Aston Martin warns on profits after 'disappointing' year
Luxury car maker Aston Martin Lagonda warned on full-year profits on Tuesday amid challenging trading conditions.
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In an update for FY19, the company said that the challenging conditions highlighted in November continued through the peak delivery period of December, resulting in lower sales, higher selling costs and lower margins.
As a result, Aston Martin now expects adjusted earnings before interest, tax, depreciation and amortisation of between £130m and £140m for the year, down from £247m in 2018. Analysts had been expecting adjusted EBITDA of about £196m.
It also pointed to higher-than-expected retail and customer financing supports and weaker core model mix weighing on the average selling price, with a shift towards the Vantage.
The group said core wholesales declined 7% year-on-year to 5,809, with Europe underperforming while the Americas, UK and Asia Pacific performed broadly in line with its volume expectations.
The year-end cash balance was £107m, giving expected net debt and leverage ranges of £875m to £885m and 6.2-6.8x, respectively.
The company said it remains in discussions with potential strategic investors which may or may not involve an equity investment.
President and chief executive officer Andy Palmer said: "From a trading perspective, 2019 has been a very disappointing year. Whilst retails have grown by 12%, our best result since 2007, our underlying performance will fail to deliver the profits we planned, despite a reduction in dealer stock levels.
"We are taking a series of actions to manage the business through this difficult period. This will include a cost saving programme alongside a focus on returning dealer stock levels to those more normally associated with a luxury company; winning back our strong price positioning is a key focus."
At 0845 GMT, the shares were down 14% at 450p.
Neil Wilson, chief market analyst at Markets.com, said the numbers are "pretty horrid" and the net debt figure is "a major concern".
"The only good news is the DBX order book has risen to 1,800 which means Aston can unlock an additional $100m in 2022 notes. This is a drop in the ocean though and for sure Aston needs to raise cash in some way. The bond market looks unpalatable but even an equity raise could prove tricky. The rationale to go private is impossible to resist - the brand still has the cache to make it appealing. Stroll on."
Russ Mould, investment director at AJ Bell, said: "It is remarkable that a company with such a strong brand can consistently issue bad news. Aston Martin has been one of the biggest flops on the stock market in living memory and today’s trading update does nothing to improve its tarnished reputation.
"Lower sales, higher costs and lower margins aren’t the whole story. You also have to consider the fact that it is now about to draw an additional $100m of very expensive debt. While strong orders for its DBX vehicle have allowed it to access this additional financing, the sheer cost of this debt (15% interest rate) is not really a good reason for celebration.
"The big question is why wealthy people aren’t buying its luxury cars. Working for this company should be a marketeer’s dream but the team responsible for attracting customers clearly haven’t got the formula right.
"There is plenty of competition for luxury cars and it seems that Aston Martin is being left behind. For example, Rolls-Royce Motor Cars has just announced its highest annual sales in its 116-year history. Perhaps it is time to get someone new in the driving seat of Aston Martin?"