AML - Stock Market Listing

[RL17]

RobDown said:

I think the FT article looks well sourced. Essentially looks like Aston Martin will raise equity from a new strategic partner(s).

Surely no coincidence with the Lawrence Stroll rumours and indeed he is mentioned in the article.

Major new equity could be highly dilutive now as market cap bouncing around the £1 bn level (and debt not much below that) and trying to mitigate that by including rights issues etc would be contentious and time consuming (and costly). Dilution impact would hit major investors and new shareholders.

Selling minor equity from existing major investors with most of the new funds as convertible debt (at reasonable rates) could delay dilution until good times come?

[hyphen]

Jon39 said:

' The group has been stung by .. and the underperformance by its entry-level Vantage sports car. '

So they are admitting that their (badly styled) new Vantage is not in demand, which must be a huge concern.

Edited by hyphen on Saturday 14th December 12:06

[RobDown]

RL17 said:

Major new equity could be highly dilutive now as market cap bouncing around the £1 bn level (and debt not much below that) and trying to mitigate that by including rights issues etc would be contentious and time consuming (and costly). Dilution impact would hit major investors and new shareholders.

Selling minor equity from existing major investors with most of the new funds as convertible debt (at reasonable rates) could delay dilution until good times come?

Totally agree. It’s difficult to see why, at first glance, existing shareholders (including the Kuwaiti/InvestIndustrial guys) would want to sell shares at £6,7,8 per share to a newcomer when not long ago you were selling at £19 (even allowing for a weaker market outlook).

So, and this is just a guess, the newcomer might have to be bringing something to the party that adds sufficient value to make it worthwhile diluting.

Someone with more knowledge of his background than me might be able to suggest what Mr Stroll brings to the party?

Edited by RobDown on Saturday 14th December 13:37

[jimmybell]

interestingly Mr Harris seems to agree with what i was trying to say, albeit he puts it in to better words.

https://www.youtube.com/watch?v=DqakvnXRbSo

[AstonV]

jimmybell said:

interestingly Mr Harris seems to agree with what i was trying to say, albeit he puts it in to better words.

https://www.youtube.com/watch?v=DqakvnXRbSo

I disagree. I believe the DBX will outsell ever other AM model combined and then some over here. SUV's have been going strong in America as long as I can remember and continue to grow. Too compete in the luxury segment a large HP V8 is a must.

Edited by AstonV on Tuesday 17th December 07:55

[dbs2000]

jimmybell said:

interestingly Mr Harris seems to agree with what i was trying to say, albeit he puts it in to better words.

https://www.youtube.com/watch?v=DqakvnXRbSo

I share the same thoughts as Harris. I hope it sells and I'm sure it will but, for me, I'd not go near this type of vehicle unless it's full EV.

[Neil1300r]

dbs2000 said:

jimmybell said:

interestingly Mr Harris seems to agree with what i was trying to say, albeit he puts it in to better words.

https://www.youtube.com/watch?v=DqakvnXRbSo

I share the same thoughts as Harris. I hope it sells and I'm sure it will but, for me, I'd not go near this type of vehicle unless it's full EV.

It's main markets are the USA and Far East - especially China. AM are not trying to do a Porsche and sell millions of them. I have no doubt that for the first 18-24 months it will make its sales targets in its target markets. Wouldn't surprise me if it is a rare site in the UK.

China is still building coal fired power stations and their consumption of coal is still increasing. I suppose you could sell an EV car in China that gets its electricity from a coal fired power station, but seems a bit pointless

[RL17]

Whilst I agree that AML are a bit late to the party, it's much better to be inside than standing outside getting a soaking.

Over 200 million SUVs in world and almost 50% of vehicles sold in US with China not far behind, % growth may be slowing but it was and still is a for too large a market segment to ignore. Account for 60% of growth in world car fleet in last 6 years or so.

https://www.iea.org/commentaries/growing-preferenc...

bit of growing story re SUVs being larger/heavier and less friendly to environment. So are hybrids, as carrying unnecessary weight (duplicate power plant) that's used infrequently and EVs are currently very heavy and in lots of places are just moving the emissions elsewhere (Germany is still burning lots of coal too).

And roads are getting busier - visibility from SUVs, real & perceived safety benefits mean they are going to be popular for ages. Driving smaller low cars in traffic and at night being blinded by self levelling lights not fun and so SUVs for this and for regular commuting make great sense.

Maybe too late to launch a mass market SUV to change the world car market but for luxury segment I agree V8 is way to go for next 2 to 3 years or so given current development spend limitations.

[nickv8]

EVs are growing in share but are likely to remain a minority for some years.

That gives AM a chance to develop/source an EV drivetrain to fit to their SUV.

In relative terms, AM aren’t doing anything many other auto manufacturers are doing at present; burning through cash developing these very advanced systems imposed by new laws and shifting public sentiment.

[jimmybell]

i guess it'l come down to the profit margins and the cost of the new facility etc. Bentayga has done Bentley well, i think it's about 50% of their units sold - but despite that it doesn't seem to have propelled Bentley to huge profits - one article i googled claiming 150mil loss in first 9 months of 2018.

Maybe AML conceiving the DBX late would mean they have factored in Brexit and bought all the components in the UK (hah, i doubt it... engine). Their predictions for Vantage seem to be pretty off so i dont hold out much hope for DBX's success (in terms of profit for AML). I want them to succeed, though.

[Jon39]

jimmybell said:

i guess it'l come down to the profit margins and the cost of the new facility etc. Bentayga has done Bentley well, i think it's about 50% of their units sold - but despite that it doesn't seem to have propelled Bentley to huge profits - one article i googled claiming 150mil loss in first 9 months of 2018.

Maybe AML conceiving the DBX late would mean they have factored in Brexit and bought all the components in the UK (hah, i doubt it... engine). Their predictions for Vantage seem to be pretty off so i dont hold out much hope for DBX's success (in terms of profit for AML). I want them to succeed, though.

I had never thought of looking up Bentley results before, but had simply assumed that their SUV had been good for them.

Oops ! A quick glance at the P & L statement shows disaster.
Perhaps though, there is more to this, than simply a Pre-tax loss of £446.5 million.
When looking at a subsidiary business, I suppose accounting can be 'variable/flexible'.

[cardigankid]

That's the trouble these days, profitability is manipulated so much that it means nothing. This is a direct result of failure to find a way to tax Amazon, Starbucks, Google and the rest in the markets in which they are making their money. Once again the politicians focus on nonsense (MMGW) instead of their responsibilities.

However, the Bentayga is an extremely good, in my view the best current SUV on the market and contains the finest craftsmanship and engineering on the planet, and you can get a V8 engined Bentayga for less than the cost of a DBX. I know which I would buy. If the Bentayga can't turn a profit for Bentley, then the DBX is not going to save AM.

I see that Steve Cropley in the latest issue of Autocar is suggesting that Andy Palmer should get a knighthood for his work at AM. Is that for boosting £62m out of the IPO for his personal benefit, or for bringing the company to the brink of bankruptcy? I don't see what else he has done.

[anonymous-user]

I have never understood why anyone gets knighted for doing the job they are paid (usually very) handsomely for, well, or not, as is sometimes the case. Not sure which of those applies to AP.

[paulrog1]

soofsayer said:

I have never understood why anyone gets knighted for doing the job they are paid (usually very) handsomely for, well, or not, as is sometimes the case. Not sure which of those applies to AP.

Completely agree with you Andy (soofsayer) Fred Goodwin is a great example.

Andy is your DB9 in bed over winter? Mines tucked up and nice and warm. Looking forward to a nice trip out with you lot in the spring.

[Jon39]

I think this is the first time honours for Andy Palmer have been mentioned for ages. The subject was certainly very quiet during the share price slide.

However, this topic has now become a store of historical comments, so take a look at the last two posts on page 1.
Always fun to look back at what we said, before any hindsight appeared.

[ajr550]

I started the thread on knighting Palmer.
He should be knighted.

[RL17]

Jon39 said:

I had never thought of looking up Bentley results before, but had simply assumed that their SUV had been good for them.

Oops ! A quick glance at the P & L statement shows disaster.
Perhaps though, there is more to this, than simply a Pre-tax loss of £446.5 million.
When looking at a subsidiary business, I suppose accounting can be 'variable/flexible'.

Sold 9,559 vehicles in 2018 verses 10,566 in 2017

Bentaga production down to 4,072 (45% of total Bnetley production) from 4,849 (46% of total for 2017) and peak of 5,586 in 2016 (47% of production) (just 96 in 2015)

main reason for drop in sales in change to new model of GT Continental and hardly any GT Convertibles produced in 2018 (28 v 1,468)

So there is a fall off on Bentaga sales (not the prettiest SUV) (assumed as they produced 16% less in 2018 and 13% less in 2017)

But there's much less of a fall in year's 2 and 3 than most cars


https://annualreport2018.volkswagenag.com/division...

https://annualreport2016.volkswagenag.com/division...

[RL17]

Jon39 said:

I had never thought of looking up Bentley results before, but had simply assumed that their SUV had been good for them.

Oops ! A quick glance at the P & L statement shows disaster.
Perhaps though, there is more to this, than simply a Pre-tax loss of £446.5 million.
When looking at a subsidiary business, I suppose accounting can be 'variable/flexible'.

Looking at Bentley Motors Ltd (which used to be Rolls-Royce Motors Ltd) they write R&D off in year of expenditure (£411m in 2018 out of £416 operating loss) and only carrying plant and tooling on balance sheet as assets (tangible fixed assets). So if you wrote off AML development costs on a similar basis they'd be making much larger losses over last 5 years.

So basically Bentley has twice as much plant and tooling on balance sheet (deferred costs) whereas AML has a £1bn of brands and development costs on balance sheet which Bentley doesn't have.



Bentley only a sub so charges for brands and cross border components could easily be well inflated too for P&L presenation and or tax purposes.

[Jon39]

RL17 said:

Looking at Bentley Motors Ltd (which used to be Rolls-Royce Motors Ltd) they write R&D off in year of expenditure (£411m in 2018 out of £416 operating loss) and only carrying plant and tooling on balance sheet as assets (tangible fixed assets). So if you wrote off AML development costs on a similar basis they'd be making much larger losses over last 5 years.

So basically Bentley has twice as much plant and tooling on balance sheet (deferred costs) whereas AML has a £1bn of brands and development costs on balance sheet which Bentley doesn't have.

Bentley only a sub so charges for brands and cross border components could easily be well inflated too for P&L presenation and or tax purposes.

Thank you Reg.

I was aware that AML have put a greater percentage of R & D costs on to their balance sheet, than is the norm for motor manufacturers.
What I don't understand, is how these amounts then come back on to the P & L. Gradually I suppose, but how is the time frame established?

Say for example the new Vantage development costs. Is the total amount on the balance sheet for that model, divided by say 7 (if the expected length of production is used), then one seventh is written off in the profits column each year?
Presumably, however it works, considerable sums will come back each year, making future profitability more difficult.

[RL17]

Jon39 said:

Thank you Reg.

I was aware that AML have put a greater percentage of R & D costs on to their balance sheet, than is the norm for motor manufacturers.
What I don't understand, is how these amounts then come back on to the P & L. Gradually I suppose, but how is the time frame established?

Say for example the new Vantage development costs. Is the total amount on the balance sheet for that model, divided by say 7 (if the expected length of production is used), then one seventh is written off in the profits column each year?
Presumably, however it works, considerable sums will come back each year, making future profitability more difficult.

Jon there's quite a lot in 2018 Annual Report re Capitalisation and Amortisation of Development Costs (it is a key risk/judgement)

2017 Spend £213m Amortise (P&L cost) £49m NBV on balance sheet £512m
2018 Spend £202m Amortise (P&L cost) £61m NBV £653m
2020 should see a much fuller amortisation figure

not stated as amortised over a fixed period but does depend on future profits/margin of car models

Note 13 Intangible assets page 178
Accounting Policy page 165
Financial Risks to business page 93
Auditors review of risks page 151 (note some of the cross refs in glossy Annual Report wrong)
Audit & Risk Management Committee review page 113

https://www.astonmartinlagonda.com/investors/annua...

Bentley individual UK company accounts treatment for individual accounts may differ to Global VW group results so AML may have same/similar treatment at group level.