Shares in luxury sports carmaker Aston Martin Lagonda (AML) are now worth less than 10% of their IPO value after the latest share price plunge.
The British marque was worth £4.3bn when its shares starting trading on the stock market in October 2018 at £19. That valuation is equivalent to £5.50 today.
But after reporting a sharp fall in first quarter sales, ballooning losses and pulling full year guidance, the stock plunged in early trade, declining around 7% to 35.4p.
SALES VOLUMES HALVE
Aston Martin reported revenue down 60% as car sales more than halved as the coronavirus pandemic ripped through dealer demand and forced many to slash prices, hurting margins.
Sales in China, one of its biggest market opportunities, collapsed, falling 86% year-on-year.
For the first quarter to 31 March 2020, pre-tax losses soared from £17.3m a year ago to £118.9m as sales plunged from £196m to £78.6m. Gross margins slumped from 42.1% to 5.2% thanks to high fixed costs.
The decline in revenue came as the coronavirus ‘impacted dealer demand, amplifying the impact of strategic decision to lower wholesales to reduce dealer inventory towards a luxury norm; and, reflected lower average selling price,’ the company said.
PRESSURE ON PRICING
Total and core wholesale average selling price of fell to £98,000 from £160,000 a year ago, with core wholesales volumes down 44%, as a result of the strategic destocking and the onset of Covid-19, it added.
The company said it was on track to start deliveries in the summer following its decision to reopen its St Athan manufacturing facility. It began production of DBX bodies on 12 May and remained on course to start full production in the next few weeks.
With close on £1bn of net debt Aston Martin was effectively forced to raise £536m of emergency funding in April, including a £171m stake going to racing entrepreneur Lawrence Stroll and his partners. Stroll has since been made executive chairman of the company.
DANGEROUS DEBT
Even so, the firm’s net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) remains dangerously high at 10.4-times EBITDA over the last 12 months. Lenders typically get nervous at multiples beyond three.
Given the opacity of the business environment in the coming months it was no surprise that Aston Martin pulled its previous guidance for the year, citing uncertainty surrounding the duration and impact of the Covid-19 pandemic on the global economy.
The market had been anticipating huge losses for the company this year to 31 December, with consensus previously pitched at £168m of pre-tax losses despite predicting sales of more than £1bn.
‘My immediate priority is to rebalance supply and demand, reducing dealer stock,’ said Lawrence Stroll.
