Aston Martin Lagonda (AML) Ordinary 10p

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Aston Martin has announced two transactions which looks set to increase its cash resources by over £125mn.

The Yew Tree Consortium is increasing its stake in Aston Martin from around 28% to 33%, bringing in around £52.5mn of proceeds. Aston Martin also intends to sell its minority stake in the Aston Martin Aramco Formula One Team, raising around £75mn of proceeds.

First-quarter trading has been in line with prior guidance. Volumes are set to be broadly in line with the prior year, but the mix will be negatively impacted by fewer deliveries of its higher-priced Specials.

Full-year performance is expected to weighted toward the second half. However, the impact of recent additional US tariffs “remains under review”.

Full-year volume guidance has been adjusted, with Aston Martin now expecting “modest growth” (previously mid-single-digit growth). Targets for positive full-year operating profits and positive free cash flow in the second half remain unchanged.

The shares rose 10.1% in early trading.

Our view

Aston Martin’s announced deals to raise over £125mn of funds to strengthen its balance sheet. While that may not seem like a big amount in today’s world, it is nearly 20% of the group’s current market value.

First-quarter trading’s been in line with company guidance, with volumes set to be in line with last year. But to be clear, Aston Martin remains loss-making and we see little scope for that to change in 2025.

The group looks set to continue burning through cash in the near term, and the impact of recent US tariffs is still being assessed, but it’s likely to have a significant negative impact given that nearly 40% of its sales come from across the pond.

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 isn’t generating positive cash flows. 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.

In an attempt to stem the financial bleeding, Aston Martin is set to let go of around 5% of its staff. This is expected to bring annualised cost savings of around £25mn, with half of that figure to be realised this year. That’s only part of the puzzle though, as cost cuts can only be taken so far.

Given the group’s lack of scale—it made only 6,030 cars last year—even a small reduction in volumes can have a big negative impact on profits and vice versa. Returning to profitability will require Aston Martin to grow volumes again, benefitting from the improved efficiencies that greater scale brings.

Hopes are also being pinned on selling more Specials, which are ultra-exclusive cars that retail at a much higher value than its core offering. These tend to be more profitable than the Core range, but if there are demand or production issues with the new Valhalla models, there’s a high chance that full-year targets get brought into question.

We’re quite concerned given the recent tariffs, struggling demand, and high rate of cash burn. While it’s already well below the long-run average, which could suggest upside potential if things go well, the valuation is likely to come under more pressure if volumes don’t pick up.

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 average.

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 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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