Magnificent 7 Aston Martins help push British firm into profit
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James Bond’s favourite car maker has accelerated to record first-half year profits as Aston Martin today revised upwardly its projected full year earnings and revenues on the back of seven exciting new models.
Earlier losses have been driven hard into reverse by booming sales of the new 200mph DB11 model and a series of low-run but high-earning special edition models, with 80 per cent of vehicles exported.
For the six months to June 30, the company reported pre-tax profits of £21.1million (NZ$37.5million) – turning around a loss of £82.3million (NZ$146.4 million) in the same period of 2016 that was built on revenues that almost doubled to £410.4million (NZ$730.0million) from £211.8million (NZ$376.7million) in the first half of 2016.
Second quarter pre-tax profits reached £15.2million (NZ$27.0million) on revenues of £222.0million (NZ$394.9million). That compared with a pre-tax loss of £52.6million (NZ$93.5million) on revenues of £119.2million (NZ$212.0million) in the prior-year quarter.
On the back of ’sharply improved’ first and second quarter and buoyant sales, the firm said it was now increasing its guidance for its end of year performance.
It now expects 2017 underlying profits to rise to £175milion (NZ$311.3million) on revenues of £830million (NZ$1.47billion). That is up from the previous guidance of £170million earnings on revenues of £800million (NZ$302million and NZ$1.42billion respectively).
Aston Martin president and chief executive officer Dr Andy Palmer – who personally inspected and signed off the first 1,000 of the 2,500 DB11s so far built - said that with increasing sales, a new factory and exciting new models ready to come on stream, the British car-firm was ‘accelerating financially’ with a third successive quarter of pre-tax profit.
He said the firm had planned ahead for a potential Brexit and a weaker pound by boosting sales to America. That strategy was now paying off. But UK sales had also held up ‘remarkably well’ giving a double bonus, he said.
He cited ‘rising global demand for its luxury handcrafted sports cars’ for its success.
Car deliveries globally rose 67 per cent in first half 2017 to 2,439 vehicles as orders continued to rise in the UK, mainland Europe, the Americas and China among its 50 markets around the world.
The average selling price per model, excluding special editions, rose 25 per cent to £149,000 – principally driven by DB11 with customers adding more optional extras.
The firm with its headquarters in Gaydon, Warwickshire, currently employs 1,673. But that is set to grow after recently opening a new plant at St Athan in South Wales, where assembly of the forthcoming DBX family SUV model is due to start in 2019, supporting up to 750 new jobs.
Dr Palmer said the firm’s ‘Second Century’ transformation programme to 2022 was firmly ‘on track’ with at least one new model every year for the next seven years – with new variants of the DB11, new Vantage and Vanquish models, a mid-engined supercar to take on Ferrari, and the re-launching of the Lagonda brand. It is also developing the Valkyrie ‘hypercar’.
Aston Martin plans to roll-out an all-electric £230,000 RapidE supercar model with a 200-mile range in 2019, which it is developing in partnership with Williams Advanced Engineering.
By 2040 it also intends to offer a zero-emissions and hybrid versions of all its models, though Dr Palmer has dismissed suggestions of a Government ban on petrol and diesel cars by that date as ‘absurd.’
The luxury and sports car firm also highlighted ‘strong cash generation’ of £94.6million from its operating activities and ended the first half with £123.1million in cash.
During the period, Aston Martin also completed a £550million refinancing to enhance liquidity, reduce borrowing costs and increase financial reserves.
Dr Palmer, added: ‘Aston Martin is accelerating financially with our third successive quarter of pre-tax profit. Our improving performance reflects rising demand for our new DB11 model, as well as for special edition vehicles and the ongoing benefits from our Second Century transformation plan.’
Aston Martin’s performance increased speculation that the firm is on course for a potential Stock Market listing.
Speaking to the Daily Mail, Dr Palmer said of the positive results: ’Brexit so far has been helpful. We planned for it. Most companies assumed we’d remain in Europe, so not many had a Plan B. We did.
'We calculated that if the vote was to leave, the pound would devalue to around $1.30, and it did. That weaker pound makes our exports cheaper in the US. So we generated tail-winds to absorb any headwinds coming from Brexit.
‘We took the windfall and boosted our marketing in the US. We thought it would compensate for any losses in the UK. But our sales in the UK are also holding up. We’ve had a double benefit.’
In May the firm signed up American NFL football star Tom Brady, partner of Brazilian supermodel Gisele Bundchen, as a brand ambassador and the ‘face of Aston Martin in the US. US sales are now up 10 per cent to around 1,000 of its 5,000 annual sales. China is also ‘going well’, according to the CEO.
Mark Wilson, executive vice president and chief financial officer, added: ‘The strength of our first-half results prove that our strategy is on track. We exceeded our budget for the tenth consecutive quarter, giving us confidence that we will deliver a step-change in full-year performance. We are increasing our baseline guidance for underlying earnings of £175million on revenues of £830million in 2017.’
Aston Martin is owned by a consortium comprising Kuwait’s Adeem Investment and Tejara Capital, which together hold around 55 per cent per cent, and Italian private equity Invest Industrial with nearly 40 per cent. Daimler has a 5 per cent non-voting stake.
Aston Martin said in its report: ‘During the second quarter, Aston Martin continued its product offensive with the launch of the 4.0-litre twin-turbo V8 variant of the DB11, which combines a top speed of 187 mph with the most fuel efficient powertrain on offer by the company. It also announced plans for its first all-electric, zero-emission model: the limited-edition RapidE set to begin production in 2019.’
It noted: ’Demand for the DB11 and continued strong sales of the V12-powered Vanquish S and Vantage S models coincided with sell-out success for special-edition vehicles such as the Vanquish Zagato Coupe and continued development work on the Aston Martin Valkyrie hypercar in conjunction with Red Bull Advanced Technologies.
‘As the company expands, conversion work is well underway on the new state-of-the-art manufacturing facility in St Athan, where assembly of the upcoming DBX SUV model is due to start in 2019, supporting up to 750 new jobs in South Wales.’
- Daily Mail