Company round-up

Aston Martin to ‘reset’ the company following losses

Aston Martin DB11

New models will be introduced

Aston Martin slumped to a £36.7 million operating loss and said its chief financial officer would be leaving as it attempts to use 2020 to “reset” the business.

The luxury car maker announced a 9% year-on-year revenue decline to £997.3m.

It said this led to severe liquidity pressures, higher year-end net debt of £876m and significantly increased adjusted leverage to 7.3x.

As announced last month, it is proposing an equity fundraising of £500m to improve liquidity, stabilise the balance sheet and provide a platform for the future. There will be a £317m rights issue as part of the deal.

The equity raise includes a proposed investment of £182m from a consortium led by Canadian billionaire Lawrence Stroll who has taken a 20% stake and will become executive chairman.

The company said: “2020 is the year in which the business will be reset in order that it can start to operate as a true luxury car brand. This process is absolutely necessary for the long-term performance and value of the company.”

Mark Wilson will step down as chief financial officer and from the board by mutual agreement no later than 30 April.  He will remain available to the company through to 30 June.

The company will launch the DBX and Vantage Roadster in the second half of the yea, and Valkyrie deliveries are set to start at the same time.

“DBX and the entrance into the luxury SUV market is a key moment for us, therefore it is crucial that it is delivered to customers with the highest quality standards,” the company said.

“We always maintain our quality assurance and testing standards and will continue to do so through the third production trial that has just started at St Athan [Wales].”

The company’s problems have been compounded by the coronavirus in China which was the company’s fastest growing market last year.

However, it said none of its top suppliers manufactures in China and despite some disruption to the supply of some components there has been no impact on production.

Andy Palmer, chief executive and president, said: “2019 was an extremely challenging period for the company.  While retail sales grew, we were unable to generate the revenue and profits we had originally planned.”

Market reaction

Russ Mould, investment director at AJ Bell, said: “Full year results from Aston Martin are as ugly as you can get. Sales have gone into reverse and profit has evaporated. Worst of all is the scale of its borrowings. Its net debt position of £876 million is nearly as much as the entire year’s revenue (£997 million).

“While earnings have been disappointing, the real problem with the company is the state of the balance sheet.

“Arguably the scale of its planned £500 million fundraise isn’t large enough. This may be all the company thinks it is capable of raising in the near-term, but there seems a big risk it will have to go cap in hand to shareholders again in the not too distant future.

“New strategic investor and incoming executive chairman Lawrence Stroll may have underestimated the scale of Aston Martin’s financial problems. Let’s hope he has deep pockets.

“Aston Martin is resetting its business plan which includes a large clear out of the current board of directors. Unfortunately before it can start executing on this plan it is already facing a new headwind in the form of the coronavirus.

“The company has experienced some supply chain problems and China was also expected to be a key source of income this year, given how the country was its fastest-growing market in 2019.

“The fact parts of China are currently in lockdown is having a negative impact on consumer spending and Aston Martin could therefore struggle to meet previous expectations for sales in the country.”

John Moore, senior investment manager at Brewin Dolphin, said: “It seems a long time since the optimism of Aston Martin’s IPO. At the time, the shares looked expensive but had hope value built into them – as this has evaporated, the share price has reversed more than 70%.

“Today’s announcement of a strategic re-think feels like it has been a long time coming in the company’s quoted period, as initial hopes of higher sales faded to financial concerns.

“Indeed, the outbreak of coronavirus could not have come at a worse time – China is one of the business’s main growth drivers and among the few bright spots in today’s update.

“A rights issue will likely hurt shareholders in the short-term, but the ballooning of debt meant there were few options. The decision for a root-and-branch review of the business while moving to stabilise the finances is a step in the right direction, but progress needs to be reported after this or the shares could run out of gas.”

Persimmon CEO steps down

After 23 years at Persimmon, David Jenkinson has informed the board of his wish to step down as Group CEO in due course.

He has signalled his intention early to give the house builder’s board “good time” to recruit a successor.

Mr Jenkinson will remain in the CEO role and fully committed to leading the ongoing programme of change for as long as the business requires.

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