AML - Stock Market Listing

AML - Stock Market Listing

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RL17

1,231 posts

92 months

Saturday 18th January 2020
quotequote all
Been in Africa for a family wedding for 2 weeks and catching up.

Seems even more perfect hindsight on here recently.

Business value still in the £2bn to £2.5bn range (higher when investment stories run). So debt level around 50%of value.

Assume no one on here has ever had a mortgage over 50% of value smile

There has been loads of investment over last few years, and £350m in 2020 (despite St Athan and DBX virtually done) and AML still tight lipped on that (should say more in Feb) but good to see it's not being cutback. Don't see a company starved of investment.

So board at time of flotation were being advised on approx £600m of debt (reduced by pref share conversion from £811m. Based on float advice that debt was 12-15% of business value. So don't hang the non-execs.

Businesses need to generate a return on capital in excess of interest cost/return (otherwise they should liquidate and let investors buy bonds or invest in businesses they can). Management job to build cars to fulfil projections.

Agree with Rob that DB11 didn't do so well after great boost to 2017 figures. So not all to do with new Vantage.

10-15% changes in sales volumes and some margin hit and economies and overall car demand slowing, UK uncertainties and most other manufacturers in segment launching SUVs have hit sales and cash flow at a critical time before DBX revenue come in.

Relatively small changes in revenue can have huge impact on projections and share price. The lead time in developing cars doesn't help.

Not saying management perfect, but the awful debt being mentioned hasn't gone up that much and I don't think the old AM way off one new model every 3 years or so would have survived til now. The increase in interest costs is worrying but not terminal.

Agree AML not going bust - worse worse case is major investors taking it private, licking their wounds and preparing for a trade sale.

Thankyou4calling

10,596 posts

172 months

Saturday 18th January 2020
quotequote all
Business value isn’t £2 billion.

It’s half that!

Jon39

Original Poster:

12,782 posts

142 months

Saturday 18th January 2020
quotequote all

RL17 said:
Been in Africa for a family wedding for 2 weeks and catching up.

Seems even more perfect hindsight on here recently.

Hope you had a good trip.

I think 'perfect hindsight' is perhaps just a little harsh, Reg.
This topic began in January 2018, many months before the IPO.
Some of the points made recently, were the same concerns that had been discussed on the very early pages of this topic.
One known aspect was the enormous spending required, for the development of so many proposed future models.

Demand.
By chance I came across a related aspect, after a question was raised about the Search function on this website.
The new Vantage and the DB11, were of course replacements for the Vantage and DB9. I know times have changed, but there is a big difference in the sales numbers. Dealers were actually turning away customers in 2003/4 and that was before production had even begun. Presumably the customers placing orders then, had only seen photographs of the concept car in newspapers and magazines.

https://www.pistonheads.com/gassing/topic.asp?h=0&...

Extract - ' Every dealer is different but my local one is not accepting deposits (factory line) and reckons to have over 350 names against the car. '


Debt.
Do you agree that this has now become the decisive aspect?
The total is now approaching £1 billion.
Refinancing might allow time to repay, but the annual interest liability could become overwhelming.
Just the latest bond, $100 million, will incur annual interest of $15 million.
In 2022, if all the bonds can be refinanced, is there a danger that the Company profits will then be completely swallowed by interest payments?
When the debt was last refinanced, the interest cost reduced, but it is probably more likely to go in the other direction next time.









Edited by Jon39 on Saturday 18th January 15:48

RL17

1,231 posts

92 months

Saturday 18th January 2020
quotequote all
Thankyou4calling said:
Business value isn’t £2 billion.

It’s half that!
Business value £ 2 bn

less Debt £1bn

= company value £1bn (market cap currently just over £1bn)

AMLGHplc could sell the AML car business separately to Daimler AG for £2bn, £1bn of proceeds repays all the debt and AMLGHplc is left with £1bn of cash and company value is still £1bn.


RL17

1,231 posts

92 months

Saturday 18th January 2020
quotequote all
Jon39 said:

RL17 said:
Been in Africa for a family wedding for 2 weeks and catching up.

Seems even more perfect hindsight on here recently.

Hope you had a good trip.

I think 'perfect hindsight' is perhaps just a little harsh, Reg.
This topic began in January 2018, many months before the IPO.
Some of the points made recently, were the same concerns that had been discussed on the very early pages of this topic.
One known aspect was the enormous spending required, for the development of so many proposed future models.

Demand.
By chance I came across a related aspect, after a question was raised about the Search function on this website.
The new Vantage and the DB11, were of course replacements for the Vantage and DB9. I know times have changed, but there is a big difference in the sales numbers. Dealers were actually turning away customers in 2003/4 and that was before production had even begun. Presumably the customers placing orders then, had only seen photographs of the concept car in newspapers and magazines.

https://www.pistonheads.com/gassing/topic.asp?h=0&...

Extract - ' Every dealer is different but my local one is not accepting deposits (factory line) and reckons to have over 350 names against the car. '


Debt.
Do you agree that this has now become the decisive aspect?
The total is now approaching £1 billion.
Refinancing might allow time to repay, but the annual interest liability could become overwhelming.
Just the latest bond, $100 million, will incur annual interest of $15 million.
In 2022, if all the bonds can be refinanced, is there a danger that the Company profits will then be completely swallowed by interest payments?
When the debt was last refinanced, the interest cost reduced, but it is probably more likely to go in the other direction next time.

Edited by Jon39 on Saturday 18th January 15:48
Thanks Jon, great trip but RSA still pretty divided.

Concerns over IPO being a diversion of management time and a costly exercise have been raised correctly and I'd agree. Also note your concerns over DB11 UK sales which seemed to get an ostrich response from some and you were told to bury.

Perfect hindsight comment raised in relation to lots of posts, not yours, in relation to cash at time of flotation, flotation price etc is clearly a obvious and negligent mistake and that board had a duty to AM pistonheads forum above that of shareholders etc. Off with their heads and all that smile

Main point is AMLGH is now a public company and the shares prices and fortunes of management vary widely as small changes in revenues and EBITDA (when compounded forward in forecast models) have big effects on how company is perceived and valued.

Investors are in business to make money and not just a few hundred bespoke cars on outdated chassis and tech.

Employees are working very hard and the margins between success and failure for PLCs in public spotlight can small.

Jon39

Original Poster:

12,782 posts

142 months

Saturday 18th January 2020
quotequote all

RL17 said:
..... Also note your concerns over DB11 UK sales which seemed to get an ostrich response from some and you were told to bury. .....

You remembered that. smile

It just seemed logical to me, that the Vantage/new Vantage and the DB9/ DB11, should be always be the two big sellers for the Company.
Unfortunately we only have public access to UK quarterly model figures, but as the UK has historically been the largest individual market, I thought they might give at least some sort of indication, about what is going on. Aston Martin disappeared from the monthly SMMT figures, and are now lost within 'Other British'.

The 'Second Century Plan' announcement (2015, I think) suggested better times for AML than before, so I thought to meet that requirement, the new models would have to sell better than their predecessors. Unfortunately the figures soon indicated otherwise, particularly with the new Vantage. As you say, I stopped posting that comparison, but anyone who wants to, can look up DVLA (3rd Q 2019 are the latest published).

Looking back though now, I suppose it was a clue.
As a fairly serious investor, I look for wide range of sometimes quite obscure indicators. Did you notice anything different on the Sevenoaks forecourt in November ?









Edited by Jon39 on Saturday 18th January 22:42

cardigankid

8,849 posts

211 months

Sunday 19th January 2020
quotequote all
RL17 said:
Thankyou4calling said:
Business value isn’t £2 billion.

It’s half that!
Business value £ 2 bn

less Debt £1bn

= company value £1bn (market cap currently just over £1bn)

AMLGHplc could sell the AML car business separately to Daimler AG for £2bn, £1bn of proceeds repays all the debt and AMLGHplc is left with £1bn of cash and company value is still £1bn.
Firstly, what is AMLGHplc if it doesn’t have the car company, and what is the car company if it doesn’t own the brand? Are you saying they are going to licence the name to Daimler? I can’t see Daimler accepting that, for the basic reasons that 1. Why should they save the company for the benefit of a separate brand owner, and 2. The separate brand owner would be at liberty to damage the brand by association with a range of products entirely out with the control of the car company.

AM is a strong brand, but so is Boeing. It’s not like perfume, handbags or even watches, where simply stamping the name on a product gives it significant added value. I’m not criticising a bit of merchandising, but unless the company produces a first class piece of design and engineering it is nothing, and it is producing that which they should be focussed on. I don’t think an Aston Martin branded helicopter which has actually got damn all to do with Aston Martin is the way forward. No car, and the brand is just yet another quaint British antique.

Secondly, why would Daimler pay £2bn for a company which needs further investment and is losing money?

Edited by cardigankid on Sunday 19th January 10:05

oilit

2,618 posts

177 months

Sunday 19th January 2020
quotequote all
Jon39 said:

Did you notice anything different on the Sevenoaks forecourt in November ?


Edited by Jon39 on Saturday 18th January 22:42
You have got me curious - what happened?

Jon39

Original Poster:

12,782 posts

142 months

Sunday 19th January 2020
quotequote all
oilit said:
Jon39 said:
Did you notice anything different on the Sevenoaks forecourt in November ?
You have got me curious - what happened?

The number of AMs on the forecourt increased remarkably.
Parked on the area vacated by Jaguar.
They included almost a dozen new, or nearly new Vantages.

I did not know why, but afterwards during December, we had contributors here talking about the enticing £1,000 monthly offer.
Perhaps the two things were things were connected.


cayman-black

12,625 posts

215 months

Sunday 19th January 2020
quotequote all
So have they all gone now then? I would say that's exactly why they were all there.

Jon39

Original Poster:

12,782 posts

142 months

Sunday 19th January 2020
quotequote all

ds666 said:
I'm no investment banker, but EBITDA is a funny measure to use when your I and your DA are massive, relative to your E and future investment needs.

Years ago it was never mentioned, but appears to have become a business buzz word.
Mind you, I notice it is often used now, as one of the performance measures in director incentive schemes.

AML Adjusted EBITDA
2015 = £71.4m
2016 = £100.9m
2017 = £206.5m
2018 = £247.3m


Now compare with Pre-tax Profits
2015 = £128.0m loss
2016 = £162.8m loss
2017 = £ 84.5 m profit
2018 = £ 68.2 m loss

The EBITDA measure shows continuous steady growth.
It is a mystery to me, which is why I prefer to look at bottom line figures.




hornbaek

3,670 posts

234 months

Monday 20th January 2020
quotequote all
Businesses don’t go bankrupt by making losses. They go bankrupt when they run out of cash. AML has been popping up the EBITDA by transferring R&D cost to the balance sheet, hence the “adjusted” title to the EBITDA. The R&D and finance costs are then accounted for below the EBITDA number leading to the pre-tax loss.
The EBITDA number is used when comparing different companies operating performance, neutralising the effect of the financing structuring. But still the EBITDA number can be manipulated. A much better benchmark number is the cash-flow. As a listed company AML has to publish the cash flow at the start and at the end of a financial year. That number is what it is, and in AMLs case it is hugely negative.

Jon39

Original Poster:

12,782 posts

142 months

Tuesday 21st January 2020
quotequote all

The colder winter weather, usually means more time for me to do indoor activities.
I have just looked up some old Aston Martin accounts (nurse will help me overcome the urge). smile
Discovered a couple of aspects, which might be of interest.

1.) I didn't know, but during the Ford ownership period, Aston Martin was 75% owned by Jaguar (Ford subsidiary at the time), and only 25% directly owned by Ford. Don't know why it was structured in that way, but possibly the makings for a good pub quiz question.

2.) We obviously knew that Ford must have been extremely generous to AML, but the accounts do provide more detail about this.
Vehicle development costs are shown in the profit and loss accounts. Not making use of the balance sheet then. There are also corresponding credit amounts directly from Ford, repaying those costs.

I thought it was the sales success of the DB9 and Vantage, which produced the sequence of (pre-tax) profitable years, but the Ford repayments would have had a direct effect on those profit figures.

Interesting to see the relationship between vehicle sales numbers, profits and the changing number of employees, but that is for another time.







JRAM01

2 posts

50 months

Wednesday 22nd January 2020
quotequote all
I am new to the forum and have been looking at the IPO chat. I believe AM have fundamentally undermined the confidence of their two most important stakeholders with last year's IPO fiasco - their employees and their owners, who believed in and supported the marque. The immediate post IPO drop in share price which has continued unabated has been a debacle and such trends tend to continue unless, or until a change of confidence is engendered. The existing management team and in particular the CEO, Chairman & FD should be held to account. A censure vote at the 2020 AGM would at least highlight the lack of confidence in the management team to take the marque forward. Any motion requires the backing of 100 shareholders to be considered. The question is would forum members and owners & shareholders more widely support an appropriately worded proposal?

Jon39

Original Poster:

12,782 posts

142 months

Wednesday 22nd January 2020
quotequote all

JRAM01 said:
I am new to the forum and have been looking at the IPO chat. I believe AM have fundamentally undermined the confidence of their two most important stakeholders with last year's IPO fiasco - their employees and their owners, who believed in and supported the marque. The immediate post IPO drop in share price which has continued unabated has been a debacle and such trends tend to continue unless, or until a change of confidence is engendered. The existing management team and in particular the CEO, Chairman & FD should be held to account. A censure vote at the 2020 AGM would at least highlight the lack of confidence in the management team to take the marque forward. Any motion requires the backing of 100 shareholders to be considered. The question is would forum members and owners & shareholders more widely support an appropriately worded proposal?

Thanks for joining Jeremy.

I take a slightly different view about the points which you have made.

- It is generally agreed, and was fairly obvious to some at the time, that the value at IPO had been hyped upwards prior to the IPO during 2017 and 2018 (20 different new model announcements, I have forgotten all the associated luxury goods announcements).
We obviously do not know who encouraged all that, but perhaps the confidence of the major shareholders was not undermined, as you suggest.
7 Dec 2012 invest £150million for 37.5% stake.
3 Oct 2018 sell part holding for about £650 million, and retain a 15.4% stake.

- Andy Palmer introduced considerable fresh enthusiasm into AML. His plans were ambitious, which obviously would involve enormous spending on new models and a new factory. I think the Company problems are not engineering, but that sales of the core models have not met expectations, so finances have suffered. The very high priced special models, have sold extremely well. Who would have thought a list price of about £7 million could even be possible ?

- Don't think an AGM motion would have any effect, because about 70% of the shares are still in the possession of the original owners.

- Debt is very high, but the DBX project is now looking good. Remember Porsche now make more SUVs than sports cars !






Edited by Jon39 on Wednesday 22 January 17:36

RL17

1,231 posts

92 months

Thursday 23rd January 2020
quotequote all
Jon39 said:

The colder winter weather, usually means more time for me to do indoor activities.
I have just looked up some old Aston Martin accounts (nurse will help me overcome the urge). smile
Discovered a couple of aspects, which might be of interest.

1.) I didn't know, but during the Ford ownership period, Aston Martin was 75% owned by Jaguar (Ford subsidiary at the time), and only 25% directly owned by Ford. Don't know why it was structured in that way, but possibly the makings for a good pub quiz question.

2.) We obviously knew that Ford must have been extremely generous to AML, but the accounts do provide more detail about this.
Vehicle development costs are shown in the profit and loss accounts. Not making use of the balance sheet then. There are also corresponding credit amounts directly from Ford, repaying those costs.

I thought it was the sales success of the DB9 and Vantage, which produced the sequence of (pre-tax) profitable years, but the Ford repayments would have had a direct effect on those profit figures.

Interesting to see the relationship between vehicle sales numbers, profits and the changing number of employees, but that is for another time.

Q1 75% ownership allows tax losses to be used in UK sub-group. The other 25% ownership would have depended on who had cash or could borrow and get tax relief on debt incurred for purchase etc.

Probably the most important thing when buying AM is can you benefit from their losses wink



RL17

1,231 posts

92 months

Thursday 23rd January 2020
quotequote all
cardigankid said:
RL17 said:
Thankyou4calling said:
Business value isn’t £2 billion.

It’s half that!
Business value £ 2 bn

less Debt £1bn

= company value £1bn (market cap currently just over £1bn)

AMLGHplc could sell the AML car business separately to Daimler AG for £2bn, £1bn of proceeds repays all the debt and AMLGHplc is left with £1bn of cash and company value is still £1bn.
Firstly, what is AMLGHplc if it doesn’t have the car company, and what is the car company if it doesn’t own the brand? Are you saying they are going to licence the name to Daimler? I can’t see Daimler accepting that, for the basic reasons that 1. Why should they save the company for the benefit of a separate brand owner, and 2. The separate brand owner would be at liberty to damage the brand by association with a range of products entirely out with the control of the car company.

AM is a strong brand, but so is Boeing. It’s not like perfume, handbags or even watches, where simply stamping the name on a product gives it significant added value. I’m not criticising a bit of merchandising, but unless the company produces a first class piece of design and engineering it is nothing, and it is producing that which they should be focussed on. I don’t think an Aston Martin branded helicopter which has actually got damn all to do with Aston Martin is the way forward. No car, and the brand is just yet another quaint British antique.

Secondly, why would Daimler pay £2bn for a company which needs further investment and is losing money?

Edited by cardigankid on Sunday 19th January 10:05
Aston Martin Lagonda Global Holdings plc is just a company - it's not even 18 months old! It could also be wound up or liquidated in a few months after a sale or a reorganisation.

Daimler mentioned just as a hypothetical example to demonstrate the the car business (incl brand) can be separated from the debt. Just like a car company that pays a £100m dividend (company value will go down £100m and business value unchanged).

Majority of large companies, FTSE100 etc have loads of different businesses and majority of business sales, rather than company sales.

Point is that AML business worth twice as much as AMLGHplc and

Debt and companies can be reorganised and usually there's a separate group company that issues the debt/bonds (Aston Martin Capital Holdings Limited I believe). So there's probably a company with the car business (in AMLGHplc group) that's worth £2bn that could be sold (company sale) for that (hypothetically of course) or that company could sell the AML business. (as part of the deal the buyer gets the AML name/names etc and seller renames all it's remaining companies with dull name company names).

Brands can be separated also - would have expected/expect Ford companies in UK (when they actually made cars) or Europe which clearly had a car business or two (European market cars) to have made cars under license from Ford US (and so had a car business without owning the brand).

So AML car business worth £2bn and AML cars is not the same as AMLGHplc.





hornbaek

3,670 posts

234 months

Thursday 23rd January 2020
quotequote all
So you believe, that the bondholders would have no problem with the fact that the shareholder decides to sell off the companies assets without the bond holders having a say. Ever heard about collateral or negative pledge ? Control is indirectly with the bond holders today as they would have secured themselves the appropriate rights before providing the finance.

Jon39

Original Poster:

12,782 posts

142 months

Thursday 23rd January 2020
quotequote all
RL17 said:
Q1 75% ownership allows tax losses to be used in UK sub-group. The other 25% ownership would have depended on who had cash or could borrow and get tax relief on debt incurred for purchase etc.

Probably the most important thing when buying AM is can you benefit from their losses wink

Thank you Reg. Interesting and it makes sense to me now. Your business/accountancy knowledge is much appreciated.
Without the numerous saviours / buyers / financiers, from Count Lozuis Zborowski to the Ford Motor Company, few of us would own our beautiful cars now.

In your following post, you describe various scenarios.

One thought. At present the value of the car business must be partly based on having operational factories.
Separating the debt - might there be a complication, because at least one of the bonds has company property as security ?


( Edit - I have now seen hornbaek's post. )





Edited by Jon39 on Thursday 23 January 13:24

RL17

1,231 posts

92 months

Thursday 23rd January 2020
quotequote all
hornbaek said:
So you believe, that the bondholders would have no problem with the fact that the shareholder decides to sell off the companies assets without the bond holders having a say. Ever heard about collateral or negative pledge ? Control is indirectly with the bond holders today as they would have secured themselves the appropriate rights before providing the finance.
Hypothetical example a few days ago with proceeds (current business value) of 2 x debt level (just to illustrate that the debt and AM cars and L cars and the AMLGHplc company (an entity younger than this thread) are not inseparable). So this had all the bonds being repaid at face value with proceeds of business sale (of course some consents etc required and charges released etc etc) - if bonds are trading below par then issue value (book debt to AML) plus accrued interest would be attractive (especially if alternative was to continue making losses etc and risks of administration with bonds not fully covered).

It's much easier to satisfy bond holders than equity holders who have had different entry points, returns and expectations over recent years.

Bondholders only really come into play once coupons and/or redemptions at maturity are missed or if specific physical assets back a debt issue (but any physical assets AML have are not of huge value without the business). Higher interest rates being offered and paid on recent issues reflect increased risks