Aston Martin Lagonda (AML) Ordinary 10p

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Aston Martin’s full-year revenue fell by 21% to £1.3bn, amplified by a 17% decline in deliveries of its Special models, which carry higher average selling prices. Total deliveries fell by 10% to 5,448 cars.

Underlying operating losses more than doubled to £0.2bn, reflecting the fall in revenue and shift in mix towards lower margin vehicles.

Free cash outflows worsened by 5% to £0.4bn due to the drop in profitability. Net debt increased by £0.2bn to £1.4bn.

In 2026, car deliveries are expected to be similar to 2025’s level of 5,448. Underlying operating profit is expected to improve towards breakeven, helping to reduce free cash outflows (outflow of £0.1bn expected).

The shares rose 2.7% in early trading.

Our view

Aston Martin’s full-year results followed closely in the slipstream of last week’s profit downgrade, so the major bad news was already built into expectations. As a result, guidance pointing to slimmer losses this year was enough to send the shares higher on the day.

Production issues with the Valhalla appear to have been ironed out now, and it should help push margins higher this year. But Aston Martin’s developed a bit of a reputation for overpromising and underdelivering in recent times. As a result, we remain cautious about the extent of the improvement forecast for this year.

Tariffs are expected to remain a headwind in 2026. The current regime allows the first 25,000 UK cars to be exported to the US each quarter to be subject to a basic tariff of 10%, on a first-come, first-served basis. Anything over that in each quarter will be subject to a much higher tariff of 27.5%. Given the lack of control, and the fact that around a third of Aston Martin’s revenue comes from the US, this is a significant trip hazard.

The group’s lack of scale (it made only 5,448 cars in 2025) is also an issue. It means that even a small dip in volumes can have a big negative impact on profits and vice versa. Returning to profitability will require Aston Martin to grow volumes again, especially its higher-priced specials like the Valhalla, benefitting from the improved efficiencies that greater scale brings.

In the meantime, the group’s been selling a handful of assets to help shore up the balance sheet. There are also plans to let go of up to 20% of its workforce to help trim its cost base. While these actions provide a short-term buffer, they’re not a viable long-term plan, with the latter making it particularly difficult to increase future output.

The current high level of debt and the associated financing costs are also a big problem. Double-digit interest rates show that lenders need to be compensated heavily for the high level of risk they’re taking on.

To make matters worse, the group still expects negative free cash flows this year. That could spell real trouble if it runs out of funds to meet these obligations. As a reminder, debt investors are in the driving seat when it comes to claims on assets if Aston Martin fails to meet scheduled debt payments.

If management can deliver the expected improvements this year, there could be upside on offer. However, we’re quite sceptical given ongoing tariff uncertainty, struggling demand, production delays, and high rate of cash burn. As a result, we see scope for 2026 profit expectations to drop from here.

Environmental, social and governance (ESG) risk

Most of the auto industry falls into the medium risk category in terms of ESG. Product governance, particularly around safety, and the carbon emissions from companies’ products and services are key risk drivers. Business ethics, labour relations and operational carbon emissions are also contributors to ESG risk.

According to Sustainalytics, Aston Martin’s management of ESG risks is strong.

ESG issues are overseen by the board and overall disclosure is strong. There’s a robust environmental policy in place, with a commitment to net zero for scope 1 and 2 emissions by 2030 and scope 3 emissions by 2039 and has interim targets in place. However, AML doesn’t divulge sustainability-linked revenue and environmental impact isn’t systematically considered in the design phase. Although some of AML’s facilities are externally certified, scope is unclear and its product and safety programme needs improvement.

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 LSEG. 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.

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