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Aston Martin Slumps After ‘Disappointing’ Year of Profit Decline

Published 01/07/2020, 04:01 AM
Updated 01/07/2020, 06:05 AM
© Reuters.  Aston Martin Slumps After ‘Disappointing’ Year of Profit Decline

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Aston Martin Lagonda Global Holdings (LON:AML) fell 17% after saying profit declined last year, increasing the urgency for the British sports-car maker to attract new capital to fund a turnaround.

Challenging conditions continued through the peak delivery period of December, the company said Tuesday, adding that full-year adjusted earnings were about 130 million pounds ($171 million) to 140 million pounds. The company reported 247 million pounds for 2018.

Aston has turned out to be a frustrating investment for shareholders who bought into the initial public offering in late 2018. The shares fell 57% in the course of 2019, a year Chief Executive Officer Andy Palmer on Tuesday called “very disappointing.” By contrast, Ferrari (NYSE:RACE) NV’s stock returned 70% last year, highlighting the diverging fortunes between the two super-car brands.

The company, best known as the ride of choice for onscreen spy James Bond, has been battered by an industry downturn, uncertainty around Brexit and a lukewarm response to some models. Weaker-than-expected sales have forced the carmaker to scale back its sales volume targets. While Aston Martin made progress reducing inventory, it remains “a bit higher than we’d like,” the CEO said in an interview.

Aston Martin has focused its efforts on the DBX sports-utility vehicle, which it unveiled late last year to break into a lucrative yet increasingly crowded market. The $189,000 DBX sits at the heart of plans to more than double annual output to 14,000 autos by 2023. Aston Martin said it got 1,800 orders for the model, meeting a condition it had to obtain a follow-on loan for $100 million.

“The DBX is the one bright spot,” Palmer said in the interview. “The order rate is much higher than we had expected.”

Aston Martin said it had to boost customer financing support and increase marketing, especially in the U.S., which undermined its cost-savings plan. The rally in the pound in December has also become an obstacle as it reduces the value of sales from abroad. The carmaker said higher sales of its entry-level Vantage model eroded average selling prices.

“The main question is not how many DBX have been ordered, but at what price and will it generate free cash or enough money to offset falling sales of Vantage/DB11,” said Sanjay Jha, an analyst at Panmure Gordon in an email.

The carmaker said it remains in talks with potential investors that were originally announced in December. That month, industry magazine Autocar reported that Canadian fashion billionaire Lawrence Stroll is planning a bid for the company.

Aston Martin expected its net debt to be between 875 million pounds and 885 million pounds at the end of 2019. In September, Aston raised $150 million of debt at double the cost of its existing bonds, with a further $100 million available if it achieved certain sales target for the DBX.

Aston Martin fell as much as 84 pence to 436.60 pence, cutting its market value to just above 1 billion pounds. It was the second-worst performing stock on the FTSE 350 index last year.

(Updates with analyst comment in eight paragraph.)

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