Aston Martin heads further off course

The value of the Aston Martin brand shouldn’t be underestimated. Without it, it’s difficult to fathom why anyone would want to pump money into a perennially loss-making car maker that’s been toiling under a huge debt burden.

According to consultancy Brand Finance, the marque has a value of about $1.1bn (£905mn), which gives some indication as to why Saudi Arabia’s Public Investment Fund recently agreed to stump up £78mn for a 16.7 per cent in Aston Martin Lagonda (AML), as well as partnering with chairman Lawrence Stroll’s Yew Tree Consortium and Mercedes-Benz to subscribe to £335mn of shares being offered through a £575mn rights issue.

Results for the six months to 30 June show PIF what it is letting itself in for. AML’s operating loss doubled to £90mn in these interim results, and when a £134mn charge relating to a revaluation of its dollar-denominated debt is added, its pre-tax loss trebled to £285mn. More worryingly, a £275mn cash outflow meant its net debt ballooned to nearly £1.29bn, from £892mn six months earlier.

At least half of the proceeds AML is raising will be used pay down its expensive debt – its $1.55bn (£1.27bn) of dollar-denominated notes pay coupons of between 10.5-15 per cent. The rest will offer a “liquidity cushion to underpin and accelerate future capital expenditure”.

The company expects to at least generate cash in the second half as an easing of supply chain challenges allows it to deliver more cars. A new management team led by former Ferrari executive Amedeo Felisa has the task of delivering Stroll’s goal for AML to become “sustainably free cash flow positive from 2024”. Although its shares have fallen by 65 per cent so far this year, until it achieves this the company doesn't really look like an investable prospect. Sell.

Last IC View: Sell, 428p, 15 Jul 2022