcement is for information purposes only and is not intended to and
does not constitute or form part of any offer or invitation to purchase or
subscribe for, or any solicitation to purchase or subscribe for, any
securities or to take up any entitlements to any securities in any
jurisdiction. No offer or invitation to purchase or subscribe for, or any
solicitation to purchase or subscribe for, any securities or to take up any
entitlements to any securities will be made in any jurisdiction in which such
an offer or solicitation is unlawful.
No securities have been nor will be registered under the Securities Act or
under any securities laws of any state or other jurisdiction of the United
States and may not be offered, sold, taken up, exercised, resold, renounced,
transferred or delivered, directly or indirectly, within the United States
except pursuant to an applicable exemption from or in a transaction not
subject to the registration requirements of the Securities Act and in
compliance with any applicable securities laws of any state or other
jurisdiction of the United States. There will be no public offer of any
securities in the United States.
BUSINESS REVIEW
Trading in 2019 was weaker than anticipated, particularly for Vantage and in
Europe and the UK across all car lines. The year started with elevated levels
of dealer inventory, partially due to the supply chain disruption at the end
of 2018 but also as a result of the lower than expected demand for Vantage and
the lead-time required to adjust manufacturing and supply levels.
Achieving the retail sell-through to start to de-stock the dealer network and
reduce the Company's own stock levels, required more retail and customer
financing support than planned particularly in H2, weighing on average selling
price. Despite core retail dealer sales increasing by 12% year-on-year, this
was not high enough to support the Company's original expectations and
wholesale volumes were lower than planned. As a result of the lower than
planned wholesales in H1, Company stock had built up at 30 June 2019 and the
Company took steps to reduce its outlook for the year accordingly. A further
reduction in H2 volumes created an immediate need for liquidity with pressure
on liquidity continuing in Q4 as revised targets were not met during the
largest selling season.
Whilst dealer stocks at 31 December 2019 were c.190 units lower than they were
a year previously, they remain elevated and the Company is focused on reducing
these to new lower norms repairing the balance between demand and supply, to
allow Aston Martin to regain its price positioning.
Finally, costs were higher than planned due to a combination of incremental
marketing campaigns in December, particularly in the US and in support of DBX
launch activities, alongside headcount and other SG&A cost savings falling
short of savings targets.
DB11 and DBS Superleggera performed comparatively well and have grown market
share in recent years but have not been immune to the challenging trading
conditions experienced in 2019. Despite gaining share in a declining
segment, which was down a double-digit percentage for the year, the Vantage
underperformed versus original expectations, particularly in Europe and the
UK.
A key focus has been the development and execution of the launch and
production plans for DBX, a car which will mark the entry of Aston Martin into
the growing SUV segment of the market. St Athan, the new production facility
in Wales, has been running production trial builds since April 2019 and was
officially opened on 6 December. The third production trial when the factory
and its supplier base will be tested at run rate capacity and to final build
quality has just started.
DBX was unveiled on 20 November at simultaneous events in Beijing and Los
Angeles. The order book built more rapidly than for any of our prior launches
and on 7 January 2020 it stood at c.1,800 with c.1,200 of those being a
combination of customer orders and specifications in progress and c.600
dealer-specified to maintain the successful launch of DBX including test
vehicles, marketing vehicles and showroom vehicles. The order book has
continued to build and now is in excess of planned DBX retail sales for FY
2020. Geographically, over 60% of orders are from the Americas and APAC; and
over half are from customers who are new to the brand.
DBS Superleggera Volante, the highest priced current core car and named the
Sunday Times' Sports Car of the Year, launched in Q3. Deliveries of the
limited run Vantage AMR, the first manual variant of the new Vantage, started
in Q4.
Specials were a key profit driver, particularly in the second half. The
majority of the 64 specials delivered in the year were the final Vanquish
Zagato Shooting Brakes. The first 19 cars of the Aston Martin DBZ Centenary
Collection, the DB4 GT Zagato Continuations, were also delivered in 2019. The
pair will be completed with deliveries of the DBS GT Zagatos in Q4 2020.
Aston Martin Valkyrie made its dynamic debut at the British Grand Prix in
July. Development of the car continues apace with delivery of the first car
planned for H2 2020 ramping up to run rate through the second half.
Revised business plan
The underperformance of the Company against its original plans and the
resulting severe pressure on liquidity prompted an operational and financial
review. As announced on 31 January 2020, this resulted in a reset of the
business plan. The Company is focusing on providing greater financial and
operational stability and flexibility through controlling medium-term
investment, improving cash generation and rephasing product cadence.
The Company is taking a more conservative view for sports car wholesales for
2020, particularly for Vantage and, in the medium-term, sports car volumes
will be managed to maintain the appropriate balance between supply and demand
and restore pricing to previous levels.
The timing of future product launches has been reviewed to manage medium-term
investment requirements, improve cash generation and provide greater financial
stability and flexibility:
· Aston Martin's mid-engined core car (Vanquish) is expected to be
revealed following the unveiling of Valhalla in 2022;
· Development of a fuel efficient, modular V6 engine with hybrid
and plug-in capabilities continues, which will support Aston Martin core cars
being available as hybrid and plug-in hybrid variants from the mid-2020s;
· The Lagonda brand will be relaunched no earlier than 2025
(previously 2022) and while development of Rapide E is substantially complete,
the programme has been paused pending a review (previously deliveries had been
expected to start in 2020).
Mid-engined cars are a core part of Aston Martin Lagonda's future. As part
of this, an enhanced approach to F1(TM) is considered important. As part of
the investment from the Consortium:
· Aston Martin Lagonda has entered into an agreement with Racing
Point F1(TM), which will become the Aston Martin F1(TM) team with effect from
the 2021 season;
· The agreement is for a 10-year initial term, with Aston Martin
Lagonda receiving an economic interest in the team. It also includes a
sponsorship agreement from 2021 and for the subsequent four years, with
commercial terms commensurate with the Company's current annual F1(TM)
expenditure, renewable for five years, subject to satisfying certain
conditions at the time;
· For the 2020 F1(TM) season Aston Martin will continue its proud
sponsorship with Red Bull Racing F1(TM) Team;
· The technology partnership between Aston Martin Lagonda and Red
Bull Advanced Technologies will continue until Aston Martin Valkyrie is
delivered.
Specials continue to be a key component of the plan
· Production of the Aston Martin Valkyrie is expected to ramp up
through H2 2020;
· Deliveries of the Goldfinger DB5 Continuations are due to start
in 2020 as well as the DBS GT Zagatos, which will complete the DBZ Centenary
Collection;
· The recently announced V12 Speedster will be unveiled later this
year with deliveries due to start in Q1 2021;
· The Aston Martin Valkyrie AMR Pro is expected to be revealed in
2021;
· Valhalla is expected to be unveiled in 2022;
· New specials which have not yet been revealed will comprise the
balance of one heritage Special and two contemporary Specials each year.
Operating structure
· Restructuring sees changes in management of Sales, Marketing
& Communications and Engineering;
· A significant reduction in contractors, a voluntary redundancy
and early retirement programme actioned in 2019 led to a c.22% reduction in
headcount year-on-year, additional reductions will be made to rebalance our
permanent and contractor headcount; 300 new roles will be created at the St
Athan facility in addition to the 300 employees currently at the site;
· The property footprint will also reduce alongside general
SG&A reductions commensurate with our financial and operational ambitions;
· These changes are expected to yield £10m of annualised savings
with £7m delivered during 2020 after one-off costs, broadly offsetting
expected cost increases due to the opening of the new plant in St Athan;
· Efficiencies in manufacturing costs are expected to be delivered
through improved supply chain management and ongoing designed-in initiatives
- Production of V12 engines is to move to a third-party supplier in the UK
from 2021, increasing our domestic content and delivering cost savings
Key strategic priorities going forward are:
· Controlling production to prioritise demand over supply, to build
a stronger order book and regain price positioning;
· Successfully launching DBX in Q2;
· Successfully relaunching Vantage including the Roadster
derivative, with deliveries scheduled for Q2 and starting Aston Martin
Valkyrie deliveries in the second half of the year;
· Reducing the operating cost base by £10m on an annualised basis,
with £7m in 2020 after one-off costs, broadly offsetting expected cost
increases due to the new St Athan plant; and
· Improving the cash flow profile of the business and transitioning
towards a business generating positive free cash flow over the medium term.
FINANCIAL REVIEW
Revenue analysis
Wholesale volumes by region
Wholesales (1) 31-Dec-19 31-Dec-18 Change
UK 1,429 1,798 (21%)
Americas 2,050 1,761 16%
EMEA ex.UK 1,074 1,489 (28%)
APAC 1,309 1,393 (6%)
Total 5,862((2)) 6,441 (9%)
Core 5,798 ((2)) 6,256 (7%)
(1) Number of vehicles. (2) Adjustment of 12 (11 core and one Special) to
numbers reported on 7 January 2020 as closed FY accounts
Total wholesales decreased 9% to 5,862 units, with core volumes down 7%. The
Americas continued to grow, now the largest region at 35%, as the Company
focuses on upgrading the dealer network capabilities and investing in
appropriate brand and marketing activities. EMEA and the UK were impacted as
economic uncertainty weighed on sentiment; EMEA wholesales declined by 28% and
the UK declined by 21%. Within Asia, strong growth in China (up 28%) was
offset by a more muted performance in other markets with APAC down 6% overall.
The Company began 2019 with higher inventory in the dealer network than
originally planned, partially due to supply chain disruptions late in Q4 2018
and weaker than planned demand for Vantage. Core retail sales grew 12%,
exceeding wholesale volumes, leading to a reduction in dealer inventories of
c.190 units over the year, although dealer inventories remain at elevated
levels.
Revenue by Category
£m 31-Dec-19 31-Dec-18 Change
Sale of vehicles 897.6 1,010.7 (11%)
Sale of parts 63.0 61.1 3%
Servicing of vehicles 9.3 14.6 (36%)
Brand and motorsport 27.4 10.1 171%
Total 997.3 1,096.5 (9%)
For core cars, Average Selling Price (ASP) declined to £135k (2018: £141k)
reflecting the impact of higher retail and customer financing support and the
model mix shift towards Vantage. Total ASP declined to £152k (2018: £157k)
with fewer Specials than the prior year. The core ASP reduction combined with
lower volumes and lower revenue from Specials year-on-year led to an 11%
decline in revenue from sale of vehicles.
Revenue from the sale of parts increased by 3% to £63m as the segment
continues to benefit from the growth in vehicle sales in recent years.
Servicing of vehicles declined by £5m to £9m mainly due to a reduced amount
of restorations in the year as the team focused on the production of the DB4
GT Zagato continuations reducing the Company's service capacity.
Brand and motorsport revenues increased to £27m, predominantly reflecting
revenues from the sale of 61 race cars in the year.
Total revenues were down 9% to £997m.
Summary income statement
£m 31-Dec-19 31-Dec-18 % change
Revenue 997.3 1,096.5 (9%)
Cost of sales (642.7) (660.7)
Gross profit 354.6 435.8 (19%)
Gross margin % 35.6% 39.7%
Operating expenses(1,3) (330.2) (308.9)
of which depreciation & amortisation(2) 128.8 100.4
Other income (19.0) 20.0
Adjusted operating profit(1,3) 5.4 146.9 (96%)
Adjusted operating profit margin 0.5% 13.4%
Adjusting operating items (42.1) (74.1)
Operating (loss)/profit (36.7) 72.8 n.m.
Net financing expense (67.6) (141.0)
of which adjusting financing items (6.6) (61.9)
Loss before tax (104.3) (68.2) (53%)
Taxation (0.1) 11.1
Loss after tax (104.4) (57.1) (83%)
Adjusted EBITDA(1,3) 134.2 247.3 (46%)
Adjusted EBITDA margin 13.5% 22.6%
Adjusted (Loss)/profit before tax(1,3) (55.6) 67.8 n.m.
Diluted EPS (pence) (49.7) (31.0)
Adjusted diluted EPS (pence)(1,3, 4) (32.1) 27.5
(1)Excludes adjusting items; (2)Includes loss / (profit) on disposal of fixed
assets,(3) Alternative Performance Measures are defined in the Appendix (4
)2018 Adjusted diluted EPS is presented on a normalised basis
Operating (loss)/profit analysis
Operating loss of £37m (2018: £73m profit) was impacted by a £19m provision
(2018: £20m income) relating to the sale of legacy Intellectual Property
taken in the first half of 2019. Further headwinds included:
· Higher than anticipated retail and customer financing support;
· Weaker core model mix weighing on average selling price, with a
shift towards Vantage;
· Lower wholesale volumes as the Company started to de-stock the
dealer network;
· Incremental fixed marketing spend to support retail campaigns,
particularly in the US, leading to lower cost savings than originally planned
and;
· First time St Athan costs and full year of PLC costs.
Total adjusted operating expenses were up c.£20m including increased
depreciation and amortisation (D&A) of £129m (2018: £100m) due to the
expanded range of core sports cars selling. The adoption of IFRS 16 in the
year increased D&A by £12m which was more than offset by reduced
operating lease costs of £16m. Adjusted operating profit in the period was
£5m (2018: £147m).
Adjusted EBITDA was £134m with a margin of 13.5% after the £19m provision
mentioned above. Adjusted EBITDA included a £9m foreign exchange benefit,
primarily due to USD:Sterling movements. This benefit was lower than
originally expected due to the late December rally in Sterling resulting in an
incremental headwind due to retranslation of non-Sterling balances. Further,
the first-time adoption of IFRS 16 resulted in a £15m EBITDA benefit
year-on-year.
Adjusting operating items of £42m are principally an impairment of assets
associated with the Rapide E programme which has been paused as announced on
31 January as well as £3m of restructuring costs as we sought efficiencies
across the business.
Net financing expense
£m 31-Dec-19 31-Dec-18
Bank deposit and other interest income 5.0 4.2
Foreign exchange gain on borrowings not designated as part of a hedging 11.3 -
relationship
Bank loans, overdrafts and secured loan notes (55.3) (44.3)
Interest on preference shares, deposits held, lease liabilities, defined (22.0) (39.0)
benefit liability and other interest
Net finance expense before adjusting items (61.0) (79.1)
Adjusting financing items (6.6) (61.9)
Net finance expense (67.6) (141.0)
The net finance expense over the period was £68m (2018: £141m), including a
one-off £7m financing charge booked in the first half relating to derivative
financial instruments where the criteria for hedge accounting had not been
met. The net finance expense includes the interest charges on the $340m new
notes issued during the year. The charge was lower than the £83m as guided at
the time of the Q3 results (November 2019) predominantly due to exchange
movements on some of the USD denominated notes, £11m in the year.
Adjusted loss before tax was £56m (2018: £68m profit). Loss before tax after
adjusting items was £104m (2018: £68m).
Taxation
The tax charge on the adjusted loss before tax was £9m mainly driven by
income tax charges in overseas entities, partially offset by a credit in
relation to deferred taxation. Tax on adjusting items mainly relates to the
impairment charge and resulted in an overall charge of £0.1m, on the loss
before tax.
Earnings per share
Adjusted diluted EPS was (32.1p) (2018: 27.5p on a normalised basis(1)).
(1) Alternative Performance Measures are defined in the Appendix
Cash Flow / Net Debt
£m 31-Dec-19 31-Dec-18
Net cash generated from operating activities 19.4 222.6
Net cash used in investing activities (305.2) (306.3)
Net cash inflow from financing activities 243.3 57.8
Effect of exchange rates on cash and cash equivalents 5.8 2.7
Net cash outflow (36.7) (23.2)
Cash balance 107.9(1) 144.6
Cash not available for short-term use 8.7 -
Borrowings and inventory repurchase arrangement 992.8 704.1
Net debt(2) 876.2 559.5
Adjusted Leverage(2) 7.3x 2.3x
(1)Excluding £9m in cash not available for short-term use; (2 )2019 Net debt
including £111m lease liabilities following the adoption of IFRS 16 was
£988m; (3) 2019 adjusted EBITDA for leverage calculation excludes the £15m
benefit from first time adoption of IFRS 16
Cash generated from operating activities was £19m (2018: £223m). This
included a net working capital outflow of £84m with, an inventory outflow of
£33m due to higher finished goods stock year-on-year reflecting the weaker
than expected wholesale performance and additional stock held in anticipation
of the United Kingdom's planned exit from the European Union (c.£9m); a £29m
receivables outflow due to timing of wholesales and a £70m payables outflow
predominantly driven by capex timing. These outflows were partially offset by
an inflow of £48m of customer deposits.
Deposits on the balance sheet stood at £319m (2018: £271m), with increasing
deposits for Valhalla and Goldfinger DB5 continuations. As deliveries of Aston
Martin Valkyrie start, the deposit balance is expected to unwind although this
will be partially offset by building deposits on other Specials.
Capex of £310m was broadly in-line with guidance and the prior year (2018:
£311m), the majority of spend was focused on DBX, St Athan and Valkyrie
development. Investment plans were reduced from original guidance of
£320m-£340m due to the liquidity constraints.
With a net cash outflow of £37m, the closing cash balance at year-end was
£108m (2018: £145m), excluding £9m of cash not available for short-term
use. Net debt at 31 December 2019 was £876m, up £316m over the period (2018:
£560m). The increase in borrowings reflected the issue of $340m in bonds
during the year and the re-valuation of the U.S. tranche of Senior Secured
Notes alongside a partial drawdown of the RCF (£70m). In addition, the
Company secured £39m of short-term financing through an inventory repurchase
arrangement during the period to support short-term liquidity needs.
Adjusted net leverage was 7.3x adjusted EBITDA (2018: 2.3x). Adjusted return
on invested capital (ROIC) was (0.3%) (2018:12.8%). Adjusted ROIC is defined
as adjusted operating profit after tax divided by the sum of gross debt and
equity. Both measures reflect the financial performance of the business and
the associated cash outflow during the year.
No dividends have been paid or proposed for the Group.
APPENDICES
Dealerships
31 Dec-19 31 Dec-18
UK + S. Africa 22 21
Americas 45 44
EMEA ex. UK 56 55
APAC 45 42
Total 168 162
Number of countries 54 53
During 2019, the Company continued to strengthen the dealer network,
increasing the total to 168 and expanding to one new country, Bahrain. The
Company selectively chose areas in China (opened 5, closed 4) and Japan
(opened 2) to provide further penetration in APAC and improve the network
ahead of DBX in 2020.
Regional wholesale units
Wholesales (1) FY 2019 FY 2018 Q4 2019 Q4 2018
UK 1,429 1,798 480 625
Americas 2,050 1,761 749 720
EMEA ex.UK 1,074 1,489 344 584
APAC 1,309 1,393 358 437
Total 5,862 6,441 1,931 2,366
Core 5,798 6,256 1,912 2,291
(1) Number of vehicles.
Summary financials
£m FY 2019 FY 2018 Q4 2019 Q4 2018
Total wholesale volumes(1) 5,862 6,441 1,923 2,366
Revenue 997.3 1,096.5 340.1 389.2
Gross profit 354.6 435.8 110.8 149.0
Gross margin 35.6% 39.7% 32.6% 38.3%
Adjusted EBITDA 134.2 247.3 64.5 87.0
Adjusted EBITDA margin 13.5% 22.6% 19.0% 22.4%
Adjusted operating profit 5.4 146.9 27.2 55.4
Adjusted operating profit margin 0.5% 13.4% 8.0% 14.2%
Adjusting operating items (42.1) (74.1) (36.7) (72.3)
Adjusting financing items (6.6) (61.9) - (61.9)
Operating (loss) / profit (36.7) 72.8 (9.5) (16.9)
(Loss) / profit before tax (104.3) (68.2) (12.0) (92.1)
Note: For definition of alternative performance measures please see Appendix
and note 14 of the Financial Statements; (1)Number of vehicles including
specials
Summary cash flow statement
£m FY 2019 FY 2018 Q4 2019 Q4 2018
Net cash generated from / (used in) operating activities 19.4 222.6 (49.5) 71.1
Net cash used in investing activities (305.2) (306.3) (54.7) (86.5)
Net cash inflow from financing activities 243.3 57.8 95.5 71.0
Effect of exchange rates on cash and cash equivalents 5.8 2.7 6.7 2.3
Decrease in net cash (36.7) (23.2) (2.0) 57.9
Cash balance 107.9(1) 144.6 107.9 144.6
(1) Excluding £8.7m in cash not available for short-term use
Adjusted ROIC calculation
£m 31-Dec-19 31-Dec-18
Adjusted Operating Profit (EBIT) 5.4 146.9
Tax (charge)/ credit (8.9) 0.6
Adj. operating profit after tax (NOPAT) (3.5) 147.5
Senior Secured Notes 829.9 590.9
Unsecured loans - 1.4
Inventory financing arrangement 38.9 -
Bank loans and overdrafts 124.0 111.8
Gross Debt 992.8 704.1
Equity 358.9 449.4
Gross Debt + Equity 1,351.7 1,153.5
Adjusted ROIC (0.3%) 12.8%
Alternative performance measures / Adjusted EBITDA reconciliation
£m 31-Dec-19 31-Dec-18
(Loss) for the year before tax (104.3) (68.2)
Adjusting operating expense 42.1 74.1
Adjusting finance expense 6.6 61.9
Adjusted EBT (55.6) 67.8
Adjusted finance income (16.3) (4.2)
Adjusted finance expense 77.3 83.3
Adjusted EBIT 5.4 146.9
Reported depreciation 42.7 32.4
Reported amortisation 85.2 67.6
Loss on sale of fixed assets 0.9 0.4
Adjusted EBITDA 134.2 247.3
Alternative performance measures
In the reporting of financial information, the Directors have adopted various
Alternative Performance Measures ("APMs"). APMs should be considered in
addition to IFRS measurements. The Directors believe that these APMs assist in
providing useful information on the underlying performance of the Group,
enhance the comparability of information between reporting periods, and are
used internally by the Directors to measure the Group's performance.
· Adjusted EBT is the profit / (loss) before income tax and
adjusting items
· Adjusted EBIT is profit / (loss) from operating activities before
adjusting items
· Adjusted EBITDA removes depreciation, loss / (profit) on sale of
fixed assets and amortisation from adjusted EBIT
· Adjusted Earnings Per Share is (loss)/profit after income tax
before adjusting items, divided by the weighted average number of ordinary
shares in issue during the reporting period
· Normalised adjusted EPS is (loss) / profit after income tax
before adjusting items, divided by the number of ordinary shares in issue at
31 December 2018
· Net Debt is current and non-current borrowings in addition to
inventory repurchase arrangements, less cash and cash equivalents and cash
held not available for short-term use but excluding lease liabilities
recognised following the adoption of IFRS 16, as shown in the Consolidated
Statement of Financial Position
· Adjusted leverage is represented by the ratio of Net Debt, to the
last 12 months adjusted EBITDA excluding any benefit from the first-time
adoption of IFRS 16
· Adjusted Return on Invested Capital represents adjusted operating
profit after adjusted tax divided by the sum of gross debt, including
inventory repurchase arrangements whilst excluding lease liabilities, and
equity.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2019
2019 2018
Notes Adjusted Adjusting items* Total Adjusted Adjusting items* Total
£m £m £m £m £m £m
Revenue 2 997.3 - 997.3 1,096.5 - 1,096.5
Cost of sales (642.7) - (642.7) (660.7) - (660.7)
Gross profit 354.6 - 354.6 435.8 - 435.8
Selling and distribution expenses (95.0) - (95.0) (89.8) - (89.8)
Administrative and other operating expenses (235.2) (42.1) (277.3) (219.1) (74.1) (293.2)
Other (expense)/income 4 (19.0) - (19.0) 20.0 - 20.0
Operating profit/(loss) 5.4 (42.1) (36.7) 146.9 (74.1) 72.8
Finance income 6 16.3 - 16.3 4.2 - 4.2
Finance expense 7 (77.3) (6.6) (83.9) (83.3) (61.9) (145.2)
(Loss)/profit before tax (55.6) (48.7) (104.3) 67.8 (136.0) (68.2)
Income tax (charge)/credit 8 (8.9) 8.8 (0.1) 0.6 10.5 11.1
(Loss)/profit for the year (64.5) (39.9) (104.4) 68.4 (125.5) (57.1)
(Loss)/profit attributable to:
Owners of the group (113.2) (62.7)
Non-controlling interests 8.8 5.6
(104.4) (57.1)
Other comprehensive income
Items that will never be reclassified to the Income Statement
Remeasurement of defined benefit liability (1.4) 5.4
Taxation on items that will never be reclassified to the Income Statement 8 0.2 (0.9)
Items that are or may be reclassified to the Income Statement
Foreign exchange translation differences (2.7) 0.7
Fair value adjustment - cash flow hedges 9.0 (30.5)
Amounts reclassified to the Income Statement - cash flow hedges 15.6 3.5
Taxation on items that may be reclassified to the Income Statement 8 (3.4) 3.5
Other comprehensive income/(loss) for the year, net of income tax 17.3 (18.3)
Total comprehensive loss for the year (87.1) (75.4)
Total comprehensive (loss)/income for the year attributable to:
Owners of the group (95.9) (81.0)
Non-controlling interests 8.8 5.6
(87.1) (75.4)
Earnings per ordinary share
Basic loss per share 9 (49.6p) (31.0p)
Diluted loss per share 9 (49.6p) (31.0p)
All operations of the Group are continuing.
* Adjusting items are defined in note 1, with further detail shown in note 5.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Share Premium Capital Reserve Translation Reserve Hedge Reserve Retained Earnings Non-controlling Interest Total Equity
Group £m £m £m £m £m £m £m £m
At 1 January 2019 2.1 352.3 6.6 2.3 (23.5) 99.4 10.2 449.4
Adjustment on adoption of IFRS 16 (note 11) - - - - - (2.2) - (2.2)
At 1 January 2019 adjusted 2.1 352.3 6.6 2.3 (23.5) 97.2 10.2 447.2
Total comprehensive loss for the year
(Loss)/profit for the year - - - - - (113.2) 8.8 (104.4)
Other comprehensive income
Foreign currency translation differences - - - (2.7) - - - (2.7)
Fair value movement - cash flow hedges - - - - 9.0 - - 9.0
Amounts reclassified to the Income Statement - cash flow hedges - - - - 15.6 - - 15.6
Remeasurement of defined benefit liability - - - - - (1.4) - (1.4)
Tax on other comprehensive income (note 8) - - - - (3.4) 0.2 - (3.2)
Total other comprehensive (loss)/income - - - (2.7) 21.2 (1.2) - 17.3
Total comprehensive (loss)/income for the year - - - (2.7) 21.2 (114.4) 8.8 (87.1)
Transactions with owners, recorded directly
in equity
Credit for the year under equity settled share-based payments - - - - - 3.7 - 3.7
Dividend paid to non-controlling interest - - - - - - (4.9) (4.9)
Tax on items credited to equity - - - - - - - -
Total transactions with owners - - - - - 3.7 (4.9) (1.2)
At 31 December 2019 2.1 352.3 6.6 (0.4) (2.3) (13.5) 14.1 358.9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Share Premium Share Warrants Capital Reserve Translation Reserve Hedge Reserve Retained Earnings Non-controlling Interest Total Equity
Group £m £m £m £m £m £m £m £m £m
At 1 January 2018 - 353.7 18.5 94.1 1.6 - (339.4) 7.6 136.1
Total comprehensive loss for the year
(Loss)/profit for the year - - - - - - (62.7) 5.6 (57.1)
Other comprehensive income
Foreign currency translation differences - - - - 0.7 - - - 0.7
Fair value adjustment - cash flow hedges - - - - - (30.5) - - (30.5)
Amounts reclassified to the Income Statement - cash flow hedges - - - - - 3.5 - - 3.5
Remeasurement of defined benefit liability - - - - - - 5.4 - 5.4
Tax on other comprehensive income (note 8) - - - - - 3.5 (0.9) - 2.6
Total other comprehensive income/(loss) - - - - 0.7 (23.5) 4.5 - (18.3)
Total comprehensive income/(loss) for the year - - - - 0.7 (23.5) (58.2) 5.6 (75.4)
Transactions with owners, recorded directly
in equity
Shares issued during the year 2.1 - - - - - - - 2.1
Share premium on shares issued - 352.2 - - - - - - 352.2
Capital reduction - (353.6) - (87.5) - - 441.1 - -
Exercise of share warrants - - (18.5) - - - 18.5 - -
Credit for the year under equity settled share-based payments - - - - - - 24.1 - 24.1
Dividend paid to non-controlling interest * - - - - - - - (3.0) (3.0)
Tax on items credited to equity (note 8) - - - - - - 13.3 - 13.3
Total transactions with owners 2.1 (1.4) (18.5) (87.5) - - 497.0 (3.0) 388.7
At 31 December 2018 2.1 352.3 - 6.6 2.3 (23.5) 99.4 10.2 449.4
* See note 1 for further details.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2019
Notes 2018
2019 restated*
£m £m
Non-current assets
Intangible assets 1,183.6 1,071.7
Property, plant and equipment 350.5 313.0
Right-of-use lease assets 11 81.8 -
Trade and other receivables 1.8 1.8
Other financial assets 0.2 -
Deferred tax asset 8 45.7 32.1
1,663.6 1,418.6
Current assets
Inventories 200.7 165.3
Trade and other receivables 249.7 240.8
Income tax receivable 0.3 0.8
Other financial assets 8.9 0.1
Cash and cash equivalents 107.9 144.6
567.5 551.6
Total assets 2,231.1 1,970.2
Current liabilities
Borrowings 114.8 99.4
Trade and other payables 702.1 671.0
Income tax payable 8.9 4.9
Other financial liabilities 6.3 4.2
Lease liabilities 11 14.1 -
Provisions 12.0 10.8
858.2 790.3
Non-current liabilities
Borrowings 839.1 604.7
Trade and other payables 9.4 49.8
Other financial liabilities 2.6 4.4
Lease liabilities 11 97.3 -
Provisions 16.2 12.9
Employee benefits 36.8 38.7
Deferred tax liabilities 8 12.6 20.0
1,014.0 730.5
Total liabilities 1,872.2 1,520.8
Net assets 358.9 449.4
Capital and reserves
Share capital 2.1 2.1
Share premium 352.3 352.3
Capital reserve 6.6 6.6
Translation reserve (0.4) 2.3
Hedge reserves (2.3) (23.5)
Retained earnings (13.5) 99.4
Equity attributable to owners of the group 344.8 439.2
Non-controlling interests 14.1 10.2
Total shareholders' equity 358.9 449.4
* See note 1 for further details.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
Notes 2019 2018
£m
restated*
£m
Operating activities
Loss for the year (104.4) (57.1)
Adjustments to reconcile loss for the year to net cash inflow from operating
activities
Tax charge/(credit) on continuing operations 8 0.1 (11.1)
Net finance costs 67.6 141.0
Other non-cash movements (4.4) 13.3
Loss on sale of property, plant and equipment 0.9 0.4
Depreciation and impairment of property, plant and equipment 38.8 32.4
Depreciation and impairment of right-of-use lease assets 11 13.3 -
Amortisation and impairment of intangible assets 112.4 67.6
Difference between pension contributions paid and amounts recognised in Income (4.4) (3.8)
Statement
Increase in inventories (33.3) (37.5)
Increase in trade and other receivables (28.9) (122.4)
(Decrease)/increase in trade and other payables (70.0) 136.1
Increase in advances and customer deposits 48.4 68.8
Movement in provisions 4.5 2.8
Cash generated from operations 40.6 230.5
Increase in cash held not available for short-term use (8.7) -
Income taxes paid (12.5) (7.9)
Net cash inflow from operating activities 19.4 222.6
Cash flows from investing activities
Interest received 6 5.0 4.2
Payments to acquire property, plant and equipment (82.2) (101.9)
Payments to acquire intangible assets (228.0) (208.6)
Net cash used in investing activities (305.2) (306.3)
Cash flows from financing activities
Interest paid (52.0) (42.2)
Proceeds from equity share issue - 4.6
Dividend paid to non-controlling interest in subsidiaries - (3.0)
Principal element of lease payments (10.9) -
Repayment of existing borrowings (91.5) -
Proceeds from existing borrowings 102.3 0.3
Proceeds from inventory repurchase arrangement 38.7 -
New borrowings 260.8 98.1
Transaction fees paid on new borrowings (4.1) -
Net cash inflow from financing activities 243.3 57.8
Net decrease in cash and cash equivalents (42.5) (25.9)
Cash and cash equivalents at the beginning of the year 144.6 167.8
Effect of exchange rates on cash and cash equivalents 5.8 2.7
Cash and cash equivalents at the end of the year 107.9 144.6
* See note 1 for further details
Notes to the Consolidated Financial Statements
1. Basis of Accounting
Aston Martin Lagonda Global Holdings plc (the "Company") is a Company
incorporated in England and Wales and domiciled in the UK. The Group Financial
Statements consolidate those of the Company and its subsidiaries (together
referred to as the "Group"). The Group Financial Statements have been prepared
and approved by the directors in accordance with International Financial
Reporting Standards as adopted by the EU ("Adopted IFRSs").
The Financial Statements are prepared on a going concern basis and under the
historical cost convention except where the measurement of balances at fair
value is required.
The financial information set out does not constitute the Company's financial
statements for the years ended 31 December 2019 or 2018 but is derived from
those financial statements. Financial statements for 2018 have been delivered
to the registrar of companies, and those for 2019 will be delivered in due
course. The auditors have reported on those accounts. Their report for both
years ended 31 December 2018 and 31 December 2019 were not qualified, however
the report in respect of the year-ended 31 December 2019 included a paragraph
drawing attention to Material Uncertainty Related to Going Concern. Their
reports did not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
The Group meets its day-to-day working capital requirements and medium term
funding requirements through a mixture of Senior Secured Notes ($400m and
$190m 6.5%, $150m 12%, £230m and £55m at 5.75% which all mature in April
2022), a revolving credit facility (£80m) which matures January 2022,
facilities to finance inventory, a number of back-to-back loans and a vehicle
wholesale financing facility. The amounts outstanding on all the borrowings
are shown in the financial statements.
2019 was a challenging year for the Group and, following an operational and
financial review, on 31 January 2020 the Group announced its intention to
raise £500m by way of a placing of shares totalling £182m to a consortium
led by Lawrence Stroll, and a rights issue of £318m. Receipt of the £500m is
dependent upon sufficient shareholders voting in favour of the placing and
rights issue at a General Meeting of the Company scheduled for 16 March 2020.
At the date of approving the financial statements, the Company had irrevocable
support from the major shareholders for the placing and rights issue but this
was below the 75% needed for the proposals to be approved. Assuming the
relevant resolutions are passed, and other formalities are consequently met,
the rights issue is fully underwritten and committed.
Based on the reset business plan described in the financial statements the
Directors have prepared trading and cash flow forecasts for the 12-month
period from the date of approval of the financial statements. These forecasts
assume that the £500m placing and rights issue funding is received in March
and April 2020 and show that the Group has sufficient financial resources to
meet its obligations as they fall due for the period of at least 12 months
from the date of these financial statements.
The forecasts make assumptions in respect of future market conditions and,
wholesale volumes, average selling price, the launch of new models including
DBX and Valkyrie and the potential impact of Coronavirus on sales in China and
the supply of components needed for production. The nature of the Group's
business is that there can be variation in the timing of cash flows around the
development and launch of new models and the availability of funds provided
through the vehicle wholesale finance facility. The forecasts take into
account these factors to an extent which the directors consider represent
their best estimate of the future based on the information that is available
to them at the time of approval of these financial statements.
The Directors have also prepared a downside forecast which incorporates
certain adverse sensitivities representing those key risks disclosed in the
Strategic Report which the directors consider most likely to impact cash flows
over the period of the forecast, including lower wholesale volumes as a result
of trading or supply chain disruption, product launch delays and the
non-renewal of financing facilities that mature in the period. In the event
that these downsides materialise the Directors have considered the mitigating
actions that could be taken including renewals of current financing, access to
other financing and deferral of capital expenditure. If the Placing and Rights
Issue were not to happen this downside could not be mitigated by other
actions. As the Placing and Rights Issue is not guaranteed as it is subject to
shareholder approval and is critical to the funding requirements of the Group,
the directors consider this matter represents a material uncertainty which
could cast significant doubt on the Group's ability to continue as a going
concern.
Despite the material uncertainty noted, the Directors are of the view that
there is a reasonable expectation that the Rights Issue and Placing will
proceed and that they can therefore conclude that they have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future and they can continue to adopt the going
concern basis in preparing the financial statements. Therefore, the financial
statements do not include any adjustments that would result if the going
concern basis of preparation was inappropriate.
On 3 September 2018 the Company obtained control of the entire share capital
of Aston Martin Holdings (UK) Limited by way of a share for share exchange
with one share in the Company being exchanged for one share in Aston Martin
Holdings (UK) Limited. Consequently, the Group incorporated the assets and
liabilities of Aston Martin Holdings (UK) Limited at their pre-combination
carrying amounts without fair value uplift. The equity balance as of 1 January
2018 reflects the equity of Aston Martin Holdings (UK) Limited. The share
capital of £2.1m as of 31 December 2018 and 31 December 2019 reflects the
share capital of the Company. Although the share for share exchange in 2018
resulted in a change in legal ownership, the comparative results presented
reflect the continuation of the pre-existing group headed by Aston Martin
Holdings (UK) Limited. The transaction was accounted for as a reverse
acquisition in line with IFRS 3. The Consolidated Statement of Changes in
Equity for the year ended 31 December 2018 explains the impact of these
transactions in more detail.
Prior year restatement
The following reclassifications have been made in the Statement of Financial
Position regarding the 2018 comparative values:
i) Following a review of the nature of the service plan liability, it has been
reclassified from non-current provisions into current and non-current trade
and other payables and additional disclosures as a contract liability have
been disclosed in the group financial statements. The provision balance
presented within these financial statements relates solely to expected future
warranty costs provided for at the point of revenue recognised on a new
vehicle sale.
ii) The nature of certain trade and other payables have been revisited
resulting in the reclassification of lease incentives from current trade and
other payables to non-current trade and other payables, as a large portion of
the balance relates to periods greater than 12 months in the future. From 1
January 2019 lease incentives have been accounted for under IFRS 16 and offset
against the right of use assets.
iii) Deferred tax assets and deferred tax liabilities, where a right of offset
exists in certain jurisdictions, have been offset in the Statement of
Financial Position as at 31 December 2018.
The impact on the Consolidated Statement of Financial Position for the year
ended 31 December 2018 is:
As disclosed 2018 Annual Report (i) (ii) (iii) As restated 2019 Annual Report
As at 31 December 2018 £m £m £m £m £m
Non-current assets
Deferred tax assets 123.1 - - (91.0) 32.1
Current liabilities
Trade and other payables (696.1) (5.2) 30.3 - (671.0)
Non-current liabilities
Trade and other payables (12.2) (7.3) (30.3) - (49.8)
Provisions (25.4) 12.5 - - (12.9)
Deferred tax liabilities (111.0) - - 91.0 (20.0)
Point i) has resulted in a reclassification of a £7.2m cash inflow from
Movement in provisions to increase in trade and other payables with no impact
on the cash generated from operations.
There is no impact on the Group's Consolidated Income Statement, earnings per
share, retained earnings or net assets for the year ended 31 December 2018 as
a result of these restatements.
The Statement of Changes in Equity for the year-ended 31 December 2018 has
been restated to reclassify the £3.0m dividend paid to non-controlling
interest from Total Comprehensive income/(loss) for the year to Transactions
with owners, recorded directly in equity.
Where the notes included in this Preliminary announcement provide additional
analysis in respect of the above restatements, the comparative values
presented have been re-analysed on a consistent basis.
New IFRS standards and interpretations adopted during 2019
In 2019 the following standard were endorsed by the EU, became effective and
adopted by the Group:
• IFRS 16 Leases
See note 11 for further detail including transition disclosures and elections
taken.
• Interpretation 23 Uncertainty over Income Tax Treatments
The interpretation addresses the accounting for income taxes when tax
treatment involve uncertainty that affects the application of IAS 12 Income
Taxes.
The Group assessed any uncertainties over income tax treatments. Since the
Group operates in a multinational environment, it evaluated whether the
Interpretation had an impact on its consolidated financial statements.
Upon adoption of the Interpretation, the Group considered whether it has any
uncertain tax positions, particularly those relating to transfer pricing. The
subsidiaries' filings in different tax jurisdictions may lead to challenges
from the local tax authorities related to transfer pricing.
This interpretation has not had a material impact on the Group's reported
financial performance or position.
The following standards and interpretations, which are not yet effective or
endorsed by the EU and which have not been early adopted by the Group, will be
adopted in future accounting periods:
• Definition of material - amendments to IAS 1 and IAS 8 (effective 1
January 2020).
• Interest rate benchmark reform - amendments to IFRS 9, IAS 39 and IFRS 7.
None of these amendments above are expected to have a material impact on the
Group.
Adjusting items
An adjusting item is disclosed separately in the Consolidated Statement of
Comprehensive Income where the quantum, nature or volatility of such items
would otherwise distort the underlying trading performance of the Group as
they are not expected to repeat in future periods. The tax effect is also
included.
Details in respect of adjusting items recognised in the current and prior year
are set out in note 5.
2. Segmental information
Operating segments are defined as components of the Group about which separate
financial information is available and is evaluated regularly by the chief
operating decision-maker in assessing performance. The Group has only one
operating segment, the automotive segment, and therefore no separate segmental
report is disclosed. The automotive segment includes all activities relating
to design, development, manufacture and marketing of vehicles including
consulting services; as well as the sale of parts, servicing and automotive
brand activities from which the Group derives its revenues.
Revenue 2019 2018
£m
£m
Analysis by category
Sale of vehicles 897.6 1,010.7
Sale of parts 63.0 61.1
Servicing of vehicles 9.3 14.6
Brands and motorsport 27.4 10.1
997.3 1,096.5
Revenue 2019 2018
£m
£m
Analysis by geographic location
United Kingdom 229.6 255.4
The Americas 295.3 305.7
Rest of Europe, Middle East & Africa 231.2 247.1
Asia Pacific 241.2 288.3
997.3 1,096.5
3. Operating Profit/(loss)
The Group operating profit/(loss) is stated after
charging/(crediting):
2019 2018
£m
£m
Depreciation and impairment of property, plant and equipment 41.8 32.4
Depreciation absorbed into inventory under standard costing (3.0) -
Depreciation and impairment of right-of-use assets 13.3 -
Amortisation and impairment of intangible assets 116.1 67.6
Amortisation absorbed into inventory under standard costing (3.2) -
Loss on sale of property, plant and equipment 0.9 0.4
Depreciation, amortisation and impairment charges included in Administrative 165.9 100.4
and other operating expenses
Increase in trade receivable loss allowance - Other Expenses (note 4) 19.0 -
Increase in trade receivable loss allowance - Administrative and other 1.0 0.1
operating expenses
Net foreign currency differences 8.6 1.7
Cost of inventories recognised as an expense 538.2 552.9
Impairment of inventories held (note 10) 2.3 -
Write-down of inventories to net realisable value 2.5 1.1
Expenditure related grant income* (0.2) (0.3)
Operating lease payments (gross of sub-lease receipts)
• Land and buildings - 7.5
• Plant and machinery and IT equipment** 1.2 2.2
Sub-lease receipts • Land and buildings (0.3) (0.3)
Auditor's remuneration***:
• Audit of these financial statements 0.2 0.2
• Audit of financial statements of subsidiaries pursuant to 0.3 0.3
legislation
• Taxation compliance - 0.3
• Taxation advisory services - 0.6
• Other corporate finance services - 1.0
• All other services 0.1 0.2
Research and development expenditure recognised as an expense - 11.5
2019 2018
£m
£m
Total research and development expenditure 226.0 213.8
Capitalised research and development expenditure (226.0) (202.3)
Research and development expenditure recognised as an expense - 11.5
* Government grant income has been offset against the qualifying employee
expenditure within the Consolidated Income Statement.
** Election taken by the Group to not recognise right-of-use lease assets and
equivalent lease liabilities for short-term and low-value leases.
*** The auditors remuneration for year ended 31 December 2018 relates to
services provided by the Group's former incumbent auditors.
4. Other (expense) / income
2019 2018
£m
£m
Sale of intellectual property - 20.0
Loss allowance recognised in relation to the sale of intellectual property (19.0) -
(19.0) 20.0
Other income from the ordinary course of business of £20.0m was recognised
from the sale of certain legacy intellectual property during the year ended 31
December 2018. During the year ended 31 December 2019 the recoverability of
the outstanding receivable was assessed as doubtful resulting in a loss
allowance of £19.0m recognised as a charge to the Consolidated Income
Statement.
5. Adjusting items
2019 2018
£m
£m
Adjusting operating expenses:
Impairment of assets:
Development costs (27.7) -
Plant, machinery, fixtures and fittings (4.7) -
Tooling (3.7) -
Inventory (2.3) -
Right-of-use lease assets (note 11) (1.0) -
(39.4) -
Restructuring costs (2.8) -
Initial Public Offering costs:
Staff incentives 0.6 (61.2)
Professional fees (0.5) (12.9)
(42.1) (74.1)
Adjusting finance expenses:
Movement on derivatives not qualifying for hedge accounting (6.6) -
Premium paid on the redemption of preference shares - (46.8)
Preference share fee write-off - (15.1)
(6.6) (61.9)
Total adjusting items before tax (48.7) (136.0)
Tax credit on adjusting items 8.8 10.5
Adjusting items after tax (39.9) (125.5)
The Lagonda brand is expected to be relaunched no earlier than 2025
(previously 2022) and while development of Rapide E is substantially complete,
the programme has been paused pending further review. An assessment of the
carrying value of Rapide E assets, and assets carried across from Rapide as
part of the Group's carry-over-carry-across ("COCA") principle, has resulted
in an impairment charge of £39.4m - see note 10 for further details.
In 2019 the Group incurred employee redundancy costs of £2.8m (31 December
2018: £nil) as part of the first phase of a restructuring plan that is
expected to conclude in 2020.
During the year ended 31 December 2018 staff incentive and other costs were
incurred as part of the Initial Public Offering ("IPO"). These costs included
accrued staff incentives due for payment in 2019. In the context of the
continuing challenging trading conditions during 2019, the executive team no
longer believed that it was appropriate to receive their 2018 IPO related
bonus payments and, following further discussion with the Remuneration
Committee, agreed to waive their unpaid bonus in full. This resulted in £4.2m
being credited back to the Consolidated Income Statement in 2019 as an
adjusting item to remain consistent with the treatment of the initial accrual
in 2018.
The Legacy LTIP share option charge for the year ended 31 December 2019
related to the IPO was £3.6m and is included in Staff incentives (2018:
£24.1m).
In the year-ended 31 December 2019 a charge of £6.6m was recognised in
relation to fair value movements of derivative financial instruments held to
hedge future foreign currency cashflows, but where the necessary criteria for
hedge accounting had not been met. Once the criteria for hedge accounting had
been met, all movements in the fair value of these derivative financial
instruments are recorded either in Other Comprehensive Income or in arriving
at adjusted operating profit/(loss) in the Consolidated Income Statement.
6. Finance income
2019 2018
£m
£m
Bank deposit and other interest income 5.0 4.2
Foreign exchange gain on borrowings not designated as part of a hedging 11.3 -
relationship
Total finance income 16.3 4.2
7. Finance expense
2019 2018
£m
£m
Bank loans, overdrafts and secured notes 55.3 44.3
Other interest 7.5 0.3
Interest on lease liabilities (note 11) 4.6 -
Net interest expense on the net defined benefit liability 1.1 1.1
Interest on preference shares classified as financial liabilities - 32.0
Interest on contract liabilities held 8.8 5.6
Finance expense before adjusting items 77.3 83.3
Adjusting finance expense items:
Premium paid on the redemption of preference shares - 46.8
Preference share fee write-off - 15.1
Movements on derivatives not qualifying for hedge accounting 6.6 -
Total Adjusting finance expense 6.6 61.9
Total finance expense 83.9 145.2
8. Taxation
Current tax charge/(credit) 2019 2018
£m
£m
UK corporation tax on (losses)/profits (1.3) 1.3
Overseas tax 13.2 6.4
Prior period movement 2.0 0.9
Total current income tax charge 13.9 8.6
Deferred tax credit
Origination and reversal of temporary differences (13.0) (13.5)
Prior period movement (0.8) (6.2)
Total deferred tax credit (13.8) (19.7)
Total income tax charge/(credit) in the Income Statement 0.1 (11.1)
Tax relating to items charged/(credited) to other comprehensive income
Deferred tax
Actuarial gains on defined benefit pension plan (0.2) 0.9
Fair value adjustment on cash flow hedges 0.1 (3.5)
Current tax
Fair value adjustment on cash flow hedges 3.3 -
3.2 (2.6)
Tax relating to items charged in equity - deferred tax
Share based payments - (13.3)
(a) Reconciliation of the total tax charge/(credit)
The tax charge/(credit) in the Consolidated Statement of Comprehensive Income
for the year is lower (2018: lower) than the standard rate of corporation tax
in the UK of 19.0% (2018: 19.0%). The differences are reconciled below:
2019 2018
£m
£m
Loss from operations before taxation (104.3) (68.2)
Loss on operations before taxation multiplied by standard rate of corporation (19.8) (13.0)
tax in the UK of 19.0% (2018: 19.0%)
Difference to total income tax charge/(credit) due to effects of:
Expenses not deductible for tax purposes 0.2 21.3
Recognition of previously unrecognised tax losses (6.3) (18.9)
Movement in unprovided deferred tax 10.5 -
Derecognition of deferred tax asset of interest deductible in future periods 8.0 -
Irrecoverable overseas withholding taxes 1.2 -
Adjustments in respect of prior periods 1.2 (5.3)
Effect of lower rates applied to deferred tax 2.2 (0.1)
Difference in overseas tax rates 1.5 1.5
Other 1.4 3.4
Total income tax charge/(credit) 0.1 (11.1)
(b) Tax paid
Total net tax paid during the year of £12.5m (2018: £7.9m).
(c) Factors affecting future tax charges
A reduction in the UK corporation tax rate to 17% (effective 1 April 2020) was
substantially enacted on 6 September 2016. This will reduce the Group's future
current tax charge accordingly.
(d) Deferred tax
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities
2018
2018
Assets
Liabilities
2019 restated*
2019 restated*
£m
£m
£m
£m
Property, plant and equipment (54.2) (49.3) - -
Intangible assets - - 117.3 111.0
Employee benefits (6.3) (6.6) - -
Provisions (13.7) (0.6) - -
Interest deductible in future periods - (7.6) - -
RDEC credit (7.0) - - -
Losses (56.6) (45.7) - -
Share based payments (13.3) (13.3) - -
Other - - 0.7 -
Deferred tax (assets)/liabilities (151.1) (123.1) 118.0 111.0
Set off of tax liabilities/(assets) 105.4 91.0 (105.4) (91.0)
Total deferred tax (assets)/liabilities (45.7) (32.1) 12.6 20.0
* See note 1 for further details.
Movement in deferred tax in 2019 1 January Gross tax recognised Gross tax recognised Other movement 31 December
2019
in income and OCI
in equity
£m
2019
£m
£m
£m
£m
Property, plant and equipment (49.3) (4.9) - - (54.2)
Intangible assets 111.0 6.3 - - 117.3
Employee benefits (6.6) 0.3 - - (6.3)
Provisions (0.6) (13.0) - (0.1) (13.7)
Interest deductible in future periods (7.6) 7.6 - - -
RDEC credit - - - (7.0) (7.0)
Losses (45.7) (10.9) - - (56.6)
Share based payments (13.3) - - - (13.3)
Other - 0.7 - - 0.7
(12.1) (13.9) - (7.1) (33.1)
Movement in deferred tax in 2018 1 January Gross tax recognised Gross tax recognised Less amounts unrecognised 31 December
2018
in income and OCI
£m
2018
£m
£m in equity
£m
£m
Property, plant and equipment 8.8 (58.1) - - (49.3)
Intangible assets 51.8 59.2 - - 111.0
Employee benefits (8.0) 1.4 - - (6.6)
Provisions (1.4) 0.8 - - (0.6)
Interest deductible in future periods - (7.6) - - (7.6)
Losses (27.7) (18.0) - - (45.7)
Share based payments - - (13.3) - (13.3)
23.5 (22.3) (13.3) - (12.1)
Other movements reflect the reclassification of RDEC credits from Trade and
other receivables to deferred tax and foreign exchange differences.
The Group believes that it is appropriate to recognise a Deferred Tax Asset in
respect of historic tax losses due to the future forecast profitability of the
Group as demonstrated by the reset business plan.
In addition to the deferred tax recognised above, the Group has a £18.5m
(2018: £nil) unrecognised net deferred tax asset in respect of interest
deductions deductible in future periods where the likelihood of recoverability
is not considered to support recognition of the asset.
The aggregate amount of temporary differences associated with investment in
subsidiaries and branches, for which deferred tax liabilities have not been
recognised is £32.5m for the year ended 31 December 2019 (2018: £34.5m).
9. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the loss for the
year available for equity holders by the weighted average number of ordinary
shares in issue during the year.
Diluted earnings per ordinary share is calculated by adjusting basic earnings
per ordinary share to reflect the notional exercise of the weighted average
number of dilutive ordinary share awards outstanding during the year. The
weighted average number of dilutive ordinary share awards outstanding during
the year are excluded when including them would be anti-dilutive to the
earnings per share value.
Continuing and total operations 2019 2018
Basic earnings per ordinary share
Loss available for equity holders (£m) (113.2) (62.7)
Basic weighted average number of ordinary shares (million) 228.0 202.1
Basic loss per ordinary share (pence) (49.6p) (31.0p)
Diluted earnings per ordinary share
Loss available for equity holders (£m) (113.2) (62.7)
Diluted weighted average number of ordinary shares (million) 228.0 202.1
Diluted loss per ordinary share (pence) (49.6p) (31.0p)
2019 2018
Number
Number
Diluted weighted average number of ordinary shares is calculated as:
Basic weighted average number of ordinary shares((1)) (million) 228.0 202.1
Adjustments for calculation of diluted earnings per share((2)):
Legacy long-term incentive plan - -
2019 long-term incentive plan - -
Weighted average number of diluted ordinary shares (million) 228.0 202.1
1. Additional ordinary shares issued as a result of the share split conducted
in 2018, have been incorporated in the 2018 earnings per share calculation in
full without any time apportionment.
2. The number of ordinary shares issued as part of the Legacy long-term
incentive plan, and the potential number of ordinary shares issued as part of
the 2019 Long-term incentive plan, have been excluded from the weighted
average number of diluted ordinary shares as including them is anti-dilutive
to diluted earnings per share.
Adjusted earnings per share is disclosed in note 14 to show performance
undistorted by adjusting items and give a more meaningful comparison of the
Group's performance.
10. Impairment testing
INDEFINITE USEFUL LIFE NON-CURRENT ASSETS
Goodwill and brands acquired through business combinations have been allocated
for impairment testing purposes to one cash-generating unit - the Aston Martin
Lagonda Group business. This represents the lowest level within the Group at
which goodwill and brands are monitored for internal purposes.
The Group tests the carrying value of goodwill and brands at the
cash-generating unit level for impairment annually or more frequently if there
are indicators that goodwill or brands might be impaired. At the year-end
reporting date, a review was undertaken on a value in use basis, assessing
whether the carrying values of goodwill and brands were supported by the net
present value of future cash flows derived from those assets.
Key assumptions used in value in use calculations
The calculation of value in use for the cash-generating unit is most sensitive
to the following assumptions:
• Cash flows were projected based on actual operating results and
the reset five-year business plan. Beyond this, cash flows were extrapolated
using a constant growth rate of 2.0% per annum. Key assumptions such as
revenue, gross margin and fixed costs within the forecasts are based on past
experience and the reset business plan;
• Discount rates are calculated using a weighted average cost of
capital approach. They reflect the individual nature and specific risks
relating to the business and the market in which the Group operates. The
pre-tax discount rate used was 9.0% (2018: 10.2%*); and
• An exchange rate of $1.33/£ has been used for 2020, with $1.40/£
used for 2021 into perpetuity.
Sensitivity analysis
• the pre-tax discount rate would need to increase to 16.2% for the
assets to become impaired; or
• the growth rate of 2.0% per annum beyond the five-year plan would
need to be -11.8% for the assets to become impaired; or
• the USD exchange rate would need to increase to $1.97/£ (with all
other currencies moving against the £ in line with the $) for the assets to
become impaired.
*Restated - the post-tax discount rate was incorrectly disclosed in the 31
December 2018 Consolidated Financial Statements.
FINITE USEFUL LIFE NON-CURRENT ASSETS
Recoverability of non-current assets with finite useful lives include
property, plant and equipment, right-of-use lease assets and certain
intangible assets. Intangible assets with finite useful lives mainly consist
of capitalized development costs.
The Group reviews the carrying amount of non-current assets with finite useful
lives when events and circumstances indicate that an asset may be impaired.
Impairment tests are performed by comparing the carrying amount and the
recoverable amount of the cash-generating unit ("CGU"). The recoverable amount
is the higher of the CGU's fair value less costs of disposal and its value in
use.
In assessing the value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks.
IMPAIRMENT
At 31 December 2019 the Group was engaged in early stage discussions with
strategic investors in relation to building longer term relationships. The
impact on current project lifecycles and the cadence of future model launches
was under review.
On 31 January 2020, the Group announced its intention to strengthen its
financial position in order to immediately improve liquidity and reduce
leverage. A proposed placing of newly issued ordinary shares of the Company to
a Consortium, and a subsequent underwritten rights issue, was proposed for
completion following the publication of the 2019 Annual Report and Accounts.
The Group and ventures affiliated to the Consortium agreed, as part of the
reset business plan, to control medium-term investment requirements providing
greater financial stability and flexibility. The Lagonda brand is now expected
to be relaunched no earlier than 2025 (previously 2022) and while development
of Rapide E is substantially complete, the programme has been paused pending
further review.
With the aforementioned indicators of impairment, a review of the carrying
value of Rapide E assets and assets carried across from Rapide as part of the
Group's carry-over-carry-across ("COCA") principle has been completed. As a
result of this review an impairment charge has been recognised in full for the
Rapide E assets:
2019
£m
Development costs 27.7
Plant, machinery, fixtures and fittings 4.7
Tooling 3.7
Inventory 2.3
Right-of-use lease assets (note 11) 1.0
Total impairment charge recognised as adjusting in the Consolidated Income 39.4
Statement
11. Leases
The Group holds lease contracts for buildings, plant and machinery and IT
equipment.
The application of IFRS 16 required the Group to make estimates that affect
the valuation of lease liabilities and right-of-use lease assets. These
predominantly include determining the contracts that fall under IFRS 16, the
contract term and the interest rate used for the discounting of future cash
flows.
The lease term determined by the Group comprises a non-cancellable period,
periods covered by an option to extend if the Group is reasonably certain to
exercise the option and periods covered by an option to terminate if the Group
is reasonably certain not to exercise that option. The same period is applied
to determine the useful economic life and therefore the depreciation rate of
the right-of-use lease assets.
The modified retrospective transition approach was chosen under which, prior
to reflecting the impact of lease incentives, deposits and dilapidation
provisions, the Group evaluated its lease liability on transition using
incremental borrowing rates assessed at the date of transition with a
right-of-use assets of equal value.
The Group has elected, under IFRS 16, not to recognise right-of-use lease
assets and lease liabilities for short-term and low value leases. It continues
to recognise these lease costs on a straight-line basis over the lease term
within Administrative and other operating expenses in the Consolidated Income
Statement.
The equity reserves of the Group at 1 January 2019 have been reduced by £2.2m
to reflect the derecognition of legal and other costs associated with lease
agreements previously expensed over the lease term. Whilst qualifying costs of
this nature incurred would be included in the value of the associated
right-of-use asset following adoption of IFRS 16, under the transition
approach adopted this treatment is not followed.
£m
Operating lease commitment disclosed at 31 December 2018 124.3
Exemption applied (2.0)
Embedded leases 5.3
Lease incentives and other 43.2
Gross lease liabilities at 1 January 2019 170.8
Discounting (54.3)
Lease liabilities upon adoption of IFRS 16 at 1 January 2019 116.5
Management have implemented new processes and procedures across the Group to
ensure compliance with the new accounting standard.
a) Right-of-use lease assets
The Group is party to property leases with terms of 1 to 30 years, in addition
to plant, machinery and IT equipment leases of between 1 to 5 years.
Properties Plant and machinery IT equipment Total
£m
£m
£m
£m
Cost
Introduced on adoption of IFRS 16 at 1 January 2019 72.7 4.6 5.2 82.5
Additions 3.3 5.3 1.2 9.8
Modifications (0.3) - - (0.3)
Transfer from tangible fixed assets - 3.3 - 3.3
Effect of movements in exchange rates (0.4) - - (0.4)
Balance at 31 December 2019 75.3 13.2 6.4 94.9
Depreciation
Introduced on adoption of IFRS 16 at 1 January 2019 - - - -
Charge for the year 7.7 2.1 2.5 12.3
Impairment (note 10) 1.0 - - 1.0
Effect of movements in exchange rates (0.2) - - (0.2)
Balance at 31 December 2019 8.5 2.1 2.5 13.1
Carrying value
Introduced on adoption of IFRS 16 at 1 January 2019 72.7 4.6 5.2 82.5
At 31 December 2019 66.8 11.1 3.9 81.8
b) Obligations under leases
Future gross minimum rentals payable accounted for under IAS 17 as at 31
December 2018 were:
2018
£m
Not later than one year 0.2
After one year but not more than five years 12.6
More than five years 111.5
124.3
The weighted average of the incremental borrowing rate applied to the lease
liabilities recognised in the Statement of Financial Position at 1 January
2019 was 4.04%.
The maturity profile of undiscounted lease cash flows accounted for under IFRS
16 as at 31 December 2019 are:
2019
£m
Less than one year 14.8
One to five year 30.4
More than five years 126.4
171.6
The maturity profile of discounted lease cash flows accounted for under IFRS
16 as at 31 December 2019 are:
2019
£m
Less than one year 14.1
One to five year 26.3
More than five years 71.0
111.4
Analysed as:
Current 14.1
Non-current 97.3
111.4
The total lease interest expense for the year ended 31 December 2019 was
£4.6m. Total cash outflow for leases accounted for under IFRS 16 for the
current year was £15.5m.
Expenses charged to the Consolidated Income Statement for short-term and
low-value leases for the year-ended 31 December 2019 were £1.0m and £0.2m
respectively. The portfolio of short-term leases at 31 December 2019 is
representative of the expected annual short-term lease expense in future
years.
The impact of IFRS 16 on the Consolidated Income Statement excluding tax, for
the year-ended 31 December 2019 is:
As Reported Add back IFRS 16 interest charge Add back Less Amortisation of Legal fees Less Less Excluding impact of
31 December 2019 £m IFRS 16 depreciation charge £m Lease incentives IAS 17 IFRS 16
£m
£m £m lease cost 31 December 2019
£m
£m
Revenue 997.3 997.3
Cost of sales (642.7) (642.7)
Gross profit 354.6 - - - - - 354.6
Selling and distribution expenses (95.0) (95.0)
Administrative and other operating expenses (277.3) - 12.3 (0.2) 1.2 (15.5) (279.5)
Other (expense)/income (19.0) (19.0)
Operating profit/(loss) (36.7) - 12.3 (0.2) 1.2 (15.5) (38.9)
Finance income 16.3 16.3
Finance expense (83.9) 4.6 - - - - (79.3)
(Loss)/profit before tax (104.3) 4.6 12.3 (0.2) 1.2 (15.5) (101.9)
Adjusted EBITDA (note 14) 134.2 - - (0.2) 1.2 (15.5) 119.7
The above disclosure has been included to facilitate the understanding of the
impact of adopting IFRS 16 on the Group.
12. Net Debt
The Group defines Net Debt as current and non-current borrowings in addition
to inventory repurchase arrangements, less cash and cash equivalents including
cash held not available for short-term use. Lease liabilities accounted for
under IFRS 16 are excluded from Net Debt.
2019 2018
£m
£m
Cash and cash equivalents 107.9 144.6
Cash held not available for short-term use 8.7 -
Inventory repurchase arrangement (38.9) -
Loans and other borrowings - current (114.8) (99.4)
Loans and other borrowings - non-current (839.1) (604.7)
Net debt (876.2) (559.5)
Movement in net debt
Net decrease in cash and cash equivalents (42.5) (25.9)
Add back cash flows in respect of other components of net debt:
New borrowings (260.8) (98.1)
Proceeds from inventory repurchase arrangement (38.7) -
Proceeds from existing borrowings (102.3) (0.3)
Repayment of existing borrowings 91.5 -
Movement in cash held not available for short-term use 8.7 -
Transaction fees 4.1 -
Increase in net debt arising from cash flows (340.0) (124.3)
Non-cash movements:
Conversion of preference shares to ordinary shares - 302.9
Foreign exchange gain/(loss) on secured loan 23.7 (18.4)
Interest added to debt (1.1) (49.3)
Unpaid transaction fees (2.0) -
Foreign exchange gain and other 2.7 2.7
(Increase)/decrease in net debt (316.7) 113.6
Net debt at beginning of the year (559.5) (673.1)
Net debt at the end of the year (876.2) (559.5)
13. Capital Commitments
Capital expenditure contracts to the value of £74.4m (2018: £94.2m) have
been committed but not provided for as at 31 December 2019.
14. Alternative Performance Measures
In the reporting of financial information, the Directors have adopted various
Alternative Performance Measures ("APMs"). APMs should be considered in
addition to IFRS measurements. The Directors believe that these APMs assist in
providing useful information on the underlying performance of the Group,
enhance the comparability of information between reporting periods, and are
used internally by the Directors to measure the Group's performance.
The key APMs that the Group focuses on are as follows:
i) Adjusted EBT is the (loss)/profit before tax and
adjusting items as shown in the Consolidated Income Statement.
ii) Adjusted EBIT is the (loss)/profit from operating
activities before adjusting items.
iii) Adjusted EBITDA removes depreciation, loss on sale
of fixed assets and amortisation from adjusted EBIT.
iv) Adjusted Earnings Per Share is loss after tax before
adjusting items as shown in the Consolidated Income Statement, divided by the
weighted average number of ordinary shares in issue during the reporting
period.
v) Normalised Adjusted Earnings Per Share is loss
after tax before adjusting items as shown in the Consolidated Income
Statement, divided by the closing number of ordinary shares in issue at the
end of the reporting period.
vi) Net Debt is current and non-current borrowings in
addition to inventory repurchase arrangements, less cash and cash equivalents
and cash held not available for short-term use but excluding lease liabilities
recognised following the adoption of IFRS 16, as shown in the Consolidated
Statement of Financial Position.
vii) Adjusted leverage is represented by the ratio of Net
Debt to the last twelve months ('LTM') Adjusted EBITDA, excluding the impact
of IFRS 16.
viii) Adjusted Return on Invested Capital represents
adjusted operating profit after adjusted tax divided by the sum of gross debt,
including inventory repurchase arrangements whilst excluding lease
liabilities, and equity.
Income statement
2019 2018
£m £m
Loss before tax (104.3) (68.2)
Adjusting operating expenses (note 5) 42.1 74.1
Adjusting finance expenses (note 5) 6.6 61.9
Adjusted (loss)/profit before tax (EBT) (55.6) 67.8
Adjusted finance income (16.3) (4.2)
Adjusted finance expense 77.3 83.3
Adjusted Operating Profit (EBIT) 5.4 146.9
Reported depreciation 42.7 32.4
Reported amortisation 85.2 67.6
Loss on disposal of fixed assets 0.9 0.4
Adjusted EBITDA 134.2 247.3
Earnings per share
2019 2018
£m £m
Adjusted earnings per ordinary share
Loss available for equity holders (£m) (113.2) (62.7)
Adjusting items (note 5)
Adjusting items before tax (£m) 48.7 136.0
Tax on adjusting items (£m) (8.8) (10.5)
Adjusted (loss)/earnings (£m) (73.3) 62.8
Basic weighted average number of ordinary shares(1) (million) 228.0 202.1
Adjusted (loss)/earnings per ordinary share (pence) (32.1p) 31.1p
Adjusted diluted earnings per ordinary share
Adjusted (loss)/earnings (£m) (73.3) 62.8
Diluted weighted average number of ordinary shares(1) (million) 228.0 202.1
Adjusted diluted earnings per ordinary share (pence) (32.1p) 31.1p
2019 2018
£m £m
Normalised adjusted earnings per ordinary share
Adjusted (loss)/earnings (£m) (73.3) 62.8
Basic number of ordinary shares as at 31 December(2) (million) 228.0 228.0
Normalised adjusted (loss)/earnings per ordinary share (pence) (32.1p) 27.5p
Normalised adjusted diluted earnings per ordinary share
Adjusted (loss)/earnings (£m) (73.3) 62.8
Diluted number of ordinary shares as at 31 December(2) (million) 228.0 228.0
Normalised adjusted diluted (loss)/earnings per ordinary share (pence) (32.1p) 27.5p
1. Additional ordinary shares issued as a result of the share split conducted
in 2018 have been incorporated in the earnings per share calculation in full
without any time apportionment.
2. The basic and diluted number of ordinary shares as at 31 December have been
used as the basis for the current year normalised EPS calculation. This
represents an indication of the future weighted average number of ordinary
shares for evaluating performance of the Group. No adjustment is made for the
potential number of ordinary shares issued as part of the 2019 Long-term
incentive plan as including them is anti-dilutive.
Net debt
2019 2018
£m £m
Opening cash and cash equivalents 144.6 167.8
Cash inflow from operating activities 19.4 222.6
Cash outflow from investing activities (305.2) (306.3)
Cash inflow from financing activities 243.3 57.8
Effect of exchange rates on cash and cash equivalents 5.8 2.7
Cash and cash equivalents at 31 December 107.9 144.6
Cash held not available for short-term use 8.7 -
Borrowings (953.9) (704.1)
Inventory repurchase arrangement (38.9) -
Net Debt (876.2) (559.5)
Adjusted EBITDA 134.2 247.3
Impact of IFRS 16 on adjusted EBITDA (14.5) -
Adjusted EBITDA (excluding the impact IFRS 16 - note 11) 119.7 247.3
Adjusted leverage 7.3x 2.3x
Adjusted Return on Invested Capital
2019 2018
£m £m
Adjusted operating profit (EBIT) 5.4 146.9
Tax (charge)/credit (8.9) 0.6
Adjusted operating (loss) / profit after tax (3.5) 147.5
Senior Secured Notes 829.9 590.9
Unsecured loans - 1.4
Inventory repurchase arrangement 38.9 -
Loans and borrowings 124.0 118.8
Gross Debt 992.8 704.1
Total Shareholders' equity 358.9 449.4
1,351.7 1,153.5
Adjusted Return on Invested Capital (0.3%) 12.8%
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