Image source: Aston Martin
Call me old-fashioned, but I would hope that any member of the FTSE 250 to be profitable.
However, since Aston Martin Lagonda (LSE:AML) made its stock market debut in October 2018, the company managed to rack up after-tax losses of £1.473 billion. That's a loss of £51,700 for each vehicle sold.
| Financial year | Revenue (£million) | Loss after taxes (£million) | Cars produced |
|---|---|---|---|
| 2019 | 981 | 118 | 5,862 |
| 2020 | 612 | 411 | 3,394 |
| 2021 | 1,095 | 189 | 6,178 |
| 2022 | 1,382 | 528 | 6,412 |
| 2023 | 1,633 | 227 | 6,620 |
The British icon's share price plummeted 26% on September 30 after it said it would deliver 1,000 fewer cars than previously expected. The directors blamed this “strategic realignment of wholesale volumes by 2024”about a slowdown in demand in China and problems in the supply chain.
For the year ending December 31, 2024 (FY24), free cash flow is expected to remain negative. And earnings are expected to be lower than FY23.
The company is now worth £1.32bn, around 69% less than at the IPO.
A long but turbulent history
Some companies make losses because they are at an early stage hoping, for example, to find precious metals deep underground or develop a new wonder drug that will transform people's lives. Unfortunately, Aston Martin can't use this excuse for its poor financial performance: the luxury car maker has been in business since 1913.
But during this time, he survived seven bankruptcies. Many management teams have struggled to make the company consistently profitable. I'm not sure why people thought their luck would change by listing on the stock market.
And I suspect things are going to get more difficult in the coming years.
The days of the thirsty, gas-guzzling V12 engine are long gone, so it has to manage the transition to electric vehicle production. The company's first pure electric vehicle is not expected until 2026.
However, despite its disappointing financial results, it continues to spend heavily on its Formula 1 team. Managers consider this spending an important part of its marketing strategy, but in the Constructors' Championship it lags behind others that use engines produced by McLaren. sling, ferrari and Mercedes-Benz.
This makes me wonder if Aston Martin's involvement in the sport is doing more harm than good.
Reasons to be optimistic
But there are some positive aspects.
The brand continues to produce beautiful cars that attract a loyal following. It has won numerous “cool brand” awards as well as trophies for engineering excellence.
And it sold more cars in FY23 than ever before. Its average sales price was also the highest on record. If the Chinese economy recovers as expected, then the poor outcome forecast for FY24 could be something of a blip.
In fact, the company remains on its medium-term target (2027-2028) of achieving revenues of £2.5bn and adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) of over £800m. pounds sterling (FY23: £306m).
my verdict
However, losses must be financed. And as of June 30, 2024, the company already had debt (excluding leases) of £1.23bn on its balance sheet. Therefore, I suspect that more money will be asked from shareholders soon.
I also have to be convinced that it will be able to successfully incorporate fully electric drives into its vehicle range.
For these reasons, I do not want to invest in the company.