Tuesday 29th April 2014

Pain before gain at Aston Martin

Investment will bring great cars and returns says Aston after slender profits announced

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We'd imagine the biscuit budget is more custard creams than Duchy Originals at Aston Martin right now. The sports car maker has revealed it is operating on wafer-thin margins as it ploughs any available money it has into developing future models.

Last year the firm made an operating profit (i.e. before tax) of just £1.5 million on revenues of £519 million. That's a pitifully small amount given that sales that were actually up 11 per cent on 2012 to 4,200 cars.

Centenary year sales good but profits small

That worried financial ratings agency Standard & Poors enough to downgrade the firm's debt rating and label the independent maker's latest round of financing as 'junk', i.e. extremely high risk for investors.

Should we as Aston fans be worried? Absolutely not, the firm told us. "It's to be expected," a spokesperson said. "While we're investing in future product we're spending more than we're taking in sales. But at the end of the investment phase we're expecting significant returns."

The firm's chief financial officer, Hanno Kirner, described the current investment in a statement as "the biggest...in our 101-year history". Aston confirmed to us this money was the same £500 million to be spent over four years talked about when majority investor, Italian venture capital firm Investindustrial, announced it was buying into Aston Martin back in 2012.

And in fact, this cash pot has grown. "We've probably added to that amount," the spokesperson told us.

Vantage sales actually up on 2013

That money is being spent right now on the new, Aston-only sports car platform, as well as new engines and an electrical architecture, the last two developed with Daimler. We know the engine will be an AMG V8, likely to be a new 4.0-litre turbocharged unit.

The spokesperson also told us that SUV options are being considered, but that nothing has been decided.

Aston Martin wouldn't comment on the length on the current investment phase or when the new cars would be ready, but that four-year promise at the end of 2012 takes us to 2016, which is a long time for investors (and buyers) to hold their breath.

We still don't know who's going to be running Aston Martin after Ulrich Bez stepped down last year. Prodrive's Dave Richards also quit the board last year, although both men are still shareholders (as is Daimler to the tune of five per cent).

AMG a good partner for engines, right?

Helping tide Aston over until the launch of the new cars is the ongoing appeal of the current range, despite the older underpinnings. In the first three months of this year in Europe (Aston's biggest market after the US), sales of the V8/V12 Vantage were actually up 30 per cent compared to the same period the year before.

With that helping to top up the cash pile and the expectation of greatness from the latest AMG powerplants in the new cars, we reckon the biscuit tins of Gaydon should be bulging with organic stem-ginger oatcakes from 2016 onwards.

[Tubbycharged]

Everyone (other than maybe Porsche!) is hoping for a healthy Aston, so fingers crossed they can pull this off!