Thursday 27 February 2020 8:23 am

Aston Martin finance chief quits as firm falls to £100m loss

Aston Martin fell to a loss of over £100m today as the luxury carmaker announced it would use 2020 to “reset” the business in order to compete in the supercar market.

The firm said that the release of the new DBX and Valkyrie models, which are scheduled for the summer, would be critical to fulfilling this goal.

Read more: Aston Martin shares leap as Lawrence Stroll leads rescue deal

It was also announced that finance chief Mark Wilson would step down no later than 30 April. Shares in the firm fell nine per cent as markets opened.

The figures

Aston Martin fell to a £104.3m loss before tax, widening from last year’s £68.2m drop as the firm continues to battle an adverse market for luxury cars.

Revenue fell nine per cent to £997.3m, down from £1.1bn in 2018, which the firm said was due to a decline in sales to dealers, which fell nine per cent as well.

The company’s net debt also swelled from £559.5m in 2018 to £876.2m today.

Earnings per share fell to minus 32.1p, nearly a 60p swing from 2018’s results.

Why it’s interesting

Aston Martin, which has been mired in difficulty for over a year, today warned that the number of car sales will be lower in 2020 than in 2019 as the iconic British brand tries to reduce dealer inventories to a normal level for a luxury carmaker.

The company also warned that the coronavirus outbreak had the potential to impact the firm due to supply chain issues, which could be especially damaging for Aston Martin as the Chinese market posted a 28 per cent growth in sales last year.

John Moore, senior investment manager at Brewin Dolphin, said the outbreak “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”.

CMC Markets analyst David Madden said that Mark Wilson’s departure “is likely to be a contributing factor in the decline the Aston Martin share price as it is not a good look for the group, especially in light of the worsening financial position”.

Read more: Aston Martin reveals move into SUV market with critical DBX model

In addition to Wilson, three board members, Richard Solomons, Imelda Walsh and Tensie Whelan, will also leave the board this year.

The firm hit trouble almost as soon as the luxury carmaker listed in October 2018, with its share price declining from almost 1,900p to a little over 380p today.

In January the firm issued a profit warning, saying that annual core profit could halve as European sales weakened over its peak Christmas period.

Sign up to City A.M.’s Midday Update newsletter, delivered to your inbox every lunchtime

The struggling manufacturer told investors that annual earnings before interest, tax, depreciation and amortisation (Ebitda) will sink to between £130m and £140m.

That is as much as a 47 per cent drop compared to the £247.3m it earned the previous year.

Although shareholders were buoyed last month when it was announced that Canadian billionaire Lawrence Stroll would take a 16.7 per cent stake in the ailing carmaker, the road ahead for Aston Martin is expected to be long and challenging.

Stroll’s stake, which will be worth £182m, is part of a £500m funding raise which will include a rights issue worth £318m from major shareholders.

Read more: Lotus owner Geely considers taking stake in Aston Martin

Stroll will join the board of the carmaker as chairman, with incumbent Penny Hughes stepping down.

The deal included a £55.5m short-term working capital loan, but analysts are sceptical whether this will be enough.

Moore added: “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.”

What Aston Martin said

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 and today report a 9% year-on-year revenue decline alongside an operating loss of £37m.

Read more: Aston Martin shares fall as it warns annual profit will halve

“We have revised our business plan to reset, stabilise and de-risk the business, positioning it for controlled, long-term profitable growth.

“With our revised plan and appropriate funding in place, I believe we will have the building blocks in place to secure the necessary financial turnaround of the business consistent with our position as a luxury automotive company.”