Aston Martin DBXCompany boss Andy Palmer insists firm's ambitious growth plans remain on-track, despite investment costs and weak European sales hitting profits
Aston Martin recorded a pre-tax loss of £78.8 million in the first half of this year, due to lower-than-expected sales in Europe and expansion costs – but company boss Andy Palmer insists the firm’s ambitious growth plan remains on track.
The publication of Aston Martin Lagonda’s latest results came a week after the firm issued a profit warning in which it cut its wholesale forecasts. That caused shares in the company to dive: they are currently worth less than £6 per share, compared to £19 when the firm first floated in October 2018.
Aston’s retails sales in the first half of 2019 were up 26% year-on-year, with growth in the USA and China off-setting a steep decline in the UK and Europe. Wholesale volumes – cars being distributed to dealers – were up 6% year-on-year.
Aston boss Palmer admitted that “this has been a difficult period and we’ve clearly seen the market reaction”. But he noted that the firm's sales were up year-on-year, and added: “I’m confident we are taking the right actions and that we can successfully deliver our strategy.”
While sales were up, driven largely by demand for the Vantage and DBS Superleggera, Aston’s revenues dipped in part because it sold fewer high-price Special models, reducing the average selling price of its cars. The firm anticipates sales of its Specials will increase later this year, particularly with the ultra-limited run DB4 GT Zagato Continuation due in the fourth quarter.
In its profit warning last week, Aston Martin revised planned wholesale volumes for the full year. From 7100 to 7300 units originally forecast when it published its annual results in February, the target has now dropped to 6300 to 6500 units.
Palmer said that reduction was a result of the firm being “responsible and disciplined in the approach to our balance sheet”, and was designed to ensure that supply of the firm’s cars did not exceed demand, which could force dealers to offer discounts.
He added: “Retails are up, wholesales are up, market share is up – we’re just not as up in wholesale as we’d like. In order to protect the market position of the brand we thought it right and proper to cut the wholesale [numbers] to ensure that we don’t simply make the mistakes of history and have to discount cars to get them away.”
Aston’s profits were hit by a one-off £19 million provision for a ‘doubtful debt’ charge, relating to the planned sale of some intellectual property rights in the previous year.
The firm has also invested heavily in its ambitious Second Century growth plan, and particularly in developing the DBX SUV, which is due to be launched in December and go on sale early next year. Palmer said that Aston remained “focused completely” on the execution of the plan, and insisted that the wholesale volume revisions and falling share price wouldn’t impact that.
“We recognise there are headwinds and continuing uncertainties, and you’d correctly expect us to keep our financing arrangements under review to ensure we have appropriate resources around us,” said Palmer. He noted the first has greater cash reserves than it did this time last year, and would be prepared to secure additional funding “from sources with which we’re familiar” if needed.
He added: “Our basic intention is the execution of the [Second Century] plan. We have some short-term headwinds and one would hope we move through this short-term correction and then carry on with what we’re doing.
“You always take opportunities to be leaner and fitter, and that we will do. We’ve seen through the development of DBX so far that the efficiency of the development is much greater than it was with DB11, [with] far fewer design changes, far fewer needs to correct things not modelled correctly.
“That efficiency and things we learn through development are then cascased into [development of the] Vanquish replacement and eventually the Lagondas. We’ll take the opportunity of those learnings, but the plan remains unchanged.”
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Aston Martin shares fall as uncertainty hits sales
via Autobuzz Today
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