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Aston Martin to 'reset' business after losing £104m in a year

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read
The Prince of Wales with his Aston Martin DB6 as he arrives for a visit to the Aston Martin Lagonda factory at St Athan in Barry, Wales.
The Prince of Wales with his Aston Martin DB6 as he arrives for a visit to the Aston Martin Lagonda factory at St Athan in Barry, Wales. (PA)

Luxury carmaker Aston Martin Lagonda (AML.L) on Thursday announced a turnaround plan, as it revealed widening losses and slipping sales.

The struggling car maker said pre-tax losses grew by 53% last year to £104.3m ($134m). The business also slipped to an operating loss of £36.7m, compared to an operating profit of £72.8m in 2018.

Revenue and sales both fell by 9%. The car maker sold 5,862 vehicles last year, which brought in £997.3m. Aston Martin’s debt rose by 53% to £876.2m last year and the business now has leverage of 7.3 times earnings.

Shares were down 12% by mid-morning in London. The stock has fallen over 70% since Aston Martin went public in October 2018.

Aston Martin's shares dropped further on Thursday. Photo: Yahoo Finance UK
Aston Martin's shares dropped further on Thursday. Photo: Yahoo Finance UK

Andy Palmer, Aston Martin Lagonda president and Group CEO, said 2019 had been “extremely challenging”.

“While retail sales grew, we were unable to generate the revenue and profits we had originally planned,” Palmer said.

Aston Martin Lagonda faced “severe liquidity pressures” as a result, he said. The pressure led Canadian billionaire Lawrence Stroll to step in and rescue Aston Martin last month. Stroll, the owner of the F1 team Racing Point, took a 16.7% stake in the business worth £182m.

Read more: Aston Martin rescue deal agreed as F1 billionaire buys stake

“As announced last month, we are proposing an equity fundraising of £500m to improve liquidity, stabilise the balance sheet and provide a platform for the future,” Palmer said. “The equity raise includes a proposed investment of £182m from a consortium led by Lawrence Stroll.”

Aston Martin Lagonda said in a separate statement that shareholders, including Mercedes-Benz, had fully underwritten a rights issue to raise £317m alongside Stroll’s investment. Shares will be sold to investors at a 47% discount to Wednesday’s closing price.

Stroll is joining Aston Martin’s board as executive chairman as part of the deal. Separately, chief finance officer Mark Wilson is leaving the business.

Aston Martin Red Bull Racing Honda RB16, ambiance during the Formula 1 Winter Tests at Circuit de Barcelona - Catalunya on February 26, 2020 in Barcelona, Spain. (Photo by Xavier Bonilla/NurPhoto via Getty Images)
Aston Martin Red Bull Racing Honda RB16 during the Formula 1 Winter Tests at Circuit de Barcelona-Catalunya on February 26, 2020 in Barcelona, Spain. (Xavier Bonilla/NurPhoto via Getty Images)

Palmer said he would use the £500m to “reset, stabilise and de-risk the business, positioning it for controlled, long-term profitable growth.”

The company has already announced it is delaying its electric vehicle programme as it focuses more on near-term projects such as the DBX, its first ever SUV. Aston Martin said Thursday it took a £39m charge from mothballing the electric car programme.

“We are focused on turning around performance, restoring price positioning by operating a pull vs push model, reducing dealer inventories to a luxury norm and delivering a more efficient operational footprint,” Palmer said.

Read more: Aston Martin among the worst performing stocks of 2019

James Bond’s car maker said sales would continue to fall in 2020 as Aston Martin tries to restore its luxury image. The company warned that performance this year would be “significantly dependant” on the launch of the new DBX later this year and warned that the spread of COVID-19 could hurt business. So far the impact has been limited.

Bank of America analyst Kei Mueller and team said the outlook for 2020 was “very bleak” and “extremely vague”.

Palmer said: “With our revised plan and appropriate funding in place, I believe we will have the building blocks in place to secure the necessary financial turnaround of the business consistent with our position as a luxury automotive company.”

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