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Aston Martin Lagonda (AML) Ordinary 10p

Sell:1,903.50p Buy:1,909.50p 0 Change: 6.00p (0.32%)
FTSE 250:0.02%
Market closed Prices as at close on 27 July 2021 Prices delayed by at least 15 minutes | Switch to live prices |
Change: 6.00p (0.32%)
Market closed Prices as at close on 27 July 2021 Prices delayed by at least 15 minutes | Switch to live prices |
Change: 6.00p (0.32%)
Market closed Prices as at close on 27 July 2021 Prices delayed by at least 15 minutes | Switch to live prices |
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

HL comment (6 May 2021)

Aston Martin reported first quarter revenue of £224.4m, up 153% year-on-year, reflecting strong wholesale growth across all geographic regions, particularly in the Americas and China.

The group's operating loss narrowed to £15m from £68m, reflecting better trading, cost saving actions and a £6m currency tailwind.

Aston Martin is still expecting to sell roughly 6,000 vehicles this year with underlying cash profit margins in the mid-teens.

The shares rose 1.2% 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. This year will be the first full one to benefit from the new strategy, dubbed "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.

That follows a year spent running down dealer inventory levels, a headwind offset by the launch of the DBX, Aston Martin's first-ever SUV. The vehicles currently make up over half of the group's sales, which bodes well for the launch of a DBX variant in the third quarter.

Efficiency programmes and the issue of new shares has helped the group lower its net debt substantially, though at £723m, it's still uncomfortably high. Still, we're encouraged by management's focus on shoring up the group's financials and paving a clear path to profitability - the group is targeting revenue of £2bn, with underlying cash profits of £500m by 2025/25. That will require Aston Martin to move roughly 10,000 vehicles per year - 67% more than what's expected in 2021.

In order to deliver, the group will need to continue building on strong demand from the US and China. While China is a few steps ahead of the rest of the world post-pandemic, both nations are at a crucial turning point in their Covid recovery. While the luxury market offers some insulation from economic disruptions, Aston Martin is dependent on a strong economic recovery. A downturn could push sales lower and derail the group's plans.

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, we're not convinced there's a smooth road ahead.

Aston Martin key facts

  • Price/Book ratio as at Dec 2020: 2.93
  • Average P/B ratio since listing (2018): unavailable
  • Prospective yield: 0.0%

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

Register for updates on Aston Martin

Q1 Trading update

The group sold 1,353 vehicles, up from 578 in 2020. That reflected triple digit growth of 303% and 298% in the Americas and Asia Pacific Region respectively. Europe excluding the UK saw a 92% increase in vehicles sold while the UK delivered 19% growth despite "significantly disrupted dealer operations."

Strong growth in China coupled with a lower impact from financing helped the group's core average selling price (ASP) improve to £149,000 compared to £113,000 last year.

The group's new DBX SUV model made up the bulk of the sales (55%). With the Sport and GT contributing 23% and 21% respectively. Sport sales were up 66%, but GT sales declined 24%.

The group reported £24m in free cash flow compared to a £93m outflow at this time last year. That was the result of improved trading, a £49m working capital inflow and management's decision to spread out spending between quarters.

Net debt at the end of the quarter was £723m, marginally lower than it was at end of 2020.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. 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.

Previous Aston Martin Lagonda updates

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