Ladies and gentlemen, thank you for standing by, and welcome to the Aston Martin Lagonda full-year results 2020 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. I must also advise you that this conference is being recorded today. I would now like to hand the conference over to your first speaker today, Tobias Moers, CEO. Please go ahead.
Good morning and welcome, everybody, to our full-year results conference. Good morning. I'm happy to take your question in a few seconds. Let me just give you a brief overview about all the key messages. I've been with Transformation last year, and we set up our turnaround plan as well as growth strategy. Everything is baked in a Project Horizon. You probably saw our presentation and our video about the achievements over the course of last year. As well, we delivered our full-year results 2020 in line with our expectations, what we set up in September/October. We aggressively destocked. We have a very aggressive plan to destock our inventory with the dealerships and as well company stock. We almost come to an end. We are there by end of that quarter, so it's partially ahead of expectation as well. Successfully launched SUV, DBX, with a quality-led ramp-up.
We wholesaled about 1,500 cars. In line with our expectation, after we realigned everything in that quality-led ramp-up approach, cars had really good receipts by our customers, great reviews from journalists, from magazines, but as well from customers as well and dealerships as well regarding quality. Very important. Next derivatives out of the DBX are going to come by third quarter this year. More to come in the second quarter of next year. As well, part of the whole journey is a new leadership team, obviously Ken and myself, but a new COO with us since December, Michael Strawn, and a very, very strong leadership team now in engineering as well for powertrain, for vehicle as well, for electrical architecture. Successfully launched Project Horizon, but I think you're going to have a lot of questions around that.
We came to a new agreement with Mercedes, which is kind of a really turning point for our business for the future. No doubts we have access to electrical architecture for the future. We have access to all powertrain derivatives, all probably V8 and other variants as well. Electrified powertrain and last but not least, electric drive platforms. Refinancing the business was a very major step for us. This is our debt rate as well. It is supporting our growth ambition, and it underlines our turnaround program as well. Really important for us is the Formula One step now. I'm happy to announce that we're going to have the new race car with us by the 3rd of March. We unveiled the new race car.
We have a full-fledged work scheme now, and this gives us a totally different view to the brand for everybody in the world. The brand approach is going to be a different one in the future. I think, happy to take questions. Ken is joining me here as well as our CFO. Happy to take your questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. This will only take a few moments. If you wish to cancel your request, please press the hash key. Once again, it's star one if you wish to ask a question. Thank you. Your first question comes from the line of Charles Coldicutt from Redburn. Please ask your question.
Yeah. Good morning, everyone. Thanks for taking my questions. I've got two, please. The first on the DBX, obviously the wholesale is very strong in Q4 again. If my maths are correct, I think there was only 593 units of retail sales in Q4. Was that in line with your expectations? When should we expect sales to customers to start exceeding 1,000 units per quarter? Maybe also, could you update the current size of the order book for the DBX? My second question was going to be on Project Horizon, which obviously is going to try to improve the efficiency of the business. Can you help us a little bit quantify the improvement we should expect from that project in 2021 or maybe on a three-year timeframe? Thanks.
Thanks for your questions. Very good questions. DBX retail rate last year. Obviously, we slowed down the ramp-up and moved into a quality-led ramp-up. We had a lot of cars in shipment to the dealerships. That is probably a better reason. That is for sure the reason that we have a lower retail rate than expected previously, maybe from the former management. Absolutely. Everything was linked to the quarter four. Of course, we passed sales from the factory to the kind of transportation to the ships. We had a lot of cars on the water to China and North America as well. That is the reason for that. It improves. It is different now. The highest priority for us is to align demand and supply. We are doing really good at that. That is one issue. I am not talking about retail at the moment.
We have a clear expectation for us for the future. Now we perform a lot of test drives with our customers worldwide, in China and North America and in Europe. It is a bit of a problem in the U.K. at the moment regarding the shutdown of the dealerships. The DBX order book is in line with our expectation. I am really happy with that. Sports cars are even doing better than our expectations. We have a good situation regarding our order book. As you probably know, the U.K. market is a bit down in January and February. We have an order book for the U.K. We have cars with our dealers. We are now able to, with our order book, pull other markets in our production sequence forward. We produce these cars a bit earlier.
We push our U.K. orders probably a little bit further down the road. Now with that order book, we are able to balance our demand and supply to the market. That is right for us. Program Horizon, you saw in the presentation we talked about 50% of efficiency. This is a very conservative level. Program Horizon was established by October last year. It is related to almost every corner of the company. Very important, it is related to the efficiency in manufacturing. It really starts in inbound. It starts in freight, how we get material into the plants, how we treat material, how we handle the whole logistics side. We are going to see the first outcome, which is a different pattern. It is a different situation.
It's a different footprint for our plants as well, which is almost related to right-size the business to our demand. We have a natural demand on the market. Yeah, for sure, we have enough capacity with that. We have no problem with capacities in our plants. We right-size now the business. We come to a new way how we manufacture and assemble the cars. Everything happens by the end of the first quarter now. It's really fast how we turn around that assembly and our production facilities in the second quarter of this year. The things come together, bits and pieces coming together. It's really cross-business. The whole company is touched by that.
Okay. Thank you.
You're welcome.
Thank you. Your next question comes from the line of George Galliers from Goldman Sachs. Please ask your question.
Yep. Good morning, everyone. Thank you for taking my question. The first question I had was just on DBX volumes. It looks like they were around 64% of the wholesale mix in for Q. Is that a good assumption for the mix of DBX in 2021? If yes, taking your total wholesale target, that would equate to around 3,800 units, which is obviously some way short of the 5,000-6,000 in the long-term 10,000-unit objectives. I was also wondering what you plan to bridge the gap. I know you've mentioned derivatives, but could you clarify? Are these derivatives or AM Coupés, Stelze, Tobias, or the different nameplates potentially in a different segment?
Hi, George. Let me start on my plan, Ken Gregor. On the DBX wholesales, you're right. Q4 was a big quarter. The normal pipeline fill of showroom models going through the wholesales in that quarter. We have guided that we expect total wholesales for the business to be 6,000 units of all our models being 6,000 units in 2021. Maybe DBX would be slightly more than half, but not quite at that same rate as Q4, as you kind of rightly point out. Overall, feeling good about that in terms of the level of orders and the run rate that we see. Perhaps I hand over to Tobias to talk about how we see the variance on DBX and how we think about that.
There's one important topic what I'd like to mention in that circle. We are not running wholesale to cover our production capacity. That's one of the most important steps of what we took last year. We right-size our city. So we are running our manufacturing site in future on the same level of efficiency despite the numbers we produce. This is very, very important to know. We're not driven by a capacity which is in place for the future. This is what we change right now with Project Horizon. The 5,000 to 6,000 was kind of a guidance which was done by the previous management. We are for sure going to get there. Now we're going to have additional derivatives out of the existing DBX first to come now. That's an outcome of our technology agreement with Mercedes.
The first one is going to come to the marketplace by the third quarter of this year. The second one is going to come to the marketplace by the second quarter of next year as well. We do increase our portfolio. There's more to come. There's more to come. If you have a close look on our presentation on page 17, the DBX provides an excellent platform. It's a bespoke Aston Martin platform. That makes the difference. Therefore, we have excellent revenues on the drivability of the car, driving dynamics, etc. This is a building block, one of the building blocks for the future. For sure, more to come. I'm not talking about details, what variants we're going to push out, because we have still competitors out there in the marketplace.
Yeah, for sure, we are able to achieve that number over the course of the next two to three years, almost the next three years.
Ask about the technology agreement. Can you just confirm, does the technology agreement give you access to Mercedes' EVA platform? Would that be a platform that might interest Aston Martin? Secondly, at their strategy day last year, Mercedes said that by mid-decade, they expect to be significantly below EUR 100 per kilowatt-hour at the system level, including cell module and battery system. Is Aston able to access those cost levels as a result of the agreement? Thank you.
First of all, EVA, that's one platform. Mercedes has the ownership of more than one platform. EVA is a compact-related platform. I know that platform quite well out of my previous life. There is more to come. There are different platforms to come. We have an access. What we have finally to decide together with Mercedes by the end of next year, beginning of 2023. There is no problem for us. We are not in a rush to do so. Foremost, we have hybrid technology with Mercedes, which gives us an electric range. For sure, we're in discussion with Mercedes about which platform we're going to use. It must be an excellent fit of that platform to our performance, luxurious market segment. This is what we are keen on. Regarding the battery price, this is a forecast. I know that.
Battery pricing, I do not want to do any comments on that. For sure, the overall trend on battery, so kilowatt-hours per EUR or EUR per kilowatt-hour, is moving down. We see that everywhere. Is it probably the 100? Is it probably 110? I do not know. I do not know. Everything we got from Mercedes is a very, very reasonable cost situation for us. I am really sure that we are going to achieve a reasonable cost situation for our electric platform. For sure, related to our segment and the demand on our electric platform for a performance/luxurious business is probably different than for an EQA platform. This is what we have to consider. We are not finally through that journey.
Thank you.
You're welcome.
Thank you. Your next question comes from the line of Angus Tweedie from Citigroup. Please ask your question.
Hi. Good morning. Two questions for me. Firstly, for Ken, you talked a bit about cash burn being down in 2021. Could you give us a few more comments on how you're thinking about working capital and perhaps if cash flow could be positive if we stripped out the moves on deposits this year on specials? Secondly, Tobias, just thinking about the electrification strategy, perhaps could you discuss any thoughts you might have and how concerned you are that we could see potentially higher taxation of high-polluting ICE vehicles as part of the upcoming U.K. budget? Thank you.
Yeah. Hi, Angus. On cash flow for 2021, as I think I said before at the time of the refinancing, I do expect it to be overall negative, likely a triple-digit number, negative across the full year. I would hope to see and we're targeting to see some positive movement from working capital in the full year, building on the positive movement in working capital that we already saw in Q4 of 2020, which was also good to see. Relating to the customer deposits, I think there would be ins and outflows. I do not know if you're right on what you said on that point.
Okay. So not to expect a mass move negatively or positively in deposits would be is a fair assumption?
Overall, net. No.
Okay. Thank you.
Coming to the point of electrification, yeah, it's part of our journey. Absolutely. Being a partner with, which is part of the Mercedes Technology Transfer, with a reasonable range, electric drivetrain for one of our big box for the future. These cars are supposed to be, they have to have an electric drivetrain or electric drivetrain. Drivetrain in that car segment, the mid-engine business in future. Ultimately, we're going to have electric drivetrains. We are a consideration. We're going to have that. You saw our 2020, 2030, 90% of our portfolio has to be electrified. I know it quite well that our segment is moving faster in our segment. We see carbon dioxide related to arms and taxes all our region. I know that. We know that. It's up to move forward. We are not able to change the future.
We have to ask the future. Yeah. Also regarding earnings spreads, maybe on the mix price, if you've got any visibility on that. In your presentation, you also mentioned there are order intake on ET and sports cars. Could you maybe provide some more details on that? The last question that I have relates to DBX. Can you maybe tell us in which region you see the best demand? Which regions are rather underperforming a little bit your expectations? In general, if I want to order a DBX today, what are the waiting times that I should expect?
I'll start. Thanks, Moers. Maybe I'll start with the R&D and CapEx. We previously said that we expected R&D and CapEx to be between GBP 250 million and GBP 300 million each year for our business plan period. Guiding today that we expected to be between GBP 250 million and GBP 205 million for 2021. It is very much in line with what we said before. I think on mix and price for 2021, we're looking to build on what we saw through 2020, where we saw some improvement overall in the average selling price and the mix in Q4, really driven by a combination of factors driven by delivery of specials in Q4, delivery of DBX in Q4, and sequential reduction in dealer and retail incentives. All those themes are themes that we are looking to build in 2021, at which point, Pat, hand over to talk about order intake and EBS.
Order intake in sports cars is coming to the sports cars portfolio. It turns out that it's better than all. It's ahead of expectation, what we saw last year. We have a good situation regarding order intake of sports cars. We have an additional variant with us, Vantage Roadster. We're going to have another more performance-oriented variant with us coming soon. Are we going to present that next week or the week after to our customers and clients? DBX is in line, absolutely in line with expectation. As you know, probably the market slowed down in January and February. Now we have a good tip in the U.K., especially in the U.K., because dealerships have very restrictive situations at the moment. With our order book, we are able to maneuver around that.
We are making sure that we can rearrange our production sequence because we have strong order books for sports cars and for DBX. That is really a good situation for us. The lead time, if you are going to order one, let me know. Make sure that you are going to get the car a bit earlier. In the DBX region, INA is doing really good. It is really doing good. It is in line with expectation because China is obviously heavily DBX loaded. That is not a secret. Europe is doing better than we thought. We have a bit of downside. As you know, market down January 50% for our segment, 35% in February so far in the U.K. Europe is covering that at the moment, which is really great. North America is doing good and well. We are happy with what happened at the moment. Really happy.
Just quick follow-up on this GT and sports cars. I mean, you said initially that you expect more than 50% of the 2020. What is the split then between GT and sports cars that we showed in 2021?
GT and sports cars. Sports cars is now the Vantage variant in that. DB11, for example, is doing good. DBX is doing good.
Question comes from the line of Henning. Coming from HSBC. Please ask your question.
Excellence and a 30% save. Mr. Pitt, could you give us the basis for that? Do you suggest it's overall variable? If you could give us a EUR number for that. I think Tobias said in the Padre Marx in the video in 2021, if you could give us some sort of quantum on that. I think you sort of see that of the company. I would expect in that sense also the R&D within the CapEx and R&D guidance, notwithstanding it's the capitalized R&D here. Wouldn't that imply that the CapEx within that GBP 50-3 million guidance of the period, that the CapEx would sort of freeze as the R&D decreases as you generate efficiencies there? That's the sort of.
If you allow me, as a second, just on the cash again, I think Ken said prepared remarks to reduce the cash burn. I'm wondering if there's any quantum on that or this sort of order of magnitude and if there's any cash out for restructuring included in that as well in your mind as you talk about right-sizing capacity and what your bans might be for the magnitude of that right-sizing in 2021. Thank you very much.
Thanks, Henning. Let me see if I can start and cover as many of the questions as you talked about. In terms of the cash burn for 2021, I do expect it to be negative, but I do expect it to be substantially lower than the cash outflow that we had in 2020. Still a triple-digit number, but significantly lower. In terms of the restructuring costs within that, there's a modest amount within that, but not huge in terms of the restructuring cash effect. That's kind of covered within that. In terms of the efficiencies, as you asked about, yep, in the presentation, we talk about 30%. We're talking the restructuring programs across all areas of the business. We're thinking very significantly about material costs, variable labor, freight, inbound freight, outbound freight, all the variable areas of our cost base when we think about a number like that.
We're not providing a GBP millage guidance on that number. What I would say is it's a very significant contributor to our delivery of our guidance that we're providing in 2021 to go from our negative EBITDA that we had in 2020 to mid-teens EBITDA for 2021, and then building on that through to our medium-term guidance of GBP 500 million of EBITDA by 2024. It builds through time is what I'm saying.
Okay. Thank you.
I may have missed a few questions there. Sorry if so.
No, that's okay. The two blocks were just around the magnitude of the 30% and the magnitude of the cash burn. I think that's correct.
Okay.
Yeah. Thank you very much.
Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone. Your next question comes from the line of Jose Asumendi, calling from JPMorgan. Please ask your question.
Thank you, Alex. Good morning, Tobias and Ken. It's Jose from JPMorgan. A couple of items. Ken, can you speak a little bit about coming back to cash flow and this balance between CapEx and D&A? Can you help us understand a bit how you see D&A on the cash side is going to evolve in 2021? Do you foresee maybe it to be a bit more balanced or still be a cash outflow versus CapEx? Second, Tobias, think a little bit around maybe the short-term cutting actions that are implemented in the right term.
When you look at the business and you're trying to and you're looking, obviously, to square capacity with deliveries to dealers, is there a need to potentially access rights or utilities, or is this thing that you're considering in the medium term as you try to bring this company to generate cash? Thank you very much.
On the last point, we are not anticipating any further rebounds or impairments on that point. On the CapEx team, we expect an R&D figure be GBP 250 million-GBP 275 million. We've got guidance that depreciation in the range GBP 240 million-GBP 250 million. Yeah, we would continue to let the CapEx be to run the depreciation amortization. That's kind of normal. That you get what you refer to as a small negative in the combination of coming to costs currently and these as well.
There are bit of DBX to comment. We are able to bring it to life with much lower X investments than we thought before because we have a different legal team now in place. We know to whom to talk, how we talk, and how we move forward with engineering. Engineering runs now a commodity approach. Everything is more strategic linked. We are not talking about bits and pieces. One car line, we all talk on a strategic perspective. This gives us really, really good improvements. That is one side of the business. The other side of the business is cost. Yeah, cost- cutting is programmed across the whole operations.
To make sure that the whole operation maneuvers and acts on an efficient basis, despite if you produce 50 cars a day, 20 cars, or 25 cars, it should be always the same efficiency. The company has not been in a situation because we're thinking a bit too much regarding the facility. We now apply a different footprint for the plants. We come to single items in the plants. We come to a much flexible and able approach to how to manufacture cars. These things are coming to life now. I consider that journey in October. It is unbelievable how we transformed as well the culture and the mindset of the people with us in the business. The team is fully activated. It is even a simple thing.
If I consider how many people here when I came in to rework all the cars to ship and where we are now, that's an unbelievable journey. I never saw a journey that fast moving forward. This is all over the beginning operations, coming from inbound freight, how we do the logistic internally. It is almost everywhere. It is everywhere. The company thought they have a bespoke plant to build Valkyrie. There was no need to. We never used it. There is nothing we have to write on the other side because we can use it for engineering for the future. If you do that, you have additional headcount. You have additional overhead. You have additional fixed costs. We just decided to move it to Gaydon to the main factory. It is now here. We moved it within two weeks from that bespoke plant to Gaydon.
Gaydon is the heartbeat of sports cars, including Valkyrie Build. That's really a good engaging situation. It's a different level. It's a different company in almost two to three months. It's really linked to its variable cost and its fixed cost. It's everywhere. If you move down hours per vehicle, variable costs. If you move down to quality and manufacturing engineering and other parties, it's fixed cost. If you shut down a paint line, for example, it's fixed cost. Things like that are going to happen. It's a consolidation of the business. Thank you. Thank you very much. That's brilliant. I mean, it sounds like there's a turning point definitely on the business. Definitely thank you for that, Color. By the way, your previous management team, we were concerned of missing a lot of financial targets that were put out there.
It's very important to sort of deliver the financial targets you are setting for 2021, for 2022, and the midterm plan. From an equity perspective also, can you comment a bit about, and I know you have given comments already, but in terms of the unit sales you're trying to hit 2021, 2022, 2023, what are the unit sales you feel very comfortable with? Like, this company can definitely deliver this number of units, and we can definitely hit the financial targets. How do you look at that, Tobias, from your point of view?
We gave a strategic guide. I think it was 1,000 units, GBP 500 million EBITDA, GBP 2 billion, I do not know. We stick to that in line with the strategic guidance. Are we able to deliver? Okay. Please consider that. I am not able to give you an answer on that. We are doing good. The bits and pieces come into what we are for with our projection for the future. We do not want to under-deliver as a new management team, as a new company. I am careful with that. I stick with our preview and forecast.
Very good. Thank you.
Sorry about.
Perfect. Thank you. Thank you.
Thank you. Your next question comes from the line of Angus Tweedie from Citigroup. Please ask your question.
Hi. It's Angus again. Just a follow-up. I wonder if you could talk a little bit about how the Aston Martin Valkyrie launch is going, whether you've had any further difficulties with lockdowns and things there, and perhaps just a little bit more detail about how you're thinking about the mid-engine sports car launching in kind of 2023 time.
Coming to Valkyrie, that's a very reasonable question. I have a few of many experiences now in the meantime with hypercars, and hypercars are complicated. I've had a complicated hypercar. Now I have another complicated hypercar. I even a bit more regarding the vehicle approach. It is still a challenge. I mean, it's still a challenge, but we had breakthroughs, and we made it. We're doing good progress. The drivability is at the point by Friday. We are doing good progress with that Valkyrie. We changed a lot, for sure, with the new engineering team. We just recently changed very much our approach, how we run the testing. I'm really confident that we're going to get Valkyrie through the finish line by the second half of this year. I'm really, really confident. I drove it now many times together with the engineering team.
Honestly, it's not a car. I don't know. It's more a fighter jet plane regarding the complication of the car. It is really unbelievable. The drivability is great. It drives like a hypercar. I'm happy with that. We are going to have, and we talk at the minute, we talk about expansion of the portfolio regarding Valkyrie, which is really helpful for the future. There is another market demand for additional derivatives. More to come.
Thank you very much.
Thanks. Thank you. Your next question comes from the line of Charles Coldicutt from Redburn. Please ask your question.
Hi. Yeah. I just had a follow-up as well on the Valhalla, actually. I think that's going to be a major factor in you reaching cash flow break-even in 2023. Can you just confirm, is the plan still to produce 500 units, the coupé? Maybe also, could you comment on the deposits you've already taken on that vehicle? How many millions of pounds on the balance sheet already for that? Is the plan still for the Valhalla to have a hybrid V6, or is there an alternative in mind coming from Mercedes?
Okay. What we do at the moment is we started to reassess the Valhalla. We're not going to talk about details now for down payment, and we're not talking about details regarding the numbers because we do a reassessment of that Valhalla lineup. There is going to be a Valhalla. We're going to have the Valhalla with us in the second half of 2023. It is going to be an amazing car with kink technology. Please accept, I don't want to give this information now because we have to talk with our customers first. Valhalla at the minute got a revision. Probably it's a different than the company. Other. Us regarding combustion engine. We still have powertrains. We still have kind of a hybrid style. We're taking technology.
We have to talk client to show the Valhalla, so to speak, customers in the next four months. The deposit balance between vehicles in the year of 2016 was a chunk of GBP 80 million.
Okay. Thanks.
Again, when you can launch the first PHEV, will that also be already offered by Citroën, and then you're going to launch your BEV?
Okay. PHE platform before 2024. But you know we have to run the adaptation of all the Mercedes technology transfers. That needs time. We are faster than all my life. It needs always time. Apparently, we're going to have it with us. Electric drive, not able to talk openly about that situation at the moment. It is part of our journey, and it's part of our business plan forward and our product plan for the future. We should achieve something by the middle of the century. That's a bit the ballpark. I think at that period of time, it's crucial. Nevertheless, we are on an engineering journey. We reestablished engineering in that company on a different level. We talk with a lot of possibilities, and we have a lot of things in mind. We have to finally do that.
We have to finally line it up. We have a clear ambition for 2030, as you saw in our presentation. 90% of the whole powertrain is electrified. We still have probably combustion engine for track toys, so to speak. A mid-engine program is nowhere near there. There are B-segment that move faster into the top electric. There is a lot of things to do for us.
When we talk about the sports cars, we have the DB11 and DBS. They are now on the market since 2023. We need a refresh of all these cars, what we are doing currently. Do we have a chance to electrify them? Something what we investigate at the moment. I'm not sure about that because it's a transaxle layout. It's a very specific sports car layout. It's not that easy. I tried to achieve that in real life as well, electrified axle. That's really complicated. That's technically difficult. We get to the next generation. For sure, it should be an electric-driven car. Absolutely. We're going to have the beginning of 2022, beginning of 2023 for these cars. We still have to think form with us. Think about electrification and that we don't electrification. We have to. Working on that.
The next generation layout should be. Absolutely. And this is what we're doing.
Thank you. There are questions, so I'll call back over to Tobias.
Josephine, thank you very much for joining us. Really appreciate any final for you to be asked.
Maybe as a summary, you know what we did over the last four to six months is a lot of work. Publish our program. And that program delivers us the results over the year of 2021. We are focused on the full-year result. That's very important. We are really focused on the full-year result because everything is going to the whole improvements we're going to see in our. To get it's kind of, as you know, it's always hard to achieve the whole agency. We're absolutely ahead of target in product definition. We are ahead of target with all efficiency goals. It's always a glide path. We are focused on the full-year result. We're more than confident that we achieve everything on our plate, especially the forecast for 2024 and 2025. That's a positive forecast.
Thank you very much for joining us this morning. Have a great day.
Thank you. That does complete our conference for today. Thank you for participating. You may all disconnect.