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Aston Martin drives higher amid SUV demand

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BEIJING, CHINA - SEPTEMBER 26: An Aston Martin DBX SUV is seen during 2020 Beijing International Automotive Exhibition (Auto China 2020) at China International Exhibition Center on September 26, 2020 in Beijing, China. (Photo by Bian Zhengfeng/VCG via Getty Images)
An Aston Martin DBX SUV during 2020 Beijing International Automotive Exhibition. Photo: Bian Zhengfeng/VCG via Getty Images.

Shares in luxury car company Aston Martin (AML.L) climbed higher on Thursday as the company posted an operating profit in its most recent quarter.

The carmaker, a favourite of the fictional fast-living spy James Bond, said it had seen strong demand for its DBX sport utility vehicle, which helped profits hit £23.5m ($31.7m) during the period. This was ahead of analysts’ expectations.

It is also banking on its £2.5m Valkyrie hypercar to boost future performance. After a number of delays it is planning to ship double the number in its current quarter.

During the quarter, Aston sold 1,349 cars, compared to just 660 the prior year when factories and showrooms were closed during pandemic lockdowns.

Revenues rose from £124m to £237.6m, with the average selling price of its core models at £148,000. This was up from £130,000 last year.

Shares were as much as 3.6% higher on the day.

Revenues rose from £124m to £237.6m, with the average selling price of its core models at £148,000. This was £130,000 last year. Shares were as much as 3.6% higher on the day. Chart: Yahoo Finance
Revenues rose from £124m to £237.6m, with the average selling price of its core models at £148,000. This was £130,000 last year. Shares were as much as 3.6% higher on the day. Chart: Yahoo Finance

However, the company was hit by expensive refinancing after it took on £1.1bn of high-interest debt last October in a bid to shore up its finances. Financing costs stood at £133bn between August and October, more than the £79bn spent in the same period the year before.

“The cost of it is higher than we would have wished", Ken Gregor, finance chief, told the FT, saying that interest payments are likely to continue until around 2023.

“It’s locked in until we’re in a position to refinance,” he said.

Aston Martin is currently going through a restructuring plan, which includes a vital injection of cash, as well as clearing high dealer inventories. Billionaire Lawrence Stroll rescued the firm from close to bankruptcy last year.

“Demand for Aston Martins is clearly strong – demonstrated not only by increased sales, but also by increased sales prices across its three core models. Increased marketing spend, not least on events associated with the recently launched F1 team and new Bond film, are clearly pounds well spent," Nicholas Hyett, equity analyst at Hargreaves Lansdown, said. 

Read more: UK car market sees weakest October since 1991

"Aston Martin is never going to be a high volume manufacturer, but economies of scale are nonetheless working in its favour.

"However, despite the progress Aston Martin has a long way to go before it’s ticking over nicely. The group remains loss making and while it just about scraped into positive, free cash flow during the third quarter, that’s highly dependent on the timing of spending and customer deposits.

"Living hand to mouth like this is not a good look for a super-luxury brand. As a result net debt has ticked up substantially in the year, bringing with it an increased financial burden.”

It came as the SMMT said it expects a total of 1.66 million new cars to be registered in the UK this year, which would represent a 1.9% increase on 2020. This is a -8.8% revision down from previous forecasts due to ongoing supply chain issues.

Output continues to be hampered by the production stoppages caused by the ongoing global shortage of semiconductors, as well as the loss of production capacity arising from the closure of one of the UK’s larger plants.

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