Aston Martin shares slide 6.5% on London debut

Company had priced shares at £19 each

An Aston Martin DB10 concept car parked outside the London Stock Exchange. Photograph: Luke MacGregor/Bloomberg

An Aston Martin DB10 concept car parked outside the London Stock Exchange. Photograph: Luke MacGregor/Bloomberg

 

Shares in luxury car-maker Aston Martin fell as much as 6.5 per cent on their market debut in London on Wednesday as investors and analysts raised concerns over its ability to deliver an ambitious roll-out of new models.

The company, which last year made its first profit since 2010 and has gone bankrupt seven times, had priced its shares at £19 each, giving it a market capitalisation of £4.33 billion (€4.87bn). The shares fell to as low as £17.75.

Aston Martin has plans to launch a new model every year from 2016 to 2022.

“[It] has very aggressive growth plans. The execution of that growth needs to be flawless – nothing eats cash more than a car company when the cycle turns. There is concern that it’s more cyclical than the commentary has been,” said James Congdon, managing director of cashflow returns specialist Quest.

“The banks have done a good job for their client – but there’s no bounce.”

Aston Martin – full name Aston Martin Lagonda Global Holdings Plc – expects to produce around 7,100 to 7,300 cars in 2019, and 9,600 to 9,800 cars in 2020. It aims to increase production to 14,000 cars in the medium term, helped by new models and improving its manufacturing process.

The company is investing all of its cashflow to try to achieve this, leaving nothing for dividends or paying down debt.

Chief executive Andy Palmer, who has led a turnaround plan at the company since 2014, played down risks to the business from Britain leaving the European Union, even as other car manufacturers step up warnings over a disorderly Brexit.

He said Aston Martin was “relatively well insulated” from the effects of Brexit because Europe was not its biggest market and it may actually benefit from exporting with a cheaper pound.

Tariffs

However, 60 per cent of its parts are imported from the EU and will be hit by tariffs if there is no trade deal. “Obviously we’d all prefer no tariffs to be frank, no doubt, but the industry has to learn to adapt and it always has adapted to changes.”

In 2017, Aston Martin had adjusted earnings before tax interest, depreciation and amortisation (Ebitda) of £206.5 million, up from £100.9 million in 2016.

Its closest stock market comparable is Ferrari, which listed in 2015 and trades at an enterprise value (debt plus equity) of 22.2 times EBITDA, according to Refinitiv data. Based on this metric and Aston Martin’s net debt of £538.8 million, the British carmaker was priced at 23.6 times EBITDA on its debut.

Depending on its relative price performance, Aston Martin might make it into the FTSE 100, becoming the first car-maker in Britain’s blue-chip index since Jaguar.

Its shareholders, which include Italian investment firm Investindustrial and a group of Kuwait-based investors, sold a quarter of the company’s stock in the initial public offering (IPO). The company did not raise any money for its own purposes.

Aston Martin’s weak debut is the latest blow to Europe’s IPO market. British crowd-lending platform Funding Circle is down more than 20 per cent since it floated last week.

A banker familiar with both deals, who did not want to be named, said: “This is brutal. The IPO market stinks for growth stocks which do not have an earnings track record.” – Reuters