Brands don’t come much more iconic than FTSE 250-listed Aston Martin Lagonda Global Holdings (LSE:AML). It exudes the essence of luxury and is James Bond’s vehicle of choice. However, the stylishly enticing brand has plenty of financial failings. The British independent manufacturer of luxury sports cars and grand tourers has an insane commercial history. In fact, it’s faced bankruptcy no less than seven times.
Can desirability alone sustain this FTSE 250 stock?
In its preliminary results for the 12 months to 31 December 2020, total revenue fell 38%. And it reported a pre-tax loss of £466m. The company also wrote off £98m after abandoning plans to introduce its Rapide E electric vehicles and other products. The R&D time and money spent on these projects is now lost. Car manufacturing is a very pricey business and luxury vehicles even more so. This week the company also launched a £70m debt offering in secured notes due 2025. The company now has a market value of £48.8bn and earnings per share are negative.
Canadian billionaire Lawrence Stroll bailed the company out in a £500m rescue package in January 2020, and new leadership is now implementing a turnaround plan. Unfortunately, the pandemic has thrown a spanner in the works of its progress, but many investors remain bullish for the future.
The company has only been publicly listed on the FTSE 250 since October 2018. And the trajectory of the Aston Martin share price is a depressing sight indeed. Unfortunately, its share price has come crashing down 94% since initial public offering (IPO). And the Aston Martin share price saw extreme volatility throughout 2020 as the Covid-19 pandemic crushed its revenue streams.
Aston Martin looks ahead
On a more positive note, Aston Martin successfully launched its DBX line of luxury SUVs. These cost £158k each. It’s enjoying strong customer demand and plans its first new DBX variant in Q3 2021.
It’s also proved to be well prepared for Brexit. To-date, manufacturing operations have not been jolted by any supply chain disruption. This seems to be enough to encourage investor interest as the Aston Martin share price has been rising since the results came out on February 25.
The company hopes to sell around 6,000 cars this year, lifting this to 10k by 2024 or 2025. Research and studies have shown worldwide growth in wealth, which is what many luxury brands are banking on to boost future sales. But if this slows or inflation rears its ugly head, then it could hamper luxury sales growth.
Founded in 1913, Aston Martin has a distinguished heritage fraught with difficulties. While it’s easy to get caught up in the glamour and desirability of the brand, that alone can’t guarantee shareholder riches. I can’t forget it’s risen from the ashes of all those bankruptcies, each of which will have cost investors dearly.
The FTSE 250 supercar maker issued close to £250m in shares last year to raise cash, besides raising $1.1bn at a costly interest rate of 10.5%. I think it’s more likely that the company would further dilute the share price with another share offering before opting for bankruptcy again if times got really tough.
Hopefully, it won’t come to that and it will instead pull off an amazing financial transformation. Nevertheless, I’m not willing to take the risk. Therefore, I won’t be adding Aston Martin shares to my Stocks and Shares ISA anytime soon.
