Good day, thank you for standing by. Welcome to the Aston Martin proposed new equity financing and strategic investment by PIF conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speakers today, Lawrence Stroll, Executive Chairman, and Doug Lafferty, CFO. Please go ahead.
Good morning. I'm Lawrence Stroll, Executive Chairman of Aston Martin Lagonda. Thank you for joining this call at such short notice. Joining me today is Doug Lafferty, our CFO. Following my opening remarks, Doug will take you through our trading update for H1 2022. We will then be more than happy to take any of your questions. Let me start by saying I am extremely pleased to be speaking to you about a major new investment in the company by one of the world's leading global investment funds, PIF, as part of a transformational capital raise for Aston Martin, which we have announced this morning.
In short, the proposed capital raise of GBP 653 million, including investments from my consortium and Mercedes-Benz, and the actions we plan to take will significantly strengthen our financial position, accelerate our long-term growth, support the delivery of our financial targets, and lay a clear pathway to become sustainably free cash flow positive and ultimately drive shareholder value. I know that our capital structure has been a topic of discussion and a concern for many of you on this call, particularly given uncertainty in the broader macro and market environments. With this capital raise, we are able to remove the significant overhang on our business and our rating, meaningfully deleveraging our balance sheet, using approximately half of the proceeds for that and maintaining substantial liquidity cushion to underpin and accelerate our future capital expenditures.
On a pro forma basis, we expect to have a cash balance between GBP 500 million and GBP 600 million after the planned debt reduction. To provide some context to today, I would like to spend some time about the tremendous progress we have made in the last two years, while also acknowledging the challenges and headwinds we have faced. Since I became chairman, we have focused on fixing the core fundamentals of the company and rebuilding the necessary foundations to deliver on our vision, which is to become the world's most desirable ultra-luxury British performance brand. Starting in April 2020, I inherited a business that was in deep trouble and needed to be completely reset. In addition to the start of the pandemic, we had record levels of inventory. We were generating losses and inherited a pressing need to refinance our debt of unprecedented uncertainty.
We also took the difficult decision to aggressively destock the dealer network to rebalance supply to demand consistent with an ultra-luxury business, reducing inventory of more than 1,800 sports cars. During the period, we also brought to market the DBX and have since claimed an estimated 20% share of the luxury SUV market and signed a strategic cooperation agreement with Mercedes-Benz, providing us the powertrains and electrical architecture to support our medium-term product portfolio and prospectively for full electric vehicles thereafter. In 2021, we more than doubled our wholesale volume to 6,000 and transformed our profitability, improving adjusted EBITDA by more than GBP 200 million in one year with COVID, supported by the execution of Project Horizon. 2021 also saw the start of Aston Martin's evolution to electrification under our stewardship.
Three of our models we brought to market, DBX Straight-Six, Valhalla, and the era-defining Aston Martin Valkyrie, all feature hybrid technology and are key steps in our electrification roadmap, which will see our first plug-in hybrid vehicle delivered in 2024 and the first battery electric Aston Martin targeted for launch in 2025. A key element of our strategy has been the rejuvenation of our iconic brand, supercharged by the company's return to the pinnacle of motorsport with the Aston Martin Aramco Cognizant Formula One Team. This is already delivering great growth and demand from a new generation of customers, with more than 60% of our customers new to the brand in 2021. 2022 has seen us continue to build on our vision, creating the strongest order book and pricing dynamics we have seen in years.
With sports cars sold out into 2023 and DBX orders up by more than 40% to previous year, and the start of the evolution of our portfolio to drive improved profitability. We've successfully introduced breathtaking new products and developed an incredible pipeline of models that combine ultra-luxury with high performance. This thrilling new dimension started with DBX707, the SUV that drives like a super coupe, according to The Wall Street Journal, and the stunning V12 Vantage, which saw all 333 units sold out well ahead of its launch. Looking into next year, we will start to launch a full range of our next-generation sports cars with substantial design changes, new infotainment, and improved vehicle driving dynamics and driver performance. Let me be really clear. We have a very clear pathway with all these product portfolio I mentioned to achieve our medium targets.
There are two key drivers. First, on DBX. Now that we've launched our three variants, the DBX Straight-Six, the much-heralded DBX707, we are targeting annual volumes at approximately 4,500 a year. Second, on sports cars. With the upcoming launch of six new models, starting in 2023, we are targeting similar volumes to our DBX. Given the strength of the demand of our current generation of seven-year-old sports cars, I am extremely confident in being able to achieve this goal. The balance is expected to come from our family of specials such as Valhalla. That should help you do the math to see how we get to our future volume targets right around the corner. Crucially, these models are aligned with our commitment to a minimum 40% contribution margin per vehicle, a very significant increase from the vehicles of the past.
In line with our sustainability strategy, we launched Racing Green earlier this year, committing to a range of science-based targets to improve our environmental impact across all aspects of the business. Lastly, and more recently, enhancing our management team with several outstanding new hires to take this business forward with seasoned veterans on this long-term journey toward electrification. Put simply, the underlying fundamentals of the company have never been stronger. It's taken us two years to get there. It's been an incredible journey, and we're arriving. I must, however, confront the challenges and headwinds we have faced as well. First, while it was absolutely right to secure the balance sheet in November 2020, the one regret I have is the punitive terms of that financing.
Whether it was markets or the state of the company at the time being deeply in negative EBITDA or both, we had to live with that financing since. In isolation alone, it would not have been a problem, but compounded with other challenges, it has slowed our progress and impacted the perception and share value of this company. Second, the economic headwinds of recent times have been clear for all to see. Whether it be Chinese lockdowns, we were on the brink of launching our DBX model that's perfect for that market, COVID-19 mobility restrictions, which slowed market launches of vehicles and deliveries, and now supply chain issues and broader macro uncertainties. We, like many of our peers, have faced a very challenging market backdrop. Third point on Valkyrie, a unique hypercar with unique challenges.
A car like this has never been designed or built and probably will never be again. It has resulted in us spending significantly more time, slightly more money on this project, but we got it done and we are on track to meet our full year target. Everything I said my consortium would do, we have done. However, there are many legacy issues and ensuing headwinds that have slowed the full progress that I would have liked to have made, and this is exactly what today's news will allow us to do. The reason I am more positive than I've ever been about Aston Martin now is this proposed capital raise is the last foundation we need to realize our vision and start to truly unlock shareholder value creation. It fixes our balance sheet and accelerates our longer-term growth trajectory while giving us additional financial resilience and flexibility.
It will also further de-risk the delivery of our financial targets and set us up for a very bright future indeed. It is an incredible testament to Aston Martin and its people, the progress we have made in the last few years when one considers the challenges we inherited and what we have had to face since. The team, now led by Amedeo, can now fully focus on simply executing our plan and delivering on our targets. You will have seen that we have reaffirmed our full year outlook for 2022 in the trading update today, which Doug will walk you through in a moment. As I mentioned earlier, I am delighted to welcome PIF as a new anchor shareholder in the company alongside my consortium.
We have a shared vision, and our joint participation in this important strategic financing demonstrates both our confidence in the prospects for the company and once again, commitment to the future success of this incredible, iconic brand, Aston Martin. I would also like to thank Mercedes-Benz for their continued support and investment in demonstrating the strong long-term partnership we have created. I will now hand over to Doug to run through the trading update we have provided today ahead of our full H1 results on the 29th of July. Doug?
Thank you, Lawrence. Good morning to everyone on the call. It's a pleasure to have the opportunity to speak with you all, my first real opportunity since becoming the CFO. As Lawrence mentioned, we're pleased to reaffirm our full year 2022 outlook, and I will quickly take you through the trading update we published this morning. In the first half of the year, we continued to benefit from strong demand across our product lines with GT and sports cars fully sold out into 2023, and order intake for DBX more than 40% higher year-over-year. Despite supply chain disruptions impacting the timing of early DBX707 deliveries in Q2, order intake remains robust and in line with our expectations.
Supply chain and logistics disruptions, including COVID-19 lockdowns in China, have understandably impacted wholesale volumes, most notably DBX deliveries in Q2, with H1 wholesale volumes of 2,676. However, pricing has been strong, and wholesale ASP continued to increase year-on-year, supported by strong dynamics throughout the core portfolio as well as FX tailwinds. In addition, initial deliveries of the fully sold out V12 Vantage run of 333 cars commenced in Q2 with an expected H2 ramp up, which will be supportive to our gross margin for the full year. There were 27 Aston Martin Valkyrie deliveries in the first half of 2022 as production rates continued to increase. 38 vehicles were assembled in the first half, and we remain on track to achieve our full year target range of 75-90 deliveries. Moving to the balance sheet.
Given FX movements during the period, we anticipate a further FX revaluation impact, mostly non-cash, on our dollar-denominated debt. Finally, in addition to our planned capital expenditure in H1 and cash interest payment in Q2, our H1 free cash flow and cash balance was highly impacted by elevated working capital outflows related to supply chain logistics and disruptions, as well as movements in the level of usage of the revolving credit facility at the end of the period. Importantly, we expect cash flows from working capital to significantly improve in the second half of the year. As Lawrence mentioned, we'll release our interim results in two weeks on the 29th of July, and I look forward to sharing more with you then. With that, we'd be happy to answer your questions.
Please, may I ask that you focus your questions on the proposed equity capital raise and keep your questions on current trading for our call on the 29th of July when we will announce our full interim results.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. Once again, star and one if you would like to ask a question. Thank you. We will now take our first question. The question comes from George Galliers from Goldman Sachs. Please go ahead. Your line is open.
Yeah, good morning. Thank you very much for hosting this call and for taking my question. Just based on what you've released today, could you confirm that the debt pay down should be roughly something in the magnitude of GBP 300 million-GBP 400 million? Then given the delta versus what you're raising, how much of that is needed to accelerate the DBX and for the Valhalla, and how much is for the future electric vehicles? Is it fair to say that outside of the products flagged in the press release, you believe that you will subsequently be in a sufficient position to generate enough cash to self-fund Aston Martin on a forward-looking basis? Thank you.
This is Lawrence. I'll answer the bit, and then I'll pass it on to Doug. As I've stated previously and for the record, the company does not require raising additional capital to see our existing portfolio of vehicles and business plan through. I said that several times. I'm saying it again. There's not needed money for DBX. There's not needed money for Valhalla. The company was well funded for that. This truly is for two reasons. One, you touched on, which Doug will come to in a minute, to pay down debt. That has been very clear and been an anchor on the share price. Second is just to give us a cushion to always have GBP 300 million-GBP 400 million on the balance sheet. In this new world, economic world we're going into, we just thought it's very prudent.
It's not needed to deliver the models in our current plan and portfolio. Doug, if you'd answer on the
Yeah, sure. Clearly, one of our priorities is to pay down some of the debt. As we stated, up to half of the net proceeds will be used in order to do that. We should be looking at somewhere north of GBP 300 million. In regards to free cash flow, you know, our business plan, and we're not changing our midterm guidance, and we talk about free cash flow positive from 2024 onwards, and we genuinely believe that we'll be able to do that.
Perfect. Thank you very much for clarifying.
Thank you. Once again, as a reminder, if you would like to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. Once again, star and one on your telephone keypad. There currently don't seem to be any further questions. Oh, we've just had another question come in. Thank you. We will now take your next question. Please stand by. Your next question comes from Gabrielle Adler from Citi. Please go ahead. Your line is open.
Yeah. Hi. Thanks for taking my question. I just want to come back on the free cash flow profile of the business going forward. Do you still expect to be free cash flow breakeven in 2023, or is one of the reasons for doing the raise today because you're more concerned about the potential cash burn next year before reaching that free cash flow positive target in 2024 that you just mentioned?
Yeah. Thanks for the question. No, we don't have any concerns about next year. I think we previously talked about our prior guidance of becoming free cash flow positive in 2023, not positive for the whole year. That's reflected in the consensus estimates. The change to free cash flow positive from 2024 is relatively small. It's just slipped into 2024.
Okay, thanks for clarifying.
Thank you. Once again, if you'd like to ask a question, please press star and one. If you're not hearing an automated message, please press star and one with a one to two-second gap in between it. Thank you. We will now take our next question, and the question comes from Christian Bolling from Barclays. Please go ahead. Your line is open.
Hi, good morning. You just mentioned that you would intend to repay north of GBP 100 million of debt. Could you be more precise with what type of debt you will be targeting, first lien or second lien or both of them, please? Thank you.
Not at this stage gonna be any more specific. As you quite rightly point out, we've got those two bonds in issue. We've got options and we'll be considering that in due course.
Okay. Thank you.
Thank you. Once again, if you'd like to ask a question, please press star and one slowly. We will now take our next question. Please stand by. Your next question comes from the line of Charles Coldicott from Redburn. Please go ahead. Your line is open.
Hi. Thank you for taking my questions. My first would also be on the cash flow outlook. Firstly, just to confirm, your expectation after paying down the debt is that your annual cash interest charge, I guess would be roughly GBP 90 million versus the GBP 120 that is currently expected this year. Can you just confirm that? And then secondly, your statement today mentions that the strategic cooperation agreement with Mercedes-Benz may be amended in due course. Can you clarify sort of what that might mean? Does that mean you can still receive the next batch of Mercedes-Benz technology in 2023, but just pay for it later? Or is it perhaps that, you know, the clause stipulating a cash component could be altered entirely?
Sorry, my second question, on the midterm volume targets, thanks for splitting out the 10,000 units by model. On the DBX, the target is 4,500 now, but I was under the impression the prior expectation was it would be 5,000-6,000 units. Has anything changed in the plan or how you expect that car to be received? On the front engine cars, 4,500 units is a good number, I guess. You know, but if I look back at 2018 and 2019, when the models were last refreshed, you were able to sell almost 6,000 units. However, I guess that was a period with high incentives. What's your sort of confidence level on that 4,500 units? Thank you.
Let me address the first, then it's Lawrence, and I'll pass it to Doug. First of all, 4,500 units was for DBX next year. We do plan, once we extend the variants, to go above 5,000 in future years. Most importantly, we also like to plan very conservatively and overachieve our numbers and our estimates. Point, point. That's the point one and point on DBX. Secondly, historically, you're absolutely right. Sports cars sold 6,000 units when I inherited the business the year previously, and as I also mentioned, there was 2,000 too many in inventory. If you look at the true consumer demand at that time, was probably much closer in running the business model we're running as a luxury retail pull model, not a wholesale retail push model.
It's closer to 4,000 would be true consumer demand. As you know, right now, we are only manufacturing cars to order since I took over as chairman in April 2020. We are already selling 3,500 sports cars. Granted, they're several years old, and that's with confirmed orders from customers and dealers. No, not one car made for speculation or inventory. We very conservatively believe, and the number could be much more than 4,500, that when we introduce all six new models of new generation sports cars, we're extremely confident that 4,500 in our first year will be a comfortable number. We might get 5,200 orders, but we might only make 4,500 cars. I think. What else was the question?
I can cover the interest question, and there was a question on the Mercedes relationship.
Listen. Mercedes relationship has demonstrated today with their capital investment in the business underpins and shows and gives a huge vote of confidence and strength, how strong an impact our relationship is. As far as tranche two is concerned, we are not sure what our EV plans are yet. We have new management in place with Amedeo, our CEO, Roberto Fedeli, our CTO, two very well-versed gentlemen in electrification. They again, they've only been there a couple of months. They wanna study all the options available to us before making any concrete decisions. Not to be misinterpreted with the close, very close relationship we have with Mercedes.
Yeah. Just on the question around the interest. Yes, your math is broadly correct. I think we should be able to save at least GBP 30 million in cash interest per annum, once we've achieved the debt pay down.
Great. Thank you.
Thank you. Once again, if you would like to ask a question, please press star and one on your telephone keypad. Please leave a small gap between star and one. Once again, star and one, if you would like to ask a question. There currently seems to be no further questions. I will hand the call back.
Thank you very much, everybody, and we look forward to speaking to you again with our Q2 H1 results in a couple of weeks. I hope you're applauding us for this incredible transformative transaction.
Thanks, everybody.
Thank you.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.