-Strong Q4 amid price increases and foreign currency tailwind
-Business turned free cash flow positive in Q4
-Sales of £2bn and $500 million EBITDA expected by 2024/25
Shares in luxury car brand Aston Martin Lagonda (AML) raced 14% higher on Wednesday after revealing positive free cash flow in the final quarter driven by record selling prices, suggesting the business may finally be turning a corner.
The shares are up 140% since the middle of October 2022 but remain 94% below the initial public offering price.
HOW DID THE COMPANY PERFORM?
Full year revenues to 31 December jumped 26% to £1.38 billion in line with prior guidance but 3% ahead of market expectations while fourth quarter sales surged 46% year on year to £524 million.
The company achieved positive free cash flow in the final quarter of £37 million driven by higher margins and the reversal of working capital movements.
Strong pricing dynamics, a favourable sales mix and weak sterling saw 2022 average selling prices increase 18% to £177,000 while prices in the final quarter increased 21% to £184,000.
The company recorded a full year operating loss of £142 million which included a £92 million increase in depreciation and amortisation reflecting higher year-on-year Aston Martin Valkyrie programme deliveries
The business generated operating cash of £127 million but capital expenditure of £287 million related to new model developments and net interest of £139 million resulted in free cash outflows of £299 million.
Net debt reduced to £766 million despite a negative £157 million non-cash foreign exchange impact related to a revaluation of US denominated dollar debt.
WHAT DID MANAGEMENT SAY?
Executive chairman Lawrence Stroll commented: ‘Despite the operating environment, we ended the year with significantly improved growth, margin enhancement and positive free cash flow in Q4, exiting 2022 with the strongest order book in many years.
‘2022 marked the start of a thrilling new product line-up, starting with the critically acclaimed DBX707 - the most powerful luxury SUV in the world - combining ultra-luxury with high performance and, crucially, with increased profitability.
‘The DBX707 was followed by V12 Vantage, the ultra-luxury DBR22 and, in early January of this year, the DBS 770 Ultimate - all fully sold out.’
WHAT TO EXPECT IN 2023
Management reiterated medium term guidance of achieving £2 billion of sales and £500 million of adjusted EBITDA (Earnings before interest, tax, depreciation, and amortisation) by fiscal 2024/25.
Stroll said: ‘We are on track to meet these financial targets, but with significantly lower volumes than I originally envisaged. In addition, I remain highly confident that we will achieve our target to deliver 10,000 wholesales over the coming years, and with it, significantly enhanced financial performance,’
The company expects 2023 to be the peak year of capital expenditures allowing the business to generate sustainable free cash flow from 2024.
