Aston Martin – sales increase thanks to higher prices

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First-half sales increased 9% to £541.7 million, mainly due to higher selling prices and favorable exchange rates. Supply chain and logistics disruptions led to an 8% decline in volumes, although these are expected to subside in the second half of the year.

Underlying cash profit (EBITDA) increased by 20% to £59m, driven by higher revenue which was somewhat offset by higher costs.

The forecast for the full year remains unchanged. The group expects to deliver 6,600 vehicles with an improvement of around 50% in underlying cash profit.

The group previously announced a capital increase of £653 million, to support long-term growth.

Shares were broadly flat following the announcement.

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Our point of view

The recent news that Aston Martin was strengthening its balance sheet with a large cash boost prompted a positive reaction from the markets. This is an indication of the group’s financial situation, with cash flow not expected to turn positive before the end of the year.

The bloated war chest should help new CEO Amedeo Felisa drive the revamped strategy forward. He enters a lean organization, thanks to “Project Horizon”, which aimed to consolidate the brand’s image as a leading car manufacturer and improve efficiency by offering bespoke cars.

The change in strategy included a complete overhaul of the way Aston Martin sells cars. The group has reduced dealer inventory levels, which has allowed demand to outstrip supply. This has supported higher prices and added to the cachet that comes with buying an Aston Martin.

The group also focused on selling higher margin promotions. Customers register and pay a deposit for these rare models before they are built, allowing for tighter control of working capital. Cars also became cheaper to manufacture due to efficiency improvements.

Demand has been strong so far this year, with full-year targets intact. Although this will require improvement in the second half, as volumes need to more than double those sold in the first half to meet the target.

Management is targeting an annual turnover of £2bn, with underlying cash profits of £500m by 2024/25. This will force Aston Martin to move around 10,000 vehicles a year, 52% more than expected in 2022.

It’s not out of the question, 4500 DBX units are expected next year and that should then push higher. The rest is expected to come from refreshed front-engine models slated for release next year, which performed well after previous redesigns.

The brand’s positioning might insulate it somewhat from the gasoline ditch, but electric is the automakers’ direction of travel. The first hybrid cars are slated for release in 2024, with a full Aston battery expected a year later. It will take until 2030 for a full range of electric vehicles to become available.

In the short term, the group should keep its promises. But executing the electrification strategy will be a key driver of long-term success, and we haven’t yet seen whether customers will follow suit. Putting the new treasury of cash to effective use is the challenge from here, and it’s no easy task.

Aston Martin Highlights

  • Futures price to sales ratio: 0.38
  • Average price to sales ratio since listing (2018): 1.30
  • Prospective dividend yield (next 12 months): 0.0%

All ratios are from Refinitiv. Remember that returns are variable and are not a reliable indicator of future income. Keep in mind that key numbers shouldn’t be considered alone – it’s important to understand the big picture.

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Half-year results

The group sold 2,676 units over the period, including 32 promotions. The Sport and GT models stood out, with growth of more than 20%.

UK vehicle sales rose 12% to 488, driven by strong demand for Sport and GT models. Volumes were down 32% in the Americas to 720 as supply chain and logistics disruptions impacted the region. Sales in Europe (ex-UK), Middle East & Africa and Asia-Pacific recorded low to mid-single digit gains.

Average sale prices have reached record highs, rising from £156,000 to £186,000. This was driven by higher prices for base vehicles and an increased contribution from higher priced specials.

There was a free cash outflow of £234m, compared to an outflow of £44m last year. This was due to increased capital expenditure and negative changes in working capital due to supply chain disruptions.

Net debt was £1.3 billion, compared to £891.6 million at the start of the period.

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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. Unless otherwise stated, estimates, including forward-looking returns, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Returns are variable and not guaranteed. Investments go up and down in value, so investors could suffer a loss.

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Sallie R. Loera