Aston Martin Lagonda Global Holdings PLC (LON:AML) shares reversed on Tuesday as luxury carmaker, as it warned on profits amid continuing challenging trading conditions and said it remains in discussions with potential strategic investors.
In a full-year trading update, the firm – which was a flotation flop in October 2018 - warned that its annual core profit would be significantly lower than last year, as weak demand in Europe led to a 7% drop in wholesale volumes.
The company said it expects 2019 adjusted underlying earnings (EBITDA) of between £130mln and £140mln, compared with £247.3mln a year earlier.
Dr Andy Palmer, Aston Martin Lagonda President and Group CEO, commented: "From a trading perspective, 2019 has been a very disappointing year. Whilst retails have grown by 12%, our best result since 2007, our underlying performance will fail to deliver the profits we planned, despite a reduction in dealer stock levels.
“We are taking a series of actions to manage the business through this difficult period. This will include a cost-saving programme alongside a focus on returning dealer stock levels to those more normally associated with a luxury company; winning back our strong price positioning is a key focus.”
He added: “The signs from the launch of the DBX are very encouraging and the order rate seen to date is materially better than for any of our previous models. Launch plans are progressing well and we are achieving all of our key operational milestones. Start of production remains on track for Q2 2020.”
“Whilst we are disappointed with trading performance in 2019, our focus is now on revitalising the business, launching DBX and ensuring profitable growth in the medium-term," Palmer concluded.
Higher selling costs and lower margins
The group said challenging trading conditions continued through the peak delivery period of December resulting in lower sales, higher selling costs and lower margins.
It noted that the Americas, UK and Asia Pacific territories performed broadly in-line with the group’s volume expectations, but Europe underperformed.
Aston Martin said its year-end cash balance was £107mln, giving expected net debt and leverage ranges of £875mln-£885mln and 6.2-6.8 times respectively.
The firm added that, consistent with its announcement on 13 December 2019, it continues to review funding requirements and the various funding options.
In early morning trade, shares in Aston Martin dropped by nearly 10% to 469.20p.