Aston Martin Lagonda (AML) Ordinary 10p

Aston Martin has said full year Wholesales rose 82%, in-line with expectations. 3,001 DBX's were sold, and have an estimated 20% share of the luxury SUV market. Retail sales (showroom sales to customers), were better than Wholesales across GT/Sport and DBX's.

10 Aston Martin Valkyrie and Valkyrie AMR Pro vehicles were shipped in Q4, but due to timing only, this was fewer than previously planned. As a result, underlying cash profits will be about £15m lower. Deliveries and associated cash profits are expected as planned through 2022 and 2023.

The group expects a year-end cash balance of around £420m, which is better than expected.

Aston Martin shares rose 3.8% following the announcement.

Our view

After a car-crash stock market debut, luxury car-maker Aston Martin is pulling a U-turn with a strategy shift that's kicking into high gear. ''Project Horizon,'' which aims to cement the brand's image as a top-tier vehicle maker and improve efficiency by offering made-to-order cars has driven a considerable fall in losses.

Dealer inventory levels have been successfully rebalanced, opening the door for strong growth through the end of the year. The group is on track to meet its goal to sell 6,000 vehicles this year, with over 50% of sales in the first nine months coming from the DBX, Aston Martin's first-ever SUV, while the Valkyrie hypercar began deliveries in the fourth quarter.

Management's targeting 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 - 67% more than what's expected in 2021. We suspect that will include a substantial proportion of electric vehicles, and we've yet to see Aston Martin's offering on that front. The group's partnership with Mercedes to bring an EV to market is a step in the right direction, but we worry buyers won't be wowed by a Merc engine in Aston Martin clothing.

The group needs to build on strong demand from the US and China, but as the pandemic rages on we're mindful of potential economic headwinds to come. The luxury market offers some insulation from economic disruption, but a downturn could still push sales lower and derail the group's plans.

Longer term the group will hope its recently launched F1 team helps put some fuel into sales, burnishing the brand's already impressive image internationally. This will come at a cost though, and given the group's not yet profitable it could become more of a burden than a boon. That's not helped by an uncomfortably high net debt position that's continued to rise this year.

In a best-case scenario, Aston Martin fully executes on "Project Horizon," and turns a profit in 4 years' time. But a lot can happen in that time period and dragging around an eyewatering debt pile makes it tricky to manoeuvre. While we're encouraged by management's steps to improve Aston Martin's value proposition, there's still a long road ahead.

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Third Quarter Results (4 November 2021)

Aston Martin reported third quarter revenue of £237.6m, up 92% year-on-year. That reflects a 104% increase in vehicle sales, reaching 1,349 in the quarter with strong growth across all model categories.

Underlying operating losses fell from £69.8m in 2020 to £30.2m this quarter.

Deliveries of the Aston Martin Valkyrie hypercar model are expected to start next quarter, with the first customer car already completed.

Geographically, the Americas and Asia Pacific continue to be the main drivers of growth - with volumes up 516% and 144% respectively - and now account for 56.1% of all sales. That reflects strong demand for the DBX SUV model, and growing sales in China in particular. Both the UK and Europe also delivered growth but a far slower pace, 51% and 20% respectively.

Core average selling price was £148,000, up from £130,000 last year. That reflects reduced dealer stock as well as demand created by an improving brand position.

DBXs continue to be the group's most popular model, with 591 vehicles sold, compared to 289 Sport models and 433 GT models. There was a substantial increase in the number of Specials completed in the quarter, rising from 10 a year ago to 36.

The increased number of specials drove a substantial increase in gross margins, to 33.1% from 13.6%, with efficiency efforts at the St Athan factory also helping. Total operating expenses rose 24.4% to £107.7m. That's behind revenue growth, despite increased investment marketing related to F1 and Bond events as well as increased depreciation following the launch of the DBX. Net finance expense rose substantially, year-on-year to £67.7m following a refinancing carried out last year.

The group reported a free cash inflow in the quarter of £5m, up from a £143m outflow a year ago. However, this reflects temporary benefits including a deposit inflow of £38m, timing of interest payments and phasing of capital expenditure.

Net debt at the end of the quarter stood at £809m, up from £727m at the start of the year.

The group's full year guidance remains unchanged, although remains heavily dependent on the new Aston Martin Valkyrie's due to be shipped in the fourth quarter.

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