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Aston Martin - sales rise on higher prices

First half revenue rose 9% to £541.7m, largely driven by higher selling prices and favourable foreign currency exchange rates...

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First half revenue rose 9% to £541.7m, largely driven by higher selling prices and favourable foreign currency exchange rates. Supply chain and logistics disruptions meant volumes fell 8%, though these are expected to unwind in the second half.

Underlying cash profit (EBITDA) rose 20% to £59m, driven by higher revenue that was somewhat offset by rising costs.

Guidance for the full year remains unchanged. The group expects to deliver 6,600 vehicles with around a 50% improvement in underlying cash profit.

The group previously announced a £653m capital raise, to support long term growth.

The shares were broadly flat following the announcement.

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Our view

Recent news that Aston Martin was shoring up the balance sheet with a big raise of cash was met with a positive reaction from markets. That's an indication of how concerning the group's financial position had got, with cash flow that's not expected to turn positive until later this year.

The pumped-up war chest should help new CEO, Amedeo Felisa, push the revamped strategy forward. He steps into a leaner organisation, thanks to ''Project Horizon,'' which aimed to cement the brand's image as a top-tier vehicle maker and improve efficiency by offering made-to-order cars.

The strategy shift included a complete overhaul of the way Aston Martin sells cars. The group ran down dealer inventory levels, helping demand outpace supply. This supported stronger pricing and added to the cachet that comes with buying an Aston Martin.

The group's also focused on selling higher-margin Specials. Customers sign up and pay a deposit for these rare models before they're built, allowing for tighter working capital control. The cars have also become cheaper to make thanks to efficiency improvements.

Demand's been strong so far this year, with full year targets intact. Though that'll require an improvement in the second half, given volumes need to more than double those sold in the first half to reach target.

Management's targeting annual revenue of £2bn, with underlying cash profits of £500m by 2024/25. That will require Aston Martin to move roughly 10,000 vehicles per year - 52% more than what's expected in 2022.

That's not out of the question, 4500 DBX units are expected next year with that expected to then push higher. The remainder's expected to come from refreshed front engine models due for release next year, which have performed well following previous revamps.

Brand positioning could insulate it somewhat from the shift away from petrol, but electric is the direction of travel for automakers. The first hybrid cars are pencilled in for 2024 release, with a full battery Aston expected a year later. It'll take until 2030 for a full range of electric vehicles to be available though.

Near-term, the group looks likely to deliver on its promises. But the execution of the electrification strategy will be a key driver of long-term success, and we've yet to see whether customers will come along for the ride. Putting the new cash hoard to efficient use is the challenge from here, and that's not an easy task.

Aston Martin key facts

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

Half Year Results

The group sold 2,676 units in the period, with 32 specials. Sport and GT models were the standout, both growing more than 20%.

Vehicle sales in the UK rose 12% to 488, driven by strong demand for Sport and GT models. Volumes declined 32% in the Americas, to 720, as supply chain and logistics disruptions impacted the region. Sales in Europe (excluding UK), Middle East & Africa and Asia Pacific recorded low-mid single digit gains.

Average selling prices reached record levels, up from £156,000 to £186,000. That was driven by higher prices for core vehicles and an increased contribution from higher priced Specials.

There was a free cash outflow of £234m, compared to an outflow of £44m last year. That was a result of an increase in capital expenditure and negative changes in working capital because of supply chain disruptions.

Net debt stood at £1.3bn, up from £891.6m at the start of the period.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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Written by
Matt Britzman
Equity Analyst

Matt is an Equity Analyst on the share research team, providing up-to-date research and analysis on individual companies and wider sectors.

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Article history
Published: 29th July 2022