TIDMAML
RNS Number : 9725R
Aston Martin Lagonda Global Hld PLC
11 March 2021
11 March 2021
Annual Financial Report
Aston Martin Lagonda Global Holdings plc (the "Company")
announces that it has today published its Annual Report and
Accounts for the financial year ended 31 December 2020 (the "2020
Annual Report") online and it can be viewed on the Company's
website www.astonmartinlagonda.com/investors/annual-report.
In accordance with Listing Rule 9.6.1R, the 2020 Annual Report
has been submitted to the National Storage Mechanism and will
shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism . The 2020
Annual Report will be dispatched to shareholders in due course.
The date for the Company's Annual General Meeting (AGM) and the
Notice of AGM will be published on the Company's website and
distributed to shareholders in due course.
In compliance with Disclosure Guidance and Transparency Rule
("DTR") 6.3.5, the information in the Appendix below is extracted
from the 2020 Annual Report and should be read in conjunction with
the Company's Preliminary Announcement issued on 25 February 2021,
which can also be viewed at
www.astonmartinlagonda.com/investors/results-and-presentations.
Together these constitute the material required by DTR 6.3.5 to be
communicated to the media in unedited full text through a
Regulatory Information Service. This material is not a substitute
for reading the 2020 Annual Report in full and page numbers and
cross-references in the extracted information below refer to page
numbers and cross-references in the 2020 Annual Report.
For further information, please contact:
Investors and Analysts
Charlotte Cowley, +44 (0)7771 976764
Director of Investor Relations charlotte.cowley@astonmartin.com
-----------------------------------
Media
Kevin Watters, +44 (0)7764 386683
Director of Communications kevin.watters@astonmartin.com
Grace Barnie, +44 (0)7880 903490
Corporate Communications grace.barnie@astonmartin.com
Manager
-----------------------------------
Tulchan Communications
Harry Cameron and Simon Pilkington +44 (0)20 73534200
-----------------------------------
APPIX: ADDITIONAL INFORMATION REQUIRED BY DTR 6.3.5
AUDIT REPORTS
The Preliminary Announcement includes a condensed set of
financial statements. Audited financial statements for the
financial year ended 31 December 2020 are contained in the 2020
Annual Report and Accounts. The Independent Auditors' Report on the
Group financial statements and the parent company financial
statements is set out in full on pages 87 to 95 of the 2020 Annual
Report. The audit report is unmodified and does not contain any
statements under section 498(2) or section 498(3) of the Companies
Act 2006.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The following information is extracted from page 85 of the 2020
Annual Report.
Each of the directors, whose names and functions are listed on
pages 41 to 43 confirm that, to the best of their knowledge:
-- that the consolidated financial statements, prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and IFRSs adopted
pursuant to Regulation (EC) 1606/2002 as it applies in the European
Union, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- that they consider the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group's
position and performance, business model and strategy.
PRINCIPAL RISKS
The following information is extracted from pages 33 to 37 of
the 2020 Annual Report.
The most significant changes to the Group's principal risks in
the year were:
-- INSUFFICIENT LIQUIDITY - Risk reducing following the
successful capital raises and refinancing of the Senior Secured
Notes in the period.
-- COMPETITIVE POSITIONING - Risk reducing following the
completion of the Strategic Cooperation Agreement with
Mercedes-Benz AG and the successful launch of the DBX.
-- PROGRAMME DELIVERY - Risk reducing as a result of the
successful commissioning of the St Athan facility and commencement
of DBX production.
-- ACHIEVING TARGET COST REDUCTIONS - Added as a new principal
risk. The Group's ability to achieve targeted cost reductions (e.g.
material cost, fixed and variable marketing, fixed manufacturing)
may be inhibited by the Group's low volume strategy to maintain
exclusivity and luxury positioning.
-- MACRO-ECONOMIC AND POLITICAL INSTABILITY - Impact has reduced
as the 2021 budget and business plan have been created after
consideration of the recent macro-economic impacts of key factors
such as Brexit and COVID-19.
-- SUPPLY CHAIN DISRUPTION - Risk reducing due to the measures
the Group has deployed in response to managing its risk suppliers,
critical suppliers and Brexit. These include planning for
alternative ports of entry for imports and increasing inventory
levels for critical parts.
The emergence of the COVID-19 pandemic in Q1 2020 had a
significant impact on the business with the temporary closure of
our dealerships and factories. In response to this the Company
reassessed each of its principal risks in light of the pandemic and
established a COVID-19 Task Force, comprising senior management
from each function, to manage the specific risks associated with
the pandemic. Key activities included undertaking COVID-19 specific
risk assessments, promoting and facilitating safe and secure remote
working, creating Return to Work Guidelines and deploying social
distancing measures in accordance with government guidelines for
our operational sites. This Task Force remains in place and
continues to prioritise the safeguarding and wellbeing of our
employees, contractors, suppliers, customers and their families.
Furthermore, each of the principal risks has been re-assessed to
specifically consider the impact of COVID-19.
OUR PRINCIPAL RISKS
Our risk management system is designed to identify a broad range
of risks and uncertainties which could adversely impact the
profitability or prospects of the Group. Our principal risks are
those which could have the most significant effect on the
achievement of our strategic objectives, our financial performance
and our long-term sustainability.
The following pages set out the Group's principal risks,
how these risks are linked to our strategy and the primary
mitigating actions implemented for each risk during the year ended
31 December 2020. Our principal risks change over time as some
risks assume greater importance and others may become less
significant.
We categorise principal risks within one of the following four
areas: Strategic, Operational, Compliance and Financial, and link
each risk to one or more of the key strategies that underpin our
business plan.
PRINCIPAL RISK SUMMARY
Strategic Risks
Macro-economic and political instability
Exposure to multiple political and economic factors could
impact customer demand or affect the markets in which we
operate.
Risk movement Link to Strategy Risk tolerance
Down Core product offering: three Moderate
pillar strategy
Control volume growth and
personalisation
Develop Specials pipeline
Enhance strategic partnerships
Cost and investment control
-------------------------------- ---------------
Potential Causes
* Global economic slowdown due to COVID-19.
* Unfavourable movement in exchange rates.
* Adverse economic global conditions could adversely
impact our dealer network or supply chain.
Mitigating activities
* Operational and financial review of the business
undertaken to align to the new business plan.
* Monitoring global market trends to target areas for
future growth.
* Volume planning actions to optimise dealer network
stock levels.
Competitive positioning
Maintaining our competitiveness in the high luxury segment
car market is critical to achieving our strategic growth
objectives.
Risk movement Link to Strategy Risk tolerance
Down Core product offering: three Low
pillar strategy
Control volume growth and
personalisation
Develop Specials pipeline
Enhance strategic partnerships
-------------------------------- ---------------
Potential Causes
* Failure to maintain leading design which customers
value.
* Inability to produce cars that are competitive in
terms of performance, aesthetics and quality.
* Competitor pricing activity resulting in the need to
increase retail and customer financing expenditure to
support retail sales.
Mitigating activities
* Expanding product portfolio to produce incremental
new core models.
* Maintain a regular pipeline of Special Editions and
offer fully bespoke customisation offer through the
'Q' division.
* Strategic Cooperation Agreement with Mercedes-Benz AG
to provide access to advanced technologies.
Brand/Reputational damage
Our brand and reputation are critical in securing demand
for our vehicles and in developing additional revenue streams.
Risk movement Link to Strategy Risk tolerance
No change Core product offering: three Low
pillar strategy
Control volume growth and
personalisation
Develop Specials pipeline
Enhance strategic partnerships
Cost and investment control
---------------------------------- ---------------
Potential Causes
* Product recall or late delivery could impact customer
confidence and loyalty.
* Dealer network may not be effective in raising,
maintaining and promoting brand awareness.
* Inadequate dealer training in new products and
technologies could impair the customer experience.
Mitigating activities
* Standardised embedded quality procedures (e.g.
Customer Perception Audit, Parts Approval Process) to
maintain focus on vehicle quality.
* Customer satisfaction audits and assessments
performed and monitored by the Client Services Team.
* Expanded dealer network and improved training to
ensure delivery of a luxury customer experience.
Technological advancement
It is essential to maintain pace with technological development
to meet evolving customer expectations and remain competitive.
Risk movement Link to Strategy Risk tolerance
No change Develop Specials pipeline Low
Enhance strategic partnerships
Cost and investment control
----------------------------------- ---------------
Potential Causes
* Reliance on third parties to support development of
new and emerging technologies.
* Competitors may have better access to funding to
develop new technology faster and be first to market.
* Changing and more stringent regulations may make
current technology obsolete and increase the risk of
future non-compliance.
Mitigating activities
* Strategic arrangements with key partners, including
the Strategic Cooperation Agreement with
Mercedes-Benz AG, to provide powertrain, electrical
architecture and entertainment systems.
* Commodity strategy plans developed.
* Development of modular architecture "Carry Over -
Carry Across" approach for key systems and
components.
Operational Risks
Talent acquisition and retention
We may fail to retain, engage and develop a productive workforce
and to develop key talent.
Risk movement Link to Strategy Risk tolerance
No change Control volume growth and Low - moderate
personalisation
Develop Specials pipeline
Enhance strategic partnerships
---------------------------------- -----------------
Potential Causes
* Failure to build the right capabilities and
behaviours in our leadership team.
* Key contractors leaving the business and the impact
of IR35 on our contractor population.
* Failure to engage or equip our teams to deliver our
strategy or address key capability gaps.
Mitigating activities
* Remuneration Committee oversight of senior leadership
remuneration to ensure it is aligned to the strategy
and appropriate for staff retention.
* Regular review of talent and resource risks
leveraging succession plans and employee engagement
survey results.
* Benchmarking of remuneration and bonus packages to
drive employee performance and behaviours.
Programme delivery
Failure to implement major programmes on time, within budget
and to the right technical specification could jeopardise
delivery of our strategy and have significant adverse financial
and reputational consequences.
Risk movement Link to Strategy Risk tolerance
Down Control volume growth and Low
personalisation
Develop Specials pipeline
Enhance strategic partnerships
Cost and investment control
----------------------------------- ---------------
Potential Causes
* Insufficient funds to support programme investment
requirements.
* Inability to manage third-party delivery in line with
programme timelines and milestones.
* COVID-19 related issues may impact our ability to
conduct testing or engineering development within
required timescales.
Mitigating activities
* Deployment of an established Programme Delivery
Methodology (Mission 1.3) and regular Executive
Committee status reporting and oversight.
* Restructure of the business including engineering and
project management functions.
* Focus on increased levels of "Carry Over - Carry
Across" to leverage existing core architecture across
multiple applications to expedite delivery.
Achieving target cost reductions
The Group's size and low volume strategy may inhibit its
ability to deliver targeted cost reductions, or work within
budget constraints whilst delivering the planned vehicle
programme.
Risk movement Link to Strategy Risk tolerance
New Core product offering: three Low
pillar strategy
Control volume growth and
personalisation
Develop Specials pipeline
Cost and investment control
------------------------------- ---------------
Potential Causes
* High levels of complexity across car lines can drive
increased engineering requirements with associated
increased resource and cash requirements.
* Increasing material costs.
* Inertia to new ways of working may inhibit our
ability to deliver against agreed targets and
budgets.
Mitigating activities
* CFT transformation activity to agree a cost target
process with regular CEO led cost reviews.
* Restructuring of the Engineering and Procurement
functions to align accountability and operational
procedures.
* Establishment of bi-monthly cost and cash focused
Executive Committee meetings.
Cyber security and IT resilience
Breach of cyber security could result in a system outage,
impacting core operations and/or result in a major data
loss leading to reputational damage and financial loss.
Risk movement Link to Strategy Risk tolerance
Down Cost and investment control Low
------------------------------- ---------------
Potential Causes
* Cyber attack resulting in denial of service, loss of
data or other business disruption.
* Legacy systems reaching end of life may no longer be
supported and become more susceptible to failure of
breach.
* Insufficient investment in systems and resource may
result in control deficiencies or vulnerabilities not
being addressed in a timely manner.
Mitigating activities
* Project initiated to implement a new ERP system to
transition away from end of life legacy systems and
drive efficiency within the IT infrastructure.
* Enhanced IT general controls for access management,
perimeter security, remote access (e.g. multi-factor
authentication) and password management.
* 24/7 vulnerability monitoring using Darktrace and
security incident response procedures.
Supply chain disruption
Supply chain disruption could result in production stoppages,
delays, quality issues and/or increased costs.
Risk movement Link to Strategy Risk tolerance
Down Enhance strategic partnerships Low
Cost and investment control
--------------------------------- ---------------
Potential Causes
* Suppliers may be unable to meet delivery schedules
due to being in financial distress.
* COVID-19 enforced closures, or customs clearance
procedures impacted post Brexit, could result in
disruption to delivery schedules.
* Deterioration in the Group's credit rating may lead
to supply restrictions or more stringent terms and
conditions.
Mitigating activities
* Critical supply risk assessments performed to
identify where additional stock holding or
alternative sources of supply may be required.
* QCDDM supplier performance metrics being developed to
manage under-performance within the supply base.
* Supplier financial strength and performance
assessments undertaken prior to engagement.
Brexit uncertainty
Delays in customs processing and the interpretation and
implementation of the trade deal with the EU could impact
the Group's financial position, supply chain and people.
Risk movement Link to Strategy Risk tolerance
Down Develop Specials pipeline Low
Cost and investment control
------------------------------- ---------------
Potential Causes
* Additional costs associated with increased customs
duty and tariffs.
* Extended supply lead times leading to increased
working capital investment requirements.
* Exchange and interest rate volatility impacting Group
revenues, profits and cash flows.
Mitigating activities
* Establishment of Brexit Steering Committee with
regular reporting to the Executive Committee.
* Consistent regular engagement by the Group with UK
and EU Government and Trade Bodies.
* Steps taken to prepare the supply chain and dealer
network for various Brexit scenarios.
Compliance Risks
Compliance with laws and regulations
Non-compliance with local laws or regulations may damage
our corporate reputation and subject the Group to significant
financial penalties.
Risk movement Link to Strategy Risk tolerance
Down Core product offering: three Zero
pillar strategy
Control volume growth and
personalisation
Develop Specials pipeline
Enhance strategic partnerships
Cost and investment control
--------------------------------- ---------------
Potential Causes
* Non-compliance with emissions regulations could
inhibit our ability to trade in certain markets.
* Non-compliance with labour, human rights and
environmental standards could result in financial
penalty and/or brand / reputational damage.
* Rapidly evolving climate and environmental
regulations could result in areas of non-compliance
where not addressed in a timely manner.
Mitigating activities
* Vehicle safety certification achieved for all markets
and "Small Volume" Derogation status for EU emissions
compliance.
* Standards of Corporate Conduct define our activities
in relation to key compliance areas (e.g.
anti-bribery and corruption, whistleblowing, data
protection, equality and diversity, business ethics).
* In-house legal and compliance team that manages
ongoing investigations.
* Enhanced GDPR and IT General Controls.
Financial Risks
Insufficient liquidity
The Group may not be able to generate sufficient cash to
fund its capital expenditure and debt or sustain its operations.
Risk movement Link to Strategy Risk tolerance
Down Core product offering: three Low
pillar strategy
Control volume growth and
personalisation
Develop Specials pipeline
Enhance strategic partnerships
Cost and investment control
---------------------------------- ----------------
Potential Causes
* Significant leverage levels may inhibit our ability
to raise additional capital.
* COVID-19 impact could result in reduced demand and a
reduction in available cash to support the product
development plan.
* Significant debt servicing requirements reduces cash
available to support other operational needs.
Mitigating activities
* Raising of additional capital through equity issue
and refinancing activity.
* Daily management review of cash balances and
establishment of bi-monthly Executive Committee
focusing on cash and cost performance.
* Ongoing transformation activity to deliver targeted
cost savings and efficiencies.
Impairment of capitalised development costs
The value of capitalised development costs continues to
grow as we expand our product portfolio.
Risk movement Link to Strategy Risk tolerance
No change Cost and investment control Zero
--------------------------------- -----------------
Potential Causes
* Vehicle sales volumes fall below lifecycle plans and
targets as a result of the impact of COVID-19 or
other macro-economic factors.
* Vehicle pricing and contribution reduce to levels
which no longer support the carrying value of the
attributable capitalised costs.
* Uncertainty of "Carry Over - Carry Across"
utilisation on future vehicle models and derivatives.
Mitigating activities
* Capitalisation policy and procedures reviewed
annually.
* Impairment reviews performed where triggering events
have been identified.
* Regular vehicle line reviews undertaken to monitor
sales volume and contribution performance for all car
lines with any concerns communicated to finance for
consideration of potential impairment.
RELATED PARTY TRANSACTIONS
The following information is extracted from pages 83, 141 and
142 of the 2020 Annual Report.
During the year ended 31 December 2020, the significant
shareholder groups agreed to subscribe for shares in the Company as
follows:
Number of Shares
Significant Shareholder June 2020 October 2020
Group Placing Placing
Yew Tree Consortium 75,999,277 40,000,000
Adeem/PW shareholder 9,000,000 None
group(1)
Prestige/SEIG shareholder 23,662,788 N/A
group(2)
1 The Adeem/PW shareholder group ceased to be a related party
for the purposes of the Listing Rules during the year ended 31
December 2020.
2 The Prestige/SEIG shareholder group ceased to be a related
party for the purposes of the Listing Rules during the year ended
31 December 2020.
Other related party transactions are detailed in note 31.
NOTE 31
Trans actions b e t ween Group undert akings, whi ch are rel
ated parties, have been eliminated on consolidation and accordingly
are not disclosed. The Group has ent ered into transactions, in the
ordin ary course of business, with entities with significant
influen ce over the Group. Transactions ent e r ed into, and
trading b a l a nces outstanding at each year end with entities
with significant influence o ver the Group are as follows:
Sal es Purchases Amounts Amounts
to rel from relat owed b owed to
ated ed y related
party p arty r el a party
R e l a ted pa rty - Gr GBPm GBPm ted p a GBP m
oup rty
GBPm
============================== =================== =============== =============== ============= =========
Entities with significant 31 D e c ember
influ e n ce o ver the Group 2020 1.4 2.7 - 1.3
Entities with significant 31 December
influence o ver the Group 2019 1.1 4.0 0.2 0.6
============================== =================== =============== =============== ============= =========
TRANSACTIO NS WITH D I RE CTO R S
During the year ended 31 D e c ember 2020, an a g reement was
signed with a former director of the Group for the sa le of a
vehicle at an expect ed discount of GBP0.3m. In addition to this, a
former Director of the Group purchased a vehicle at a discount of
less than GBP0.1m in line with the emplo y ee purchases policy then
in effect.
In the year ended 31 December 2019 no cars were sold to any Dir
ectors.
TERMS AND CO N DITIONS OF TRANSACTIO NS WITH RELATED PARTIES
Sales and purchases between r elat ed p arti es are made at norm
al m a rket prices. Outstanding b a l ances with entities oth er
than subsidi ari es are unsecured, interest free and cash settlem
ent is expected within 60 days of invoice. Terms and conditions for
transact ions with subsidiari es a re the sa m e, with the
exception th at b alances are placed on intercompany accounts. The
Group has not provid ed or ben efited from any guarantees for any
related party rec eivabl es or p ayabl es.
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