2nd Nov 2022 14:27
(Alliance News) - Aston Martin Lagonda Global Holdings PLC shared a disappointing update on Wednesday, reigniting concerns that its problems are more deep-seated than it is letting on.
For the three months ended September 30, the Gaydon, Warwickshire-based luxury car company reported a pretax loss of GBP225.9 million, widened from GBP97.9 million year-on-year.
This was despite an increase in revenue, up 33% to GBP315.5 million from GBP237.6 million. Aston Martin attributed this result to strong pricing dynamics throughout its core portfolio, including an average selling price of GBP189,000 in the third quarter, up 28% from GBP148,000 a year prior.
Operating losses of GBP58.5 million from GBP30.2 million brought the company's year-to-date total operating loss to GBP148.4 million.
Aston Martin shares were trading 16% lower at 88.67 pence each in London on Wednesday afternoon. The stock is down 83% in 2022 so far.
"This is not the development the luxury carmaker needed, its valuation has already motored downwards since listing just a short time ago, with genuine questions being raised about the sustainability of the group's long-term growth drivers," said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
Third Bridge's Orwa Mohammed concurred: "Aston Martin has fantastic cars and a strong brand, but their financial position makes success a real challenge."
Despite a 3.0% increase in total wholesale volumes to 1,384 from 1,349 for the third quarter, Aston Martin now expects full-year growth in the range of 6,200 to 6,600 units, revised from a target of over 6,600 units.
"Volume downgrades should also come with a dose of healthy scepticism, with it being possible that weaker demand, not just supply issues, could be lurking beneath the surface," Lund Yates added.
interactive investor's Victoria Scholar also noted that fears of a global recession and "stiff competition" are likely to weigh on demand for the luxury cars.
Aston Martin said it had incurred incremental costs of around GBP20 million trying to mitigate new supply chain and logistical disruption issues over the quarter.
It said that while it has now identified resolutions to these problems, it expects cash inflows from "more normalised working capital dynamics" to only become visible towards the end of the fourth quarter and into early next year.
"Free cash is walking out the door, not helped by the unhelpful delays to deliveries which is damaging working capital. Aston Martin has already gone cap in hand to investors to the tune of GBP650 million, it will be some time before such an equity raise is welcomed again," Lund Yates continued.
"That means things need to start moving by AML's own steam, sooner rather than later."
First announced in mid-July, Aston Martin revealed it had sealed GBP654 million in a capital raise at the end of September, which would "meaningfully deleverage" its balance sheet.
In July, it had said the funds would be raised through a placing of 23.3 million shares at a price of GBP3.35 each for GBP78.0 million to Saudi Arabia's Public Investment Fund, followed by an underwritten rights issue to raise GBP575 million.
Net debt at the end of September stood at GBP833.4 million, rising 3% year-on-year from GBP808.6 million. However, it dropped from GBP1.27 billion at the end of June.
"Aston Martin is facing a huge challenge to reduce its debt level. This is particularly concerning in a deteriorating macro backdrop. It has struggled since leaving Ford's control, with different owners having different objectives and no consistent strategy," said Third Bridge's Orwa Mohammed.
The carmaker was owned partially or fully by the US's Ford Motor Co from 1987 to 2007.
Following the capital raise, Saudi Arabia's Public Investment Fund is now an anchor shareholder. It is one of the world's largest sovereign wealth funds, with around USD620 billion in assets under management.
As part of the capital raise earlier this year, Chinese vehicle manufacturing giant Zhejiang Geely Holding Group Co picked up a 7.6% stake in the company.
Looking ahead, Chief Executive Officer Amedeo Felisa said the company was taking steps to reduce the impact of supply chain issues, and also emphasised that new products like the DBR22 and the V12 Vantage Roadster were helping to strengthen its "ultra-luxury positioning".
Chair Lawrence Stroll said financial headwinds were "already improving in [the fourth quarter]", and added that he remained "extremely confident" in the firm's strategy and ability to meet its targets.
By Elizabeth Winter; [email protected], and Holly Beveridge; [email protected]
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