AML - Stock Market Listing
Discussion
IanV12VSRs said:
Thanks for posting. Whilst having no shares I do follow the share price and was shocked to see the big drop.
It sounds like difficult times ahead
It sounds like difficult times ahead
No need to worry Ian. The halving of the share price, should not be interpreted as indicating difficult times ahead.
Share prices have a 'loose' connection with current and expected future profitability (earnings). In a way they are slightly akin to a savings account, where we want our investment return to be at a particular level, otherwise we don't use the account.
Therefore, when studying the anticipated near-term profitability, at the time of the flotation (remembering in particular all the money to be spent on developing numerous future cars, and fitting out the factory and employing new staff at St Athan, before obtaining any new revenue), it is the DBX which should be the big profit earner, and last October that meant waiting until 2021 for the publication of the 2020 accounts. In other words, that all made an IPO share price look very high to many observers.
My view is that the big drop in the share price is simply because it was too high to start with, and is no reflection upon the future of the Company. Indeed I think one can go even further now, because although there has been a significant reduction in worldwide new car sales, before the flotation Andy Palmer made his business plan clear, and so what has and is happening at AML was already known. For AML investors, the world economics (demand) may have altered, but for the Company itself, few unknowns have occurred since the floatation. I must not comment about new Vantage sales (you can look at DVLA figures if you are interested) but on this forum, we had even extensively discussed that important main core model, so no unexpected investor news there either.
Whether we like big SUVs or not, we see (even just looking at UK) there is clearly enormous demand for those vehicles. The DBX looks like a winner and if so, then Aston Martin will do just fine. We just need to be patient, because when investors can see genuine profit growth in any company, then eventually the share price will follow that growth.
Edited by Jon39 on Wednesday 24th July 10:56
A question for Rob and others.
AP quote:- "Mr Palmer said: "Whilst retails have grown by 26% year-to-date, our wholesale performance is adversely impacted by macroeconomic uncertainty and enduring weakness in UK and European markets."
AML sell their cars and parts to their dealers, ie. wholesale.
I have never understood what they mean, when they refer to retail sales.
They presumably dealt directly with customers for the Valkyrie, but is each of those sales then linked to a dealer, or is that not the case and therefore becomes a retail sale?
Please explain.
Unsorted said:
Am I correct in remembering that Aston Martin utilised an unusual account procedure for dealing with R and D? Wasn't it booked as an asset or something like that based on sales of cars in future? Probably got terms etc completely wrong, but think this is the gyst of what happened?
Does this mean that an accounting wrinkle exposes Aston Martin, via disappointing sales, to danger that companies that did not use this technique will avoid?
Not an expert in this area so could easily be expressing BS. Put another way. Have they bet the ranch on assuming every new model will be a winner?
Does this mean that an accounting wrinkle exposes Aston Martin, via disappointing sales, to danger that companies that did not use this technique will avoid?
Not an expert in this area so could easily be expressing BS. Put another way. Have they bet the ranch on assuming every new model will be a winner?
Your outline is correct, although I don't think it is an aspect which would have any connection with today's profit warning.
As you say, money spent on research and development is of course a cost. It could simply be regarded as an expense on the profit and loss account. In AMLs case last year, that would have produced another net loss. Companies are allowed to place R&D costs on the balance sheet, then gradually move back to the P&L (I think) over the lifetime of the particular product.
Where eyebrows were raised, and this would be your point, was that AML placed a much higher percentage of R&D than is the norm on to their balance sheet. That would of course reduce losses, or increase profits in the initial year. It was mentioned that under USA accounting rules, that would not be permitted.
hornbaek said:
Sorry Jon. I value your comments, but you view on share price development is absolutely not right. Shareprice (and indeed company valuation is based on future outlook). Not past - that is irrelevant.
This is strange hornbaek, because I am very aware of (your quote) 'Shareprice (and indeed company valuation is based on future outlook). Not past - that is irrelevant'.
Every point you have made I agree with, so I must have written my contribution in a very confused manner.
I was just making an attempt to reassure Ian, that when an IPO share price and therefore company value, has been so obviously 'pre-IPO hyped upwards', then there is bound to be a subsequent downward adjustment, whilst investors look more thoroughly at the fundamentals. This was the initial reason why the share price halved so quickly. Not a surprise to many seasoned investors. Ian ('It sounds like difficult times ahead) thought the halving was the indicator, whereas I see the initial dropping as an IPO price correction, but now the pricing movements involve investor concerns about future profitability.
On a separate aspect, Investindustrial puzzles me. Before the IPO, I had expected them to sell their entire holding, especially at that price. Private equity firms usually tend to make clean breaks. They sold I think a quarter, then took the obvious pasting on their remaining three quarters. When I posted that point a long time ago, it was explained that the market would not handle their full exit.
Do you think they will now cancel their offer to buy 3% from other shareholders at 1000p, now that the price is 707p, or are required to go ahead?
Edited by Jon39 on Thursday 25th July 10:35
hornbaek said:
The declaration for them to buy another 3 per cent is dictated by them wanting to hold a hand under the shareprice as more selling pressure will simply reduce the value of the shares they still hold.
AML being a luxury brand defying economic cycles has proved hot air.
AML being a luxury brand defying economic cycles has proved hot air.
Hello hornbeak,
The Investindustrial offer documents have now been posted to shareholders. Very rare to see anyone giving £10 in exchange for £7 outside a magic trick. Attempting to put a floor under the share price didn't go to plan. Anyway, it bolsters ones faith about insider information in the stock market, because it would appear that a board director did even not know a profits warning was imminent.
Yes, defying economic cycles. Just look at AML in 2008, so how could it have changed? At least back then the Company was private, so the consequent actions were conducted behind closed doors. No hiding for Plcs.
ASTON MARTIN LAGONDA GLOBAL HOLDINGS PLC
24th July 2019 - First profit warning as a publicly listed company.
Extract:
The Company expects wholesales to be between 6,300-6,500 vehicles for fiscal 2019 as 22% fall in UK growth in the second quarter of the year from a year earlier hurt performance, with headwinds likely to continue for the remainder of the year.
The Company also had to set aside £19m against consultancy income recognised in Q2 2018 amid significant doubt over whether it would recover the outstanding value of the contract.
This is my simplistic observation, about the timing of why AML UK sales have slowed in the 2nd quarter 2019.
Maybe right, partly right, or wrong. What do you think?
The Gaydon manufacturing facility has a peak capacity of about 7,300 cars.
Peak production was achieved in 2007, when 7,281 cars were produced.
The core models between 2004 and 2012 (in order of price);
Vantage
DB9
DBS
Those models began to be replaced in 2016, and the current core models (in order of price);
Vantage
DB11
DBS Superleggera
When a new motor car is launched there are often customers who are keen to be early buyers. This creates an initial surge in sales.
If a model for any reason fails to meet sales targets, there will still be early orders for dealer demonstrators, dealer stock showroom cars, and customer orders. It may take six months to produce those cars, during which time the manufacturer can report strong sales. Following that initial period, dealers will only order cars which they have orders for, or know they can sell, so that is the time when the manufacturer will feel the slow down in orders.
In the UK, registration figures are available for the new Vantage up to 31st March 2019.
Being the entry core model for AML, that car has to have strong demand. It is disappointing to see that there were 1,436 new registrations of the old Vantage, during its first year of production, whereas for the new Vantage the figure is 507, for the first three quarter periods of production (deliveries began in Q3 2018).
You will know that the new Vantage was being produced during the second quarter of 2019, but not during the second quarter of 2018. ( Company statement; '...22% fall in UK growth in the second quarter of the year from a year earlier'. )
The DB11 UK figures are below those of the DB9, but that is probably not so relevant to the timing of this profit warning.
[ I don't think we can change the topic title, but it would be now more appropriate to have something along the lines of;
'Aston Martin Lagonda - Stock Market Listing'
I will try asking the website moderators. ]
In the profits warning announcement on the 24th July 2019, AML referred to Retail Sales and Wholesale.
I am still confused by those definitions, but presumably wholesale is AML to dealers and Retail are cars sold to customers.
In the Trading Update, AML reported UK up for retail, but down for wholesale.
As members of the public, we only have access to DVLA statistics. SMMT figures for Aston Martin ceased to be published in December 2018. The DVLA figures are for vehicles registered for the first time, so not completely representing new cars sold to customers, because those figure would include for eg. dealer demonstrators and manufacturer owned cars.
If you are interested these are the vehicle number figures available to us.
Remember they are UK only.
AML published 'Wholesale' figures:
Q1 2018 = 259
Q1 2019 = 235
Q2 2018 = 424
Q2 2019 = 330
DVLA 'Vehicles registered for the first time' (you can look for individual models):
Q1 2018 = 441
Q1 2019 = 553
Q2 2018 = 430
You can see a big difference between the retail and wholesale Q1 figures which I cannot explain, but do you think the March 1st registration year indicator change has something to do with it?
JohnG1 said:
The £20m of consultancy revenue matches the number mentioned in the pre-IPO prospectus around selling off the classic (Newport Pagnell) Vanquish.
So - did the Vanquish revival die a death???
Anyone have any knowledge?
So - did the Vanquish revival die a death???
Anyone have any knowledge?
I don't know more than you John, but have thought about the matter.
What we do know officially, is that the contract contained confidentiality clauses.
At the beginning, I wondered whether it was the NP Vanquish, or the Gaydon Vanquish, because it was not revealed in the statement.
Presumably it must be more likely to be the later car.
I did wonder about Morgan, because they have openly said they want to develop a modern construction sports car. I think they have denied it involves them though and anyway, can you imagine Morgan failing to make a contracted payment, especially now with Investindustrial owning (is it) 51%.
The latest rumour has been about a Chinese firm.
It is all most unfortunate, because the £20m formed a significant portion of 2018 pre-tax profit, and for the 2020 accounts it will have to be reversed.
Unfortunately the initial share price movement today shows investors are still worried, following the release of the 2019 first half results.
Full details are on the investor section of the AML website.
Number of vehicles sold (wholesale);
2018 = 2299
2019 = 2442 ( + 6% )
The 2018 figure would include the run-out period for the old Vantage, but not any new Vantages.
Revenue
2018 = £424.9m
2019 = £407.1m ( -4% )
Pre-tax profit
2018 = £20.8m
2019 = loss £78.8m
Bobajobbob said:
I assume that AM has well and truly fallen out of the FTSE 100 by now? Not sure when this happened or whether it will in next update. This of course causes further selling from funds rebalancing.
No, AML has never been in the FTSE 100.
On the day of flotation, 3rd October 2018, the market capitalisation value was £4,300,000,000 and that was just a little below the 100 index threshold.
One little 'trainspotter' aspect. The shares did briefly trade above the IPO price of 1900p on that first day. The high during that day was 1915p.
RL17 said:
Not that bad - over reaction in market. Sales growth there, but less specials in 2019 H1 .....
I think there may be more to this. We could try looking more closely.Comparing H1 2019 with H1 2018, has more variables than simply less specials this year.
A large increase in US sales has been reported.
There are of course new Vantage sales in the 2019 figures, but what about the comparative Vantage H1 2018 figures?
Do you remember this;
NHTSA has phased in requirements for side air bags and other safety advances since 2010. The rules affecting the coupe versions of Aston Martin’s DB9 grand tourers and Vantage sport cars came into effect in September. The exemption now runs until the end of August 2016 for the DB9 and an extra year for the Vantage.
Therefore possibly no USA Vantage sales at all in H1 2018.
Others will know better than me about the old Vantage sales in H1 2018 (AMR sales?), but could the 2018 Vantage run-out be flattering the 2019 figures?
'From Here to Zero.'
This topic has been on a long journey.
Hope you are not chuckling at any of my early comments (the serious ones).
On the 28th February 2018
ajr550 said:
That knighthood for Andy Palmer that nobody wanted to support, must be getting closer !
My own opinion of Dr. Palmer is that I think he is doing a good job at AML.
Only criticisms are ;
1. The ridiculous amount of hype before the IPO and the price, but perhaps he was under pressure from one or more of the major shareholders.
2. The idea of core model replacement every 7 years seems fine (exactly what Mercedes do).
The DBX project seems excellent too, which hopefully will produce Porsche SUV type profitability for AML.
3. However, there are so many other cars (at least six, plus two engines) under development at the same time, all requiring a huge outflow of capital, before the DBX produces any serious incoming revenue.
We are told that developing any new motor car model costs a fortune, so it has always seemed very odd that a tiny (in the scheme of things) motor manufacturer, can be introducing so many new models and engines within such a short period of time.
Therefore,do you think there a risk of running out of money and with a debt of £859 million, can any more be borrowed?
Do you think this makes sense, or am I being too pessimistic?
Extract from the James Bond topic.
pbe624 said:
Back on topic... JB should be driving the facelifted (see bottom picture) Vantage to get sales going again ;-)
It is now becoming clear that the main core model new Vantage, was delivered to dealers in quantity during the months following launch (wholesale). Sales then to retail customers fell below expectation (eg. at one point 200 being advertised by US dealers). Consequently, dealer re-ordering of the model has now reduced.
One of the controversial aspects on this forum, is the expressed reluctance of numerous existing Vantage owners, to buy the new model. Whilst admiring the performance, repeatedly we read comments such as, I could not live with the looks.
The story was that AP told MR, "My mother must be able to tell the models apart".
The original Vantage, DB9 and DBS did look quite similar. Ian Callum kept closely to his classic design.
Certainly with front views, there is now no confusion between the new Vantage and DB11.
Looking at (pbe624's) redesigned photo of the new Vantage, I think perhaps AP's mother would still easily tell those models apart in three quarter view.
Perhaps AML should go for it.
Most of the Audi and Mercedes-Benz models now have 'corporate identity' front grilles, so those manufacturers have intentionally given their models very similar front appearances.
Do you think it would help increase AMLs Vantage sales?
Edited by Jon39 on Thursday 1st August 12:50
RL17 said:
Thank goodness for Neil Woodford (although he seems to be getting off more lightly lately!)
I'm off topic, but just a very brief comment on Mr. Woodford.
He had an enviable record, which was achieved by investing long-term in big solid established, dividend paying companies.
When he set up his own business, that strategy changed, to investing in tiny fledgling (supposedly) growth companies.
No wonder his results were entirely different.
AstonV said:
..... So to have 200+ units in the US is a lot. .....
That figure was a few months ago.
104 new Vantage cars are shown now.
Source; https://www.cars.com/for-sale/searchresults.action...
In the UK, new cars don't seem to be individually listed at all. However, our dealers do list more cars on their own websites (including some pre-registered), than on the Aston Martin Pre-owned list.
pschlute said:
The fact that the share price traded at or around the issue price for a short period of time, can be used as an argument that it was fairly priced. Certainly "the market" thought so, at least on day one. But I would argue that a 75% decline in less than a year on figures that some have described as "not too bad" does raise serious questions.
Yes, 'trading at or around the issue price for a short period of time'.It was extremely short, and the upward move to 1915p lasted only for a few minutes.
The close on that first day was 1810p.
The fall in just the first four weeks was 25%, which must indicate the IPO price was too high.
At the time it was dismissed, "Ah, but the Ferrari share price also initially fell by a substantial amount".
The closing prices were;
1st day = 1810p
2nd day = 1800p
3rd day = 1700p
End of
2nd week = 1543.5p
3rd week = 1448p
4th week = 1411.5p
Chris Hinds said:
An IPO after all raises money for investment in the company, and as Rob mentioned earlier (I don't know Rob but the comments make sense), the people involved in valuing an IPO don't want to be anything other than conservative. The valuation of £19 was agreed, the company floated and real cash was raised and fed into Gaydon.
None of us can change the £19 figure, most of us can only speculate on the evidence that was presented and the intentions being portrayed that convinced the many parties involved that it was the right figure. m.
Not correct Chris.None of us can change the £19 figure, most of us can only speculate on the evidence that was presented and the intentions being portrayed that convinced the many parties involved that it was the right figure. m.
No new shares were issued in the IPO to raise money for the Company.
It was and still is a great puzzle to me, and I commented on here about that at the time. Very often in IPOs, new shares are issued and additional equity capital is raised. Bonds and loans require interest payments, but with equity the AML shareholders knew they would not receive dividends, so initially it is a cheaper form of finance for the company. Perhaps more so on here than in the City, we knew that so many new models were being planned, which would require enormous amounts of spending for their development. Most odd when it was known money would be needed.
A high IPO price (do you remember, luxury goods company not a car manufacturer, less affected by economic downturns, submarines, luxury apartments etc.) may have benefited the large principal shareholders on the shares they sold (floated 25%), but they did retain considerable stakes which have declined in value disastrously. One balances the other. Of course we do not know, but if there might have been any owner pressure to obtain a high IPO price (a natural hope), how might they feel now?
It is a great shame, but we all want AML to be successful.
I have always said AML should not float, because a public company is continually being openly scrutinised. It was however presumably out of AMLs hands, once the private equity investment was accepted in December 2012. Note - that was before Dr Palmer was appointed.
Edited by Jon39 on Friday 2nd August 20:44
We all know that the AML share price has unfortunately suffered a torrid time, since the flotation last October.
Investindustrial sold some of their holding in the IPO, and received proceeds of about £450 million.
Can you guess how much their remaining holding has now reduced in value ?
Calculators at the ready.
Jon39 said:
We all know that the AML share price has unfortunately suffered a torrid time, since the flotation last October.
Investindustrial sold some of their holding in the IPO, and received proceeds of about £450 million.
Can you guess how much their remaining holding has now reduced in value ?
Investindustrial sold some of their holding in the IPO, and received proceeds of about £450 million.
Can you guess how much their remaining holding has now reduced in value ?
Please check my calculation, but I think the answer is;
One billion Pounds. £1,000,000,000.
Lost in just 9 months. Ouch!
avinalarf said:
It's very sad and crazy that a well known Brand with Worldwide recognition should lose 75% of its value in 8 months.
Not a lot has really changed that much over that time to warrant that sort of devaluation.
Maybe in the next couple of years when the new cars come on stream shares will bounce back to say £10 but will AM survive that long ?
Not a lot has really changed that much over that time to warrant that sort of devaluation.
Maybe in the next couple of years when the new cars come on stream shares will bounce back to say £10 but will AM survive that long ?
You know the retail world far better than I do Steven, but any particular devaluation of course always depends upon the starting point.
I believe retailers are permitted by the rules, to double the price of a product for a certain number of weeks, then have a 50% discounted sale. Could there possibly be a parallel with the IPO?
Investors do not like to have a (reduced revenue) profits warning in the first year following an IPO. The timing of that, only a week before the results, did not go down well either. The results then caused even greater concern. One aspect to worry investors following those two announcements, is that capital expenditure (new models etc.) is so much higher than free cash flow. That was known before, but the reduction in revenue makes matters worse. Will the money will run out before additional revenue is obtained from the DBX? Existing debt is high in relation to profitability and their bond yields have risen recently, meaning if more debt is required it will be more expensive to service. Another alternative might be a rights issue (raising money from existing shareholders) but following such a severe share price decline, the shareholders might not be too happy about that.
There was mention of tighter control of costs, but it was later reported to just involve no overtime and no new recruiting.
Hope it all works out for everyone.
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