Aston Martin Lagonda cuts forecasts amid UK and European weakness

Shares of Aston Martin Lagonda tanked on Wednesday as the luxury car maker cut its forecasts for this year, pointing to macroeconomic uncertainty and weakness in the UK and Europe.

The company said "the challenging external environment" highlighted in May has worsened, along with macroeconomic uncertainties. This softness is expected to continue for the rest of the year, it said, adding that it is "planning prudently" for 2020.

As a result, Aston Martin now expects wholesale volumes of between 6,300 and 6,500 vehicles for FY19, down from previous guidance of between 7,100 and 7,300.

The group also downgraded its adjusted EBITDA margin guidance to around 20% and said the adjusted operating profit margin is expected to be approximately 8%. In addition, capital expenditure was revised to about £300m from a previous estimate of £320m to £340m.

President and chief executive officer Andy Palmer said: "Whilst retails have grown by 26% year-to-date, our wholesale performance is adversely impacted by macroeconomic uncertainty and enduring weakness in UK and European markets.

"We are disappointed that short-term wholesales have fallen short of our original expectations, but we are committed to maintaining quality of sales and protecting our brand position first and foremost. We are today taking decisive action to manage inventory and the Aston Martin Lagonda brands for the long-term. We remain focused on the successful execution of the Second Century Plan and on delivering sustainable long-term growth."

Aston Martin also said it was making a £19m provision against consultancy income that will be recognised in the second quarter.

At 0900 BST, the shares were down 23% at 796.92p.

Russ Mould, investment director at AJ Bell, said: "Floating on the stock market can boost a company’s reputation and provide an opportunity for the public to buy into the story. However, it can also expose a company to criticism from investors who are watching every move like a hawk.

"Aston Martin knows all about this situation as its share price has been in freefall since floating last year as investors questioned its aggressive growth plan and valuation.

“And now it’s gone and done one of the worst things a newly-listed company can do in the first year of being on the stock market, namely issue a revenue warning.

"Its credibility could be shattered for some time as investors question if they can trust management to do what they said Aston Martin would do at the time of the IPO last October. The situation shows how vulnerable it is to a period of economic weakness.

"Management may now be wishing that the business was never floated as investor sentiment has been so poor towards the brand since it went public."

“Perhaps it might be better returning to its former status as a privately-owned entity.”