Aston Martin’s losses widened in 2019 as sales fell and it warned of possible disruption from the coronavirus outbreak, underlining the struggling carmaker’s need for a bailout led by the fashion mogul Lawrence Stroll.
The luxury sports car manufacturer also announced on Thursday that its chief financial officer, Mark Wilson, will step down by the end of April, after a year that left the company facing a cash crunch that threatened to push it into bankruptcy for the eighth time in its 107-year history.
Aston Martin said losses before tax rose to £104m in the year to 31 December 2019, a 53% increase year on year.
Revenues slumped by 9%, to £997m, matching a decline in sales. Debt rose to £876m at the year’s end, more than seven times adjusted earnings for the year.
Shares fell 14% to hit a record low of 328p after the announcement. That left the company worth less than a fifth of its value at the time of its stock market float in October 2018, when shares were priced at £19.
Shortly after the float, Aston Martin had forecast sales of 7,300 cars in 2019, compared with the 5,862 it actually achieved.
Aston Martin expects “materially lower” sales in 2020 as it tries to reduce the number of cars held by dealers and it also warned that the Covid-19 outbreak could hit its supply chain and sales.
The carmaker said it had suffered disruption to some components in China but added that it had secured a supply until the end of March. However, the bigger worry for some analysts is the effect on sales in the key Chinese market, particularly as it launches its new, make-or-break SUV, the DBX.
Aston Martin’s Chinese sales rose by 28% during 2019 – while sales in the UK and Europe fell – suggesting that quarantine conditions in many parts of China will weigh heavily on the carmaker’s revenues, even as it enjoys a marketing boost, with three of its cars featuring in the latest James Bond film.
Aston Martin said: “Covid-19 has the potential to impact both the supply chain and customer demand in China and other markets. China was the company’s fastest-growing market in 2019 and represented 9% of total wholesales.”
The share issue led by Stroll, the Canadian billionaire who backed fashion brands such as Michael Kors, is “fully committed and underwritten” at £4 per share, the carmaker also announced, despite Aston Martin’s share price falling below that level since the bailout was announced at the end of January. Aston Martin shares floated at £19. The share issue and a £182m cash injection from Stroll aim to raise £500m in total.
Analysts questioned whether the fundraising efforts would be enough to sustain the company, particularly with the increase in debt levels.
James Congdon, an analyst at Quest, said the company is “burning cash, generating an operating loss, with possible restructuring costs ahead of it. The rights issue has not drawn a line under the uncertainty in this business, which has plagued it since IPO [initial public offering].”
Andy Palmer, Aston Martin’s chief executive, 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.
“We have revised our business plan to reset, stabilise and de-risk the business, positioning it for controlled, long-term profitable growth.”
Aston Martin also took a £39m impairment after pausing work on the Rapide E, its first all-electric car. While work is “substantially complete” and the launch had been due in 2020, the company chose to delay its electric vehicle investments until 2025 in order to conserve cash.