Aston Martin, not for the first time, put a positive gloss on poor financial results. As losses widened in the second quarter, investors were assured core profit would grow in the second half.
The legendary maker of luxury sports cars for the rich, famous and mythical British spy James Bond, has much practice putting a brave face on tough challenges, on the race-track and off. After all, it has declared bankruptcy half a dozen times in its 100-year history.
Aston Martin reported a pre-tax loss that worsened to £217 million ($279 million) in the second quarter from a loss of £142 million (183 million) in the same period last year. First-half sales fell 32% to 1,998 as a move to upgrade Vantage and DBX707 models crimped output.
While sales growth slowed, Aston Martin pointed out top-priced limited-edition vehicles like the Valkyrie (at least £3 million/$3.9 million) and Valour (at least £1 million/$1,3 million) rose to 118, compared with 38 in the same period last year. The overall lineup includes the Vantage road car, the Vantage GT4 for racing, the DB12, DBS and DBX, now refreshed.
The company said sales improvement will accelerate in the second half, resulting in “significant” year-on-year growth in core profit.
Investment researcher Bernstein in a report entitled “Aston Martin: Is it really different this time?” had short-term worries and long-term hopes.
“Aston Martin has been here before, promising the final step to higher priced models, sustained profitability and luxury status, only to then find multiple ways to break these promises. This time is it really different?” Bernstein asked in the report.
Bernstein said there were signs of improving free cash flow, and definite evidence that a turnaround towards the financial sunlit uplands demonstrated by Ferrari was possible.
“Substantial long-term opportunity (is) undeniable. This is early days with Aston still some way from a Ferrari. While DB12 order book full to 2026 was taken well, the reality is this is still only six months versus Ferrari more than 12 months on all models and two years on the Purosangue (SUV). That level of visibility translates to better cyclicality and pricing power, and ultimately valuation multiple,” Bernstein said.
The Aston Martin share price barely reacted, as it churned around recent lows.
Aston Martin is amid a financial turnaround. Executive chairman Lawrence Stroll has turned to investors like Saudi Arabi’s Public Investment Fund to buttress the balance sheet.
Despite the struggles, Aston Martin still has big ambitions. It plans to raise sales to £2.5 billion ($3.2 billion) within four years and produce earnings before interest, tax, depreciation and amortization (EBITDA) of £800 million ($1.03 billion). The long-term sales target is 17,000 sports cars and SUVs a year. The company sold 6,620 vehicles in 2023, with the DBX SUV accounting for almost half. It has delayed its electric car target from next year to 2026, no bad thing considering the financial debacle falling on manufacturers who might have considered themselves ahead of the EV game. Aston Martin is moving towards more plug-in hybrids.
Aston Martin has been accused of lack of EV ambition, but investors might well be impressed by its forward-thinking as the move to electric vehicles seems to stumble. If the way ahead for EVs brightens, Aston Martin will use technology from Saudi Arabia-backed Lucid.
Former Bentley chief Adrian Hallmark is joining Aston Martin as CEO in September.
Read the full article here
