Notes to the Interim Condensed Financial Statements
1. Basis of preparation
The results for the 6 month period ended 30 June 2022 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 financial information for the year ended 31 December 2021 does not constitute statutory accounts as defined
in section 435 of the Companies Act 2006. The auditor’s report on the statutory accounts for the year ended 31 December 2021 was not qualified and did
not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. A copy of the
statutory accounts for the year ended 31 December 2021 prepared in accordance with UK adopted international accounting standards have been delivered
to the Registrar of Companies. The annual report for the year ended 31 December 2022 will be prepared in accordance with UK adopted international
accounting standards.
Aston Martin Lagonda Global Holdings plc (the "Company") is a company incorporated and domiciled in the UK. The Consolidated Interim Condensed
Financial Statements of the Company as at the end of the period ended 30 June 2022 comprise the Company and its subsidiaries (together referred to as
the 'Group').
Going Concern
The Group meets its day-to-day working capital requirements and medium-term funding requirements through a mixture of $1,184.0m of 1st Lien notes at
10.5% which mature in November 2025, $335m of 2nd Lien split coupon notes at 15% per annum (8.89% cash and 6.11% PIK) which mature in November
2026, a revolving credit facility (£90.6m) which matures August 2025, facilities to finance inventory, a bilateral RCF agreement and a wholesale vehicle
financing facility. Under the revolving credit facility the Group is required to comply with a leverage covenant tested quarterly from June 2022 where
required.
The directors have developed trading and cash flow forecasts (that exclude the impact of the Capital Raise) for the period from the date of approval of
these Interim Condensed Financial Statements through 31 March 2024 (the “going concern review period”). These forecasts show that the Group has
sufficient financial resources to meet its obligations as they fall due and to comply with covenants for the going concern review period. A longer 21 month
period has been considered under this assessment compared to a 16 month period used for the going concern assessment in the consolidated financial
statements for the year ended 31 December 2021.
The forecasts reflect the Group’s strategy of rebalancing supply and demand and the decisive actions taken to improve cost efficiency, in alignment with the
ultra-luxury performance-oriented strategy. The forecasts include the costs of the Group's environmental, social and governance ("ESG") commitments and
make assumptions in respect of future market conditions and, in particular, wholesale volumes, average selling price, the launch of new models, and future
operating costs in light of recent inflationary pressures. 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. In addition, the availability of funds provided through the vehicle wholesale finance facility changes as
the availability of credit insurance and sales volumes vary, in total and seasonally. The forecasts take into account these factors to the extent which the
Group directors consider them to represent their best estimate of the future based on the information that is available to them at the time of approval of
these Interim Condensed Financial Statements.
The Group directors have considered a severe but plausible downside scenario that includes considering the impact of a 25% reduction in DBX volumes
from forecast levels and operating costs higher than the base plan.
The Group plans to make continued investment for growth in the period and, 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, as identified in the severe but plausible downside scenario,
actions such as constraining capital spending, working capital improvements, reduction in marketing expenditure and the continuation of strict and
immediate expense control would be taken to safeguard the Group’s financial position.
In addition, the Group also considered the circumstances which would be needed to exhaust the Group’s liquidity over the assessment period, a reverse
stress test (before taking into consideration the recently announced proposed Capital Raise). This would indicate that total core vehicle sales (DBX and
GT/Sports) would need to reduce by more than 17% from forecast levels without any of the above mitigations to result in having no liquidity. The likelihood
of management not taking substantial mitigating actions over such a long period (such as reducing capital spending to preserve liquidity) together with
these circumstances occurring is considered remote both in terms of the magnitude of the reduction and occurrence over such a long period.
Additionally, the directors have considered the impact on the going concern assessment of the proposed £653m Capital Raise announced on 15 July 2022.
If this Capital Raise is approved by shareholders this will meaningfully deleverage the balance sheet and provide a substantial additional liquidity cushion to
underpin and accelerate future capital expenditure.
Accordingly, after considering the forecasts, appropriate sensitivities, current trading and available facilities, the directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for the foreseeable future and to comply with its financial covenants and,
therefore, the directors continue to adopt the going concern basis in preparing the Interim Condensed Financial Statements.
Statement of compliance
These Interim Condensed Financial Statements have been prepared in accordance with UK adopted International Accounting Standard 34, “Interim
Financial Reporting”. 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 2021.
Significant accounting policies
These Interim Condensed 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 2021. A number of new or amended standards became
applicable for the current reporting period and that the Group did not have to change its accounting policies or make retrospective adjustments as a result
of adopting these standards. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. The
significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as
those that applied to the consolidated financial statements for the year ended 31 December 2021.