Aston Martin Lagonda Regulatory News (AML)

31 July 2019

Aston Martin Lagonda Global Holdings plc

Interim results for the 6 months to 30 June 2019

Balancing growth and brand positioning; Preparing for DBX launch in Q2 2020

1Number of vehicles including specials; 2Alternative performance measures are defined in the Appendix; 3Adjusting items are detailed in note 4 of the Interim Financial Statements

Dr Andy Palmer, Aston Martin Lagonda President and Group CEO, said:

"As described in our trading statement on 24 July, both our retail and wholesale volumes have increased year-on-year. However, we are disappointed that our projections for wholesales have fallen short or our original targets impacted by weakness in two of our key markets as well as continued macro-economic uncertainty. Accordingly, we have taken action to reduce wholesale guidance for 2019. We are also improving efficiency across the business, whilst protecting the brand.

Retail growth of 26% in the first half was driven by demand for the Vantage and DBS Superleggera, and sharply increased sales in the US and China reflecting our underlying strength and increasing our overall market share. We have also been encouraged by demand for Specials with the development of the sold out Aston Martin Valkyrie and the oversubscribed Valhalla models. Our preparations for the DBX, our first SUV, remain on track and our new St Athan facility has been commissioned. With the UK's exit from the European Union imminent, we have enacted our plans to ensure operational readiness for the supply of parts and cars.

We remain focused on execution of the Second Century Plan, financial discipline, long-term sustainable growth and ensuring we have the right funding structure in place. The strength of our brand underpins our confidence in the long-term opportunities ahead."

Key results

·; Retail unit sales +26%, with increased share of luxury market against backdrop of difficult market conditions for the wider auto-industry

·; Revenues fell to £407m as fewer Specials and core mix (more Vantage) offset growth in wholesale units

·; Operating profit reduced year-on-year due to the planned costs of expansion, an improved retail financing offer, lower Specials volume and lower Average Selling Price (ASP); In addition to a one-off £19m provision for a doubtful debt relating to the sale of legacy Intellectual Property in the prior year

·; Core wholesales +9%; Total unit growth +6%, with planned lower Specials volume (36 vs 95)

·; Continued strength in Americas (+54%) and APAC (+24%), including China (+39%), offset softness in the UK (-17%) and EMEA (-19%)

·; Core ASP £140k (H1 2018: £146k); Group ASP at £145k (H1 2018: £167k) reflecting increased Vantage mix, improvements to lease offerings and fewer Specials

·; Net cash from operations at £21m driven by planned £71m inventory build and substantial reversal of c.£90m receivable from December 2018 

·; Net debt at £732m with adjusted net leverage of 4.7x last 12 months (LTM) adjusted EBITDA (December 2018: £560m, 2.3x LTM adjusted EBITDA); reflects placement of $190m of mirror bonds 1 April 2019, investment in the period (including capex of £162m), and seasonally low cash position

·; No change in Q4 weighting to deliveries, both core and Specials (DB4 GT Zagato continuations); Lower fixed cost run-rate in the second half as marketing costs fall and efficiencies are delivered

·; Plan reflects continued external uncertainty for remainder of 2019, which we will monitor into 2020

Product expansion continues

·; DBX on track with new St Athan facility now commissioned and manufacturing first pre-production cars; DBX dynamic appearance at Goodwood Festival of Speed; Encouraging feedback from customer clinics in key markets of China and the US

·; Deliveries of DBS Superleggera Volante begin in Q3 and Vantage AMRs deliver in Q4 2019

·; Aston Martin Valkyrie made its dynamic debut at the British Grand Prix in July and its racing sibling is set to campaign at 24 Hours of Le Mans in 2021

·; Over-subscribed AM-RB 003 special named as Aston Martin Valhalla; Powered by all new Aston Martin hybrid V6 turbo mid-engine

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

Grace Barnie Corporate Communications Manager +44 (0)7880 903490

grace.barnie@astonmartin.com

Teneo

Tim Burt, Doug Campbell, Haya Herbert-Burns +44 (0)20 7420 3189

·; There will be a call for investors and analysts today at 09:00am

·; The conference call can be accessed live via a dial-in facility on +44 3333000804; PIN: 37458890#, please find more details on the corporate website https://www.astonmartinlagonda.com/investors/calendar/h1-2019-results 

·; A replay facility will be available on the website later in the day

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. 

FIRST HALF REVIEW

The first half of 2019 has seen Aston Martin Lagonda continue to execute its Second Century Plan. The more challenging global macro-economic environment is impacting the company, as communicated on 24 July. However, the successful execution of the Plan will position the Company for long-term sustainable growth through its diversified and expanded product range, wider geographic footprint and increased manufacturing capacity.

Strengthened core sports car ranges

The company is currently producing its three core models: the DB11, Vantage and DBS Superleggera. The two new variants launching in the second half of 2019 made dynamic debuts at Goodwood Festival of Speed in July. The DBS Superleggera Volante (delivering from Q3) and the manual Vantage AMR, limited to 200 units worldwide (deliveries in Q4). Deliveries of the Vantage Roadster will begin next year.

DBX production trial build progressing well at St Athan

Pre-production builds of the DBX, Aston Martin Lagonda's first Sport Utility Vehicle (SUV), started as planned and our new St Athan manufacturing site in Wales has now completed commissioning. The facility is now being tested and validated for ramp-up to full production in parallel with the extensive dynamic testing of the pre-production cars. The Take-to-Market plan is in progress with the first public showing at the Goodwood Festival of Speed clearly demonstrating the car's sporting credentials. The DBX is also being tested with customers, receiving encouraging feedback from initial clinics in the US and China. We will start building the order book from 18 August at the Monterey Car Week, California as part of our 'Confidential' prospecting activity. Plans remain on track for the DBX global reveal in December 2019 and initial deliveries in Q2 2020.

Mid-engined sports cars

The company continued to develop its first four mid-engined sports cars - the Aston Martin Valkyrie, Aston Martin Valkyrie AMR Pro, Aston Martin Valhalla and the Vanquish Vision Concept - which were showcased at this year's Geneva Auto Show. The Aston Martin Valkyrie broke cover in July completing a lap of Silverstone at the British Grand Prix. The intensive development programme for this, the world's most extreme road car, continues ahead of the first car being delivered in Q4 2019. A progressive ramp-up will see deliveries of the Aston Martin Valkyrie building towards run-rate maturity from Q2 2020. We were also pleased to announce that the Aston Martin Valkyrie - which is sold out - will mark an historic return for Aston Martin to the pinnacle of sports car racing when it campaigns at 24 Hours of Le Mans in 2021. Demand for the recently named Aston Martin Valhalla (a 500-unit coupe special, previously called AM-RB 003), already outstrips planned supply and development continues on the Vanquish Vision Concept, with the global reveal of the production car scheduled for 2020.

Specials development

Our Specials strategy is a key element of the business and demand for our Specials continues to go from strength to strength. Deliveries are on track for the fourth quarter of our most expensive new car, the DB4 GT Zagato Continuation, one half of the Aston Martin DBZ Centenary Collection of 19 pairs, which made its public debut at Le Mans. The Rapide E, Aston Martin's first all-electric model, powered by an 800V battery, was revealed at the Shanghai auto show, and completed its dynamic debut at the Monaco ePrix, before climbing the Goodwood hill during the Festival of Speed.

Operational discipline

The company is focused on protecting its luxury brand positioning, maintaining discipline on wholesale units and maintaining the quality of sales. This approach led to the decision announced on 24 July to reduce our wholesale volume guidance for 2019. The dealer network improvement continues with four new dealerships opening in the half alongside four terminations, strengthening the footprint in Asia in particular. In terms of the supply chain we are introducing a more robust and consistent supplier management process to support improved efficiency and effectiveness of our manufacturing operations, particularly ahead of scaling production at St Athan in 2020.

Operationally prepared for UK withdrawal from the European Union

In the first quarter, the company successfully tested plans put in place to mitigate the impact on the business from potential supply chain disruption should the UK withdraw from the European Union without an agreement or in an unstructured manner. This included deploying additional racking and packaging, and utilising revised supply chain routes. The company expects to deploy the same operational plan in October. Whilst the wider potential commercial impacts are currently unknown, we remain confident that operationally the business is prepared for the UK's departure from the European Union.  

Sales & Revenue analysis

Wholesale units by region

Note: Includes specials

Unit sales of core cars, excluding Specials, rose 9% for the period. Total wholesale unit growth was 6%, with fewer Specials year-on-year as planned, particularly in Q2. The planned Specials cadence for the year is primarily to support the Aston Martin Valkyrie prototype build and ramp-up, and the development of products for inclusion in the latest instalment of the James Bond franchise. Retail unit sales (up +26%) were significantly ahead of wholesales, allowing dealer inventories to return to more normal levels.

Regionally, total wholesales in APAC rose 24% (China up 39%) and the Americas up 54% continues to outperform, with particular strength in Q2 (up 83%). This growth was offset by continuing softer trends in the UK (down 17%) and Europe (down 19%), both softening further in Q2. This performance was also impacted by the higher than usual dealer inventory levels at the start of the year, and the ensuing disciplined approach to managing supply. This particularly impacted the UK and Europe where deteriorating macro-economic factors are also now starting to be felt.

Revenue by Category

1H1 2018 excludes £20m of revenue from a significant contract relating to the sale of certain legacy intellectual property reported as revenue in the first half of 2018, and reclassified as "other income" in the 2018 Financial Statements

First half revenues were lower year-on-year at £407m (H1 2018: £425m), as model mix, driven by significantly fewer specials and Vantage, drove a lower overall ASP. Revenues from sales of parts and servicing, were broadly unchanged year-on-year combined as the heritage team focused on DB4 GT Zagato Continuation builds and cars for the upcoming Bond 25 film. Income from Brands and Motorsport was driven by new Vantage GT3 and GT4 race car sales.

Total ASP was £145k (H1 2018: £167k) with significantly fewer specials than the prior year (as planned), 36 compared with 95, and reflecting an ASP on core models of £140k (H1 2018: £146k). Core model mix shifted year-on-year with increased Vantage mix, offsetting the strength in DBS Superleggera. 

Summary income statement

Note: For definition of alternative performance measures and detail on adjusting items please see the Appendix and note 18 of the Interim Financial Statements; 1Excludes adjusting items; 2EPS is presented on a diluted basis.

Gross profit was lower year-on-year at £148m with a gross margin of 36% (H1 2018: £180m; 42%). This reflected the planned decline in the number of specials year-on-year, particularly in Q2, and the core model mix, which led to a lower core ASP in addition to an improved lease offer.

Total adjusted operating expenses were £164m with:

·; planned year-on-year increases in motorsport, DBX and the St Athan plant,

·; higher marketing spending across existing and recently launched products,

·; increased headcount to support unit growth, and first time PLC related costs.

Depreciation and amortisation of £57m (H1 2018: £42m) was up £16m on the prior year with scale production of three core models in the period and included a £6m IFRS 16 charge.

The adjusted operating loss in the period was £35m (H1 2018: £64m profit).

Adjusted EBITDA was £22m with a margin of 5% after the £19m provision relating to sales of legacy Intellectual Property recognised in FY 2018. Excluding this one-off provision, adjusted EBITDA was £41m with a margin of 10%. Adjusted EBITDA included a £7m foreign exchange benefit, primarily due to USD:Sterling movements, and a £7m benefit from the first-time adoption of IFRS 16.

Adjusting operating items of £3m predominantly relate to pre-IPO long-term employee incentives, as disclosed previously. These are expected to total £4m for the full year and have no cash impact.

Net financing costs of £41m were down from £44m in the prior year primarily due to the conversion of Preference Shares to Ordinary Shares at IPO (H1 2018: £21m). The costs in the half included the first-time interest costs for the new US Dollar bonds issued on 1 April 2019 and a one-off £7m adjusting finance expense relating to cross currency forward exposures not eligible for hedge accounting. The adjusting financing expense is split Q1: £8m charge; Q2: £1m credit, an update from at the time of the Q1 results.

Adjusted loss before tax was £70m (H1 2018: £21m profit) and reported loss before tax £79m (H1 2018: £21m profit).

The effective tax rate for the year is estimated to be c.21%[1] which is the rate that has been applied for the half. The tax credit of £16m reflects tax on adjusting items as appropriate and the loss in the period.

With 228m shares in issue, adjusted diluted EPS was negative 24.6p, diluted EPS negative 28.0p.

Cash flow and net debt

Cash generated from operating activities was £21m (H1 2018: £62m). The decline year-on-year was principally due to lower EBITDA and planned increases in inventory. A £71m finished goods and stock in plant inventory build in the period supports wholesale deliveries expected to be significantly weighted to H2. The c.£90m of receivables associated with the supply chain delays during Q4 2018 have substantially unwound, with c.£7m outstanding at the end of June. This receivable unwind of c.£83m, was partially offset by some delivery phasing at the end of the period resulting in a net £41m receivable inflow for the half. Payables increased by £43m with tight management of supplier payments and continued inflows from Specials deposits as expected.

Capital expenditure was £162m, up on the prior year (£152m) primarily due to the timing of near-term product launches, investment at St Athan and R&D spending on new programmes. With a small (£3m) interest inflow, cash used in investing was £159m. The "carry-over-carry-across" (COCA) principle remains a core part of our engineering process and will drive capex efficiency and improved quality into future generations.

The £121m inflow from financing largely reflects the private placement of $190m on 1 April 2019 of 6.5% Senior Secured Notes due April 2022 to support investment flexibility, offset by interest payments (£23m).

With a decrease in net cash of £18m, cash at 30 June 2019 was £127m (31 December 2018: £145m).

1Excluding IFRS 16 lease liabilities of £112m at 30 June 2019; 2Preference shares, which were converted into ordinary shares at IPO 3LTM adjusted EBITDA excludes the £7m benefit from first time adoption of IFRS 16 in H1 2019

Net debt at 30 June 2019 was £732m (31 December 2018: £560m). The increase was led by the $190m private placement, decrease in net cash of £18m discussed above and the currency re-valuation of the US tranche of Senior Secured Notes. Gross debt includes back-to-back facilities in China (£37m) and a £70m drawdown of the RCF supporting working capital requirements.

Adjusted leverage was 4.7x last twelve month (LTM) adjusted EBITDA (excluding the £7m benefit from first time adoption of IFRS 16 in H1 2019), reflecting the impact of the new bonds, ongoing cost growth supporting new products and future plans along with the seasonality of cashflows.

The company keeps its financing arrangements under regular review to ensure that we have the resources at hand to support the continued development of the Second Century Plan, as we did in the first half with the $190m private placement. The Group continues to have flexibility within our existing debt financing arrangements which have no maintenance covenants. Ensuring we have appropriate funding mechanisms in place is a key area of focus for management and the Board, and this includes looking on a regular basis whether additional debt financing or new facilities may be required to maintain flexibility to deliver the Second Century Plan. The Group continues the process to look at the options available.

Outlook

As previously stated, the second half will benefit from the significant weighting of Specials, DB4GT Zagato continuations and the first Aston Martin Valkyrie, in the fourth quarter. We expect demand for core cars to follow a similar profile to prior years, with deliveries of DBS Superleggera Volante beginning in Q3 and Vantage AMR deliveries in Q4. Both of these factors, in addition to a planned lower fixed cost run rate, benefitting from seasonality of motor show and motorsport spend, operational efficiencies and a lower intensity of spend supporting new products, will drive a higher concentration of profits into the second half and notably the fourth quarter. 

APPENDICES

FY 2019 guidance

·; Wholesales: 6,300-6,500

·; Adjusted EBITDA margin: ~20%

·; Adjusted operating profit (EBIT) margin: ~8%

·; Net financing expense: ~£70m, including the £7m adjusting financing expense in H1 2019 (previously £63m)

·; D&A: ~£140m

·; Effective tax rate: ~21%

·; Capex and R&D expenditure: ~£300m

Dealerships

During the first half we continued to strengthen our dealer network, upgrading four dealers in APAC.

Regional wholesale units

Note: Includes specials

Summary financials

Note: For definition of alternative performance measures please see Appendix and note 18 of the Interim Financial Statements; 1Number of vehicles including specials; 22018 excludes £20m of revenue from a significant contract relating to the sale of certain legacy intellectual property in Q2 2018, now reported as Other income; 3Restated to reflect the charge recognised in relation to hedge ineffectiveness on FX forwards - see note 4 of the Interim Financial Statements

Summary cash flow statement

Non-GAAP reconciliation

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 (loss)/profit before tax and adjusting items (note 4) as shown in the Consolidated Income Statement.

·; Adjusted EBIT is operating (loss)/profit 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 as shown in the Consolidated Income Statement, divided by the weighted average number of ordinary shares in issue during the reporting period.

·; Normalised Adjusted Earnings Per Share is (loss)/profit after income tax before adjusting items as shown in the Consolidated Income Statement, divided by the closing number of ordinary shares in issue at 31 December 2018.

·; Net Debt is current and non-current borrowings less cash and cash equivalents, excluding any impact of IFRS 16, as shown in the Consolidated Statement of Financial Position.

·; Adjusted leverage is represented by the ratio of Net Debt, adjusted for Preference Shares, to the last 12 months ("LTM") adjusted EBITDA excluding any benefit from the first time adoption of IFRS 16.

Further details and definitions of adjusting items are contained in note 4 of the Interim Financial Statements. 

Principal risks

The principal risks previously reported on pages 83 to 93 of the 2018 Annual Report have been reassessed during the period together with consideration of new and emerging risks and opportunities. We have not identified any new principal risks. The nature, likelihood and potential impact of those risks have been reviewed. The only significant change that has been identified is an increase in the likelihood rating applied to the 'Macro-economic and political instability' strategic risk. Subject to this the remaining principal risks and uncertainties that the Company faces for the second half of the year are consistent with those previously reported as summarised below:

Strategic risks

Macro-economic and political instability: The Group operates in many markets exposing us to changing economic, regulatory, social and political developments that may impact customer demand, profitability or our ability to sell within those markets. Adverse macro-economic conditions or country-specific changes to the operating, regulatory or political environment may lead to an unfavourable business climate and significant tensions between major trading parties which could impact the Group's operations. This may include explicit trade protectionism, differing tax or regulatory regimes, changing public sentiment or reduced disposable incomes which could affect demand for our vehicles.

Inability to maintain favourable competitive positioning: Maintaining our competitiveness in the high luxury segment car market is critical to achieving our strategic growth objectives. The Group competes with a number of other manufacturers with strong brands and reputations and which may have access to greater financial resources. The high luxury segment is relatively small due to the price at which cars are sold and significant investment is required to introduce new models to the market, which relies on a sufficient level of demand to support the growing levels of production and competition.

Brand/reputational damage arising from poor quality, late delivery, product recall or ineffective brand positioning and awareness: Our brand and reputation are critical in securing demand for our vehicles and in developing additional revenue streams. Damage to our brand or reputation for any reason could significantly impact our ability to deliver the volume growth required by the Second Century Plan.

Inability to incorporate automotive technological advancements (e.g. active safety, connected car, electrification, autonomous driving): Inability to keep pace with changing customer requirements and expectations with the move towards more advanced technologies due to reliance on third parties for key components and availability of funds to invest internally on product development. The Group's current liquidity position and funding structure may restrict the availability of funds to pursue potential acquisitions, invest in organic growth projects or exploit emerging business opportunities to maintain our competitiveness in relation to technological change. In particular, keeping abreast of the development of new technology (e.g. active safety, connected car, electrification, autonomous driving) in line with changes in trends and customer tastes. The Group is currently reliant upon certain key suppliers maintaining their pace of technological development and making this available to the Group in a timely manner.

Operational risks

Failure to attract, develop and retain top talent: Inability to attract, motivate, develop and retain our people to perform to the best of their ability to meet our strategic objectives. Our performance, operating results and future growth depend on our ability to attract, motivate and retain talent with the appropriate level of expertise to deliver our Second Century Plan.

Inability to deliver major programmes: Failure to implement major programmes on time, within budget and to the right technical specification could jeopardise delivery of the Second Century Plan and have significant adverse financial and reputational consequences. Successful delivery of significant programmes (including the new manufacturing facility in St Athan and core (DBX) and special (Valkyrie) vehicle programmes) is fundamental to the achievement of the Group's strategic objectives.

Inadequate protection against cyber-attack resulting in potential loss of data, system availability or operational disruption: 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. The Group's technology environment is critical to its success. A robust control environment helps decrease the risks to core business operations and/or major data loss.

Potential disruption to the supply chain: Supply chain disruption could result in production stoppages, delays, quality issues and/or increased costs resulting in adverse operational and financial consequences for the Group. Potential loss of key Tier 1 supplier or a single-source supplier, or deterioration in quality could seriously jeopardise production resulting in delayed or lost sales and brand/reputational damage. (See also the principal risk relating to Brexit).

Compliance risks

Potential non-compliance with laws and regulations: The Group's operations are subject to a broad spectrum of national and regional laws and regulations in the various jurisdictions in which we operate. These include product safety, emissions, trademarks, competition, employee and customer health and safety, data, corporate governance, employment and tax. Changes to laws and regulations or a major compliance breach could have a material impact on the business. There are new regulatory requirements which the Group needs to comply with as a publicly listed company.

Uncertainty surrounding Brexit: Various Brexit scenarios could impact the Group's financial position, supply chain and people. The current uncertainty regarding the way the UK leaves the EU makes it very difficult to plan for, with multiple scenarios having to be considered and addressed.

Financial risks

Potential impairment of capitalised development costs: The value of capitalised development costs continues to grow as we expand our product portfolio. The carrying value of development costs in our balance sheet is dependent upon the future profitability of the vehicle platforms to which they are attributed. A significant reduction in vehicle lifecycle profitability could result in the need to impair the capitalised development intangible asset.

The risks summarised above, and mitigating actions taken in respect of them, are explained and described in more detail on pages 83 to 93 of the 2018 Annual Report.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

** The comparative periods have been restated to reflect the offset of certain deferred tax assets and deferred tax liabilities in addition to the re-classification of deferred income and other liabilities - see notes 7, 10 and 15 respectively.

CONSOLIDATED STATEMENT OF CASH FLOWS

*** The comparative periods have been restated to reflect the re-classification of deferred income - see note 15.

Notes to the Interim Financial Statements

1. Basis of preparation

The results for the 6 month period ended 30 June 2019 have been reviewed by Ernst & Young LLP, the Group's auditor, and a copy of their review report appears at the end of this interim report. The results for the 6 month period ended 30 June 2018 was reviewed by KPMG LLP, the Group's previous auditor as part of the Initial Public Offering in October 2018. The financial information for the year ended 31 December 2018 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2018 prepared under International Financial Reporting Standards as adopted by the EU ("IFRS") have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

Aston Martin Lagonda Global Holdings plc (the "Company") is a company incorporated and domiciled in the UK. The Consolidated Interim Financial Statements of the Company as at the end of the period ended 30 June 2019 comprise the Company and its subsidiaries (together referred to as the 'Group').

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 and as at 30 June 2018 reflects the equity of Aston Martin Holdings (UK) Limited. The share capital of £2.1m as of 31 December 2018 and 30 June 2019 reflects the share capital of the Company.

Although the share for share exchange resulted in a change in legal ownership, in substance these Interim Consolidated Financial Statements reflect the continuation of the pre-existing group headed by Aston Martin Holdings (UK) Limited. The transaction has been accounted for as a reverse acquisition in line with IFRS 3. The comparatives, for the 6 month period ended 20 June 2018 presented in these Interim Financial Statements are the consolidated results of Aston Martin Holdings (UK) Limited. The current year Consolidated Statement of Financial Position presents the legal change in the ownership of the Group. The Consolidated Statement of changes in equity for the full year ended 31 December 2018 explains the impact of these transactions in more detail.

The Group meets its day-to-day working capital requirements and medium-term funding requirements through a mixture of Senior Secured Notes ($590m at 6.5% and £285m at 5.75%) which mature in April 2022, a revolving credit facility (£80m) of which £10m was undrawn at 30 June 2019, which matures January 2022, facilities to finance inventory, back-to-back loans and a wholesale vehicle financing facility.

The Directors have prepared trading and cash flow forecasts for the 12 month period from the date of approval of these Interim Financial Statements. These forecasts 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 Interim Financial Statements.

The forecasts make assumptions in respect of future trading conditions and in particular, the launch of future models. The nature of the Group's business is such 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 as the availability of credit insurance and sales volumes vary, in total and seasonally. The forecasts take into account the aforementioned factors to an extent which the Directors consider to represent their best estimate of future events, based on the information that is available to them at the time of approval of these Financial Statements.

The Group plans to make continued investment for growth in the next 12 months, accordingly funds generated through operations are expected to be reinvested in the business mainly through new model development and other capital expenditure. To a certain extent such expenditure is discretionary and in the event of risks occurring which could have a particularly severe effect on the Group, for instance, an extreme 'Brexit' scenario, actions such as constraining capital spending would be taken to safeguard its financial position.

Due to these risks and material uncertainties over the short term, including but not limited to the global macro-economic environment, Brexit and other factors the Group has concluded that in a severe, but plausible downturn liquidity could be eroded to the extent that additional financing or new facilities, neither of which are currently committed, may be required and they have concluded that this matter represents a material uncertainty that could cast significant doubt upon the Group's ability to continue as a going concern. The Group continues the process to look at the options available.

Nevertheless, having considered the uncertainties described above, the options available for additional financing or facilities, and after making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the financial statements. Therefore, these Interim Financial Statements do not include any adjustments that would result if the going concern basis of preparation was inappropriate.

Statement of compliance

The Interim Financial Statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as endorsed by the European Union. They do not include all the information required for full annual financial statements and should be read in conjunction with the Consolidated Financial Statements of the Group for the year ended 31 December 2018.

Significant accounting policies

The Interim Financial Statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published Consolidated Financial Statements for the year ended 31 December 2018 except for the adoption of IFRS 16 - Leases effective from 1 January 2019, details of which are given in note 10.

2. Segmental information

The Group's revenue, when assessed on an annual basis, is typically weighted toward the second half of the year. In 2018 the period to 30 June accounted for 39% of the Group's annual revenue.

Non-current assets other than financial instruments and deferred tax assets by geographic location

3. Other income/(expense)

Other income of £20.0m was recognised from the sale of certain legacy intellectual property in the 6 month period ended 30 June 2018. In the current period the recoverability of the outstanding receivable was assessed as doubtful resulting in a loss allowance of £19.0m recognised as a charge to the Income Statement.

In the 6 month period ended 30 June 2018, income relating to the sale of certain intellectual property was classified as revenue within the Consolidated Income Statement. Following subsequent review of the recurring nature of the revenue stream, it was decided to reclassify this income to Other Income within the Consolidated Income Statement for the 12 month period ended 31 December 2018. There is no impact on the Consolidated Statement of Financial Position for the 6 month period ended 30 June 2018, earnings per share or retained earnings as a result of this prior period restatement.

4. Adjusting items

1. Relates to staff incentive and other costs incurred as part of the Initial Public Offering during the year ended 31 December 2018. The costs incurred in the 6 month period ended 30 June 2019 predominantly relate to pre-IPO legacy LTIP costs.

2. In the current period a charge of £6.6m was recognised in relation to fair value movements of derivative financial instruments where there is ineffectiveness in the hedge relationship on FX forwards taken out as part of cash management for expected future payments.

5. Finance income

6. Finance expense

7. Income tax credit/(charge)

The adjusted effective tax rate for the period ended 30 June 2019 is 21% (period ended 30 June 2018: 45%). This compares to a UK statutory rate of tax 19% applicable to the group for the period to 30 June 2019 (19% for the period ended 30 June 2018). A reduction in the UK corporation tax rate to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. The deferred tax asset at 30 June 2019 has been calculated based on the rate of 17% substantively enacted at the period end date. In addition to the change in tax rates, permanently disallowable expenditure gives rise to further adjustments to the total tax arising in the periods.

The Statement of Financial Position at 30 June 2018 and 31 December 2018 has been restated to net down certain deferred tax assets and deferred tax liabilities (£17.7m and £91m respectively) where a right of offset exists. There is no impact on the Consolidated Income Statement for either of the comparative periods, earnings per share or retained earnings as a result of this restatement.

8. Dividends

No dividends have been declared or paid by Aston Martin Lagonda Global Holdings plc in the 6 month period to 30 June 2019 or by Aston Martin Holdings (UK) Limited in the six month period to 30 June 2018. A dividend of £6m was declared and paid by Aston Martin Works Limited in the 6 month period ended 30 June 2018, a company in which the group has a 50% interest, resulting in a payment of £3m to the non-controlling interests.

9. Earnings per ordinary share