Aston Martin has announced plans to raise £653m from a range of new and existing investors. The group plans to use up to half of the proceeds to repay debt, with the remainder supporting future capital expenditure. Net cash after debt repayment is expected to be between £500m and £600m.
The group also provided a first-half trading update and expects 2022 performance to be in line with previous guidance.
Demand remained strong across all product lines and the average selling price continued to rise. GT/Sports cars sold out for 2023 and DBX orders were up 40% year over year.
Supply chain disruption impacted volumes and led to working capital outflows expected to impact cash in the first half
More details will be released with the group’s first half results on July 29, 2022.
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Our point of view
Markets reacted positively to news that Aston Martin was strengthening the balance sheet with a big cash boost. It’s an indication of the group’s financial situation, with cash flows still a year or two away from turning positive.
The bloated war chest should help new CEO Amedeo Felisa drive the revamped strategy forward. He enters a lean organization, thanks to “Project Horizon”, which aimed to consolidate the brand’s image as a leading car manufacturer and improve efficiency by offering bespoke cars.
The change in strategy included a complete overhaul of the way Aston Martin sells cars. The group has reduced dealer inventory levels, which has allowed demand to outstrip supply. This has supported higher prices and added to the cachet that comes with buying an Aston Martin.
The group also focused on selling higher margin promotions. Customers register and pay a deposit for these rare models before they are built, allowing for tighter control of working capital. Cars also became cheaper to manufacture due to efficiency improvements.
Demand has been strong so far this year, with full-year targets intact. Although this will require improvement in the second half, as volumes need to more than double those sold in the first half to meet the target.
Management is targeting an annual turnover of £2bn, with underlying cash profits of £500m by 2024/25. This will force Aston Martin to move around 10,000 vehicles per year, 52% more than expected in 2022. It’s not out of the question, 4,500 DBX units are expected next year, which should then increase. The rest is expected to come from refreshed front-engine models slated for release next year, which have worked in the past after a redesign.
The brand’s positioning might insulate it somewhat from the gasoline ditch, but electric is the direction of travel for automakers. The first hybrid cars are slated for release in 2024, with a full Aston battery expected a year later. It will take until 2030 for a full range of electric vehicles to become available.
In the short term, the group should keep its promises. But executing the electrification strategy will be a key driver of long-term success, and we haven’t yet seen whether customers will follow suit. Putting the new treasury of cash to effective use is the challenge from here, and it’s no easy task.
Aston Martin Highlights
- Futures price to sales ratio: 0.42
- Average price/sales since listing: 1.30
- Prospective dividend yield (next 12 months): 0.0%
All ratios are from Refinitiv. Remember that returns are variable and are not a reliable indicator of future income. Keep in mind that key numbers shouldn’t be considered alone – it’s important to understand the big picture.
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First quarter results (May 4, 2022)
First quarter revenue rose 4% to £232.7m, reflecting price increases. This compensated for the expected decline in volumes, as the group prepared for DBX707 production and supply chain issues persisted.
There was a higher proportion of Specials (custom cars) sold, which represents a higher margin. With cost reductions, underlying cash profit (EBITDA) increased by 18% to £24.4 million.
In 2022, Aston Martin continues to expect a 50% increase in underlying cash profits as it sells over 6,600 vehicles.
The group also announced that a former Ferrari CEO, Amedeo Felisa, would take over as CEO.
Wholesale volumes fell in all geographies, with double-digit declines in the Americas and Asia-Pacific due to transportation delays. The number of vehicles sold in Europe and the UK fell by 5% and 3% respectively.
SUVs fell the most, from 746 to 421, while Sport and GT models were up 22% and 20% respectively. The number of Specials sold increased from 1 to 19. The DBX accounted for 37% of cars sold, but this is expected to rise to over 50% of wholesale sales after the DBX707 launches in Q2.
The average sale price, excluding promotions, rose from £149,000 to £151,000. The ASP total, which includes promotions, rose from £151,000 to £181,000.
The group recorded a free cash outflow of £25m, compared to an inflow of £24m last year, reflecting increased investment. Net debt fell from £892m to £957m.
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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. Unless otherwise stated, estimates, including forward-looking returns, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Returns are variable and not guaranteed. Investments go up and down in value, so investors could suffer a loss.
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