Valkyrie cars drive Aston Martin to deeper loss

Aston Martin Lagonda’s (AML) pre-tax losses more than doubled due to a £156mn foreign exchange loss on its US dollar-denominated debt and costs linked to Valkyrie hypercar programme deliveries.

Revenue growth was driven by both higher prices and positive volume movements. Given the luxury car company’s high-end products, Aston Martin has been able to bump up prices for its wealthy clientele in a way that companies further down the product food chain have not. The average selling price was up 18 per cent to £177,000. Wholesale volumes, meanwhile, rose by 4 per cent to 6,412. This included 80 Valkyrie vehicles.

But higher costs dragged the company further into the red. Depreciation and amortisation charges, mostly relating to Valkyrie deliveries, increased by £96mn. And the expensive debt on the balance sheet didn’t help matters – net cash interest payments were £139mn, up from £117mn last year.

The results were in line with expectations, and the market liked what it heard about volume growth and fourth-quarter positive free cash flow. Such metrics led to a 12 per cent share price bounce, and the shares are up 45 per cent year-to-date.

But we still think the wheels have come off Aston Martin as a long-term investment option. The shares have fallen by over 90 per cent since listing, despite the recent move upwards. City analysts have a mean target price of 156p, according to FactSet – well below the current share price.

Management expects “significant growth in profitability” this year, but for now, we remain unconvinced. The debt position is unattractive, and the big annual free cash outflow – of £299mn – keeps us on the sidelines. Sell.

Last IC view: Sell, 93p, 02 Nov 2022