Aston Martin struggles to outrun debt and delays EV debut

It would be churlish not to acknowledge the fact that some progress has been made at Aston Martin Lagonda (AML). A 6 per cent increase in average selling prices was conducive both to its top line and its gross margin, which the company said hit a “record” level of 45.2 per cent in the fourth quarter. Yet this merely elevated the company’s full-year results to bad rather than awful, with its pre-tax loss halving to £240mn.

More important to a company carrying as much debt as Aston Martin is its cash position. Higher interest and working capital payments as well as a £100mn increase in capex as it developed new models meant its free cash outflow increased by around £60mn to £360mn. The luxury carmaker now expects to launch its first battery electric vehicle in 2026, delaying its previous target by a year.

    So even after tapping investors for £310mn of fresh funding through share sales last year and benefiting from a £61mn tailwind as the pound strengthened against its largely US dollar-denominated debt, the company finished the year in a bigger hole than it started – net debt increased by almost £50mn to £814mn.

What’s more, it appears to be going through chief executives very quickly, with Bloomberg recently reporting that executive chairman Lawrence Stroll has begun the search for what would be his fourth chief executive in four years.

Aston Martin's shares more than doubled in price in the first eight months of last year, as the Formula One team it sponsors performed well. But it has drifted back down since, with fundraisings increasing its share count. As we've said before, until it can start generating enough cash to make meaningful inroads into its debt, we don't see any value in its shares. Sell. 

Last IC view: Sell, 350p, 26 Jul 2023