Aston Martin Lagonda (lon:aml)
Aston Martin – Mercedes Small Shareholding Temps Me.

Aston Martin Lagonda Financials

ItemCurrent PeriodPrevious Period
Year20192018
Period6 Months6 Months
Revenue£407m£425m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA£22m£106m
Statutory Profit(£63m)£12m
Adjusted Profit(£70m)£21m
Total Debt£859m£704m
Net Debt£732m£560m

Commentary History
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Aston Martin Lagonda Share Price
Grade:The Black Grade - Shares That I Think Could Collapse To Nothing Or Suffer A Massive Share Issue.
Title: Aston Martin – Mercedes Small Shareholding Temps Me.
Company: AML - Aston Martin Lagonda
Share Price Then: 446p
Author: Ian Smith
Date: Mon 19 Aug 2019
Comments: Aston Martin going broke is hardly unusual, so is this iteration of the company any different?

I think that this time it is, the main reason is the DBX, the SUV due in early 2020.

It seems to be priced above the Porsche Cayenne and about half the price of a Rolls-Royce Cullinan so it is occupying a sector where there is hopefully demand, after all the Cayenne is a relatively common car.

It’s all very well being pure, Aston Martin only makes gentleman’s GT cars, but many credit the Boxster and Cayenne for saving Porsche, the 924, 944 and 928 were all fine cars but none had the history of the 911 or created any for themselves.

The Range Rover Evoque took the Range Rover brand into a new market as well, an off road vehicle that whilst good off road, did what the customers mostly wanted, to be good on road.

It may be that the DBX is a runaway success or the wrong car, at the moment I have no way of knowing, but that they are just about ready to launch the vehicle is a sign that the management are serious about the business not just boys playing with toys at the share holder’s expense.

The Strategic European Investment Group’s offer in July to buy another 3% of the company came just before the downbeat annual interim report, but they are going through with the purchase. Also and critically for me is that Mercedes owns about 4%.

Now 4% of Aston might be the milk and biscuits bill for Mercedes, but it gives Mercedes an interest in the company and Aston some access to Mercedes tech. Aston have some sort of a partnership with Red Bull F1 which may give access to Honda Power Unit tech and have collaborated with Williams Advanced Engineering (Williams F1) in the Rapide E.

In one way I regard the Rapide E as an intermediate design, the batteries were put in the space made free by the removal of the engine, but I think that was the point. Make a limited edition of 155 and get feedback from customers on what they really want. The Rapide E and Jaguar I-PACE both excluded a “Ludicrous Mode” as tech that is fun a couple of times then never used again.

A traditional petrol GT car, an electric GT car and SUVs in both petrol and electric make the range much more attractive to a dealer than just petrol GT cars and dealer’s reluctance to have Aston’s in stock has been suggested in a number of places.

How much information on Aston’s electric vehicle experience will make its way back to Mercedes is unknown.

There is a reason why I have go this far looking at the vehicles without discussing the financials, this is the financials look horrible to me.

There was an operating loss of £38 m for first half, but £19m of this was an accounting reversal for “Other Revenue” which was taken in the 2018 accounts for the sale of IP but the money is now not expected to be received.

The reported operating loss is

Reported Adjusted By Me
2019 2018 2019 2018
-£38m £64m -£21m £45m

Another $190m of debt was taken on in April to support investment flexibility giving the worrying high £859m gross debt.

Aston Martin is not a start-up company so increasing debt is worrying me and I can’t see how this level of debt can be supported by the current sales levels, it appears that it is going to be close to a third of gross profit.

If the DBX can tap a new market sector and the trend where revenue has doubled between 2015 and 2018, up to £1,097m then maybe.

Even if this does happen, with a current share price of around 466p and a market cap of just over a billion something like a 1:1 share issue is looking quite possible.

A debt free Aston is exciting to me but a heavily indebted luxury car maker, even with shares now down to about 25% of their launch less than a year ago?
Read Count: 233/10078

Buy/No Buy In A Nutshell
NegativesToo much debt and they have already done a share issue to fix that, very heavily reliant on sales of the DBX the new SUV, a worrying number of statements about how sponsoring the Stroll owned F1 team is great news.
PositivesNew management getting much more aggressive with people complaining that they asked for and were given loans but they can't afford them.
Initial Review Price51p
Last Review Price55.73p
Last Review Date02-Sep-2020
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