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Aston Martin signs off Brexit fund

The luxury car manufacturer is pursuing rapid growth plans at a potential cost to the exclusive allure of its products
February 28, 2019

The board at Aston Martin Lagonda (AML) has approved a £30m fund of “advanced working capital and/or operating expenses” that will be accessible should the UK leave the EU without a deal on 29 March.

IC TIP: Sell at 1,151p

But on the day of its first full-year results announcement as a listed company, chief executive Andy Palmer told CNBC that a “no-deal Brexit is already happening for us”, owing to the closed gap between the legally-enshrined date of departure and the 12-week lead time for the manufacturing of Aston Martin’s cars.

Stock days for components have increased from three days to five, while Mr Palmer said that since the Brexit vote in 2016, the company has looked carefully at raising the “local content” of its products in accordance with World Trade Organisation rules of origin. Typically, products must be manufactured from between 50 per cent and 55 per cent of local content, according to Mr Palmer. Aston Martin is now in a position to meet this requirement should the UK leave the EU without a deal, the chief executive added.

The £136m Aston Martin paid in IPO costs eliminated any hope of pre-tax profits for the UK market’s sole car manufacturer. Production volumes grew to 6,441 vehicles from 5,098 in 2017, with the company targeting between 7,100 and 7,300 in 2019. In the medium term, the company is targeting sales of 14,000 units once its range has been refreshed and its battery-powered Lagondas have been launched.

Chief financial officer Mark Wilson recognised the need to balance between driving volumes and retaining the exclusivity of a luxury product. Mr Wilson emphasised the demarcation line that exists between the Aston Martin and Lagonda brands, the latter of which is about “taking the fight to Rolls-Royce and Bentley”. “If you look at the competitive segmenting within the marketplace,” he said, “we can put a compelling product in every area that our competitors exist in a way that perhaps they can’t”. Mr Wilson questioned whether the likes of Rolls-Royce or Ferrari (US:RACE) would respectively introduce electrified mid-engined vehicles or sedans to compete with Lagonda.

Broker JP Morgan Cazenove forecasts full-year 2019 earnings per share of 61.1p, against 16.1p in the prior year.

ASTON MARTIN LAGONDA (AML)  
ORD PRICE:1,151pMARKET VALUE:£ 2.62bn
TOUCH:1,145-1,151p12-MONTH HIGH:1,915pLOW: 1,100p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:192p*NET DEBT:125%
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20170.984.538.3nil
20181.1-68.2-31.0nil
% change+26---
Ex-div:na   
Payment:na   
*Includes intangible assets of £1.1bn, or 470p a share