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Aston Martin Lagonda (LSE:AML), the FTSE 250 sports car manufacturer, is struggling. Like so many other companies reliant on high-net-worth individuals, demand for its luxury products is failing to live up to expectations.
The company had hoped to sell 7,000 vehicles in 2024. It now looks as though it will struggle to pass 5,000. That’s why in November it had to raise £210m (equity £110m and debt £100m) to shore up its balance sheet.
An historical perspective
But the company’s been here before. Since its formation in 1913, it’s survived seven bankruptcies!
All companies experience periods when they struggle financially. But with Aston Martin, it appears to be almost a permanent battle.
If it wasn’t for the fact that it’s listed on the London Stock Exchange, there might’ve been an eighth collapse. One of the primary advantages of being a public company is the access to finance it provides. Aston Martin announced its plans to raise more money on 26 November. A day later, its financing problems — for now at least — were resolved.
But since its IPO in October 2018, things haven’t gone too well. Following a number of fundraising exercises, the company now has over four times as many shares in issue as when it first listed.
Given that it’s made a loss for the past six financial years, this isn’t surprising. It was last profitable in 2017, the year before it made its stock market debut. From 2018-2023, it’s reported cumulative post-tax losses of £1.53bn.
For the first nine months of 2024, it sold 3,639 cars and its loss before tax was £229m. To break even, it would’ve needed to sell another 838 (23%) units. For the full year, the company expects its margin to fall below 40% and to report negative free cash flow.
In 2018, it said its medium-term goal was to produce 14,000 vehicles per annum. In 2023, it enjoyed its best year and sold 6,620 cars. But it lost over £34,000 on each of them.
By comparison, Ferrari sold 11,815 vehicles and made a profit after tax per car of €32,396 (£26,845). And its gross profit margin is around 10 percentage points higher than its British rival.
A more positive view
But it’s not all bad news. The successful fundraising should give the company some breathing space.
Based on its run rate for the first three quarters of 2024, if it could sell 5,850 vehicles a year, it would break even. And as the table below shows, it’s managed to do this during five of the past six years. The only exception was 2020, when the pandemic struck.
| Year | Profit/(loss) after tax (£m) | Cars sold |
|---|---|---|
| 2015 | (107) | 3,615 |
| 2016 | (148) | 3,687 |
| 2017 | 77 | 5,098 |
| 2018 | (57) | 6,441 |
| 2019 | (118) | 5,862 |
| 2020 | (411) | 3,394 |
| 2021 | (189) | 6,178 |
| 2022 | (528) | 6,412 |
| 2023 | (227) | 6,620 |
And drawing on its motor sport legacy, it continues to produce some stunning looking cars. Also, its brand remains one of Britain’s most iconic.
Not for me
However, despite these positive reasons to invest, I’m going to avoid the stock. If it was easy to make Aston Martin profitable, I’m sure it would’ve been done by now. Finding individuals who are prepared to spend £200,000+ on a new car is going to be difficult.
Its marketing blurb says the brand symbolises “luxury, exclusivity, elegance, power, beauty, sophistication, innovation, performance and an exceptional standard of styling and design”.
Maybe. But the company doesn’t make any money!
