Aston Martin: Earnings Warning & Potential CEO Exit

Aston Martin: Earnings Warning & Potential CEO Exit

I wasn’t planning on writing another article on Aston Martin until they released their full 2021 results in February.  Friday’s Trading Update announcement, along with the rumors of Tobias Moers imminent departure, have thrown a wrench in those plans.  I’ve gotten quite a number of requests for comment on these latest developments, so I’ve tried to pull together a few thoughts.

As a bit of background, the last article I did on Aston Martin was back in December after Kenneth Gregor, the CFO, suddenly resigned (CFO Jumps Ship), an event that rarely signals that a company is in great shape.  The article before that was a detailed analysis on Aston Martin’s Q3 results (Analysis of Aston Martin’s Q3 Results).  This included a section on the likelihood that Aston Martin would deliver against their 2021 Guidance. At the time, hitting the 2021 EBITDA number was heavily dependent on Aston Martin delivering a double digit number of Valkyries before the end of the year.  Tobias Moers, the CEO made the following statement in the Q3 Earnings Call in November:

 

“Valkyrie, we’re chasing to have a double-digit number delivered this year, and accompanying that, we have a parallel assembly of the track- only Valkyrie as well, where we chase for a single-digit number to deliver to customers.”

 

Multiple reports going into December indicated that Aston Martin has continuing to struggle with Valkyrie production, and it was viewed as unlikely that they would be able to deliver any before the end of the year.  As of last week, there was no indication that any Valkyries were now in customer hands.  There had also been no official announcement one way or another and nothing in the press.  All that changed last Friday, Jan 7th when Aston Martin released the following:

7 January 2022

Aston Martin Lagonda Global Holdings plc FY 2021 Trading Update

Aston Martin Lagonda Global Holdings plc (“Aston Martin” or the “Company”) today updates on FY 2021 trading.

  • Wholesales grew 82% to 6,182 as planned

  • 3,001 DBX units wholesaled in first full year of production taking estimated 20% market share of the luxury SUV segment
  •  
  •  Retails (dealer sales to customers) greater than wholesales for both GT/Sport and DBX as aligned supply to demand and as we operate as a true luxury brand
  •  
  •  Following an extensive and challenging development and testing schedule which has now successfully completed, the game-changing Aston Martin Valkyrie hypercar programme is in production and deliveries to customers have commenced
    • With a quality focused production ramp-up, 10 Aston Martin Valkyrie and Valkyrie AMR Pro vehicles were shipped in Q4. This was fewer than previously planned and accordingly, adjusted EBITDA is anticipated to be c.£15m lower than expected. The impact is timing only, all Aston Martin Valkyrie Coupes are sold and remain allocated to customers with significant deposits
    • An associated reduction in 2021 depreciation and amortisation is expected to result in a broadly net neutral impact on adjusted operating profit
    • This timing change will see deliveries and the associated EBITDA continue through 2022 as planned and now through 2023
    •  
  •  Year-end cash balance of c.£420m, higher than previously anticipated
  •  
  •  Preliminary results for the twelve months to 31 December 2021 will be announced on 24 February 2022

and simultaneously, Autocar Magazine published an article indicating that Tobias Moers, the CEO was likely on his way out Future of Aston Martin CEO Tobias Moers in doubt.

First unpacking a bit of the Aston Martin “Trading Update”, this is basically an announcement that they missed on Valkyrie deliveries and therefore have a major hole in the EBITDA number.  Back in November, Moers promised a “double digit” number of Valkyrie coupes along with a single digit number of Valkyrie AMR Pros.  The above Trading Update references:

 10 Aston Martin Valkyrie and Valkyrie AMR Pro vehicles were shipped in Q4

which would seem to be very close to the number Moers originally referenced.  What is interesting is how this statement is worded.  In the statement, Aston Martin declares that the 10 Valkyries were “shipped” in Q4. “Shipped” is very different from “delivered to customers” and as the Valkyrie is a direct sale from the factory to the customer, unless the car is delivered, the revenue from the sale should not be recognized.  “Shipped” simply indicates that the cars have left the manufacturing facility and are now likely sitting in a warehouse or storage facility.  This would explain the £15m miss in EBITDA.  In fact, nowhere has Aston Martin stated that a single Valkyrie has been delivered to a customer.  For Moers to have made the original statement during the November earnings call, 7 weeks before the quarter end, on the number of Valkyries Aston expected to deliver in 2021, with making the EBITDA number heavily dependent on hitting that number, he had to have had a very high degree of confidence that Aston could achieve this goal.  To miss it, and miss it badly, is highly concerning.  Aston also references a “quality focused production ramp-up” which is basically shorthand for “slow and with major challenges”.  

The other statement of immediate interest here is:

Year-end cash balance of c.£420m, higher than previously anticipated

 

which is quite disingenuous. I can’t find any guidance Aston ever issued on year end cash on hand.  In fact, it is down £69m from year end 2021.  Regarding the statements on total number of cars wholesaled and retailed, I will come back to these when Aston Martin releases their full 2021 Earnings Report, and more information is available.  

Coming back to the Autocar article on Moers future at Aston Martin being in doubt, Moers relationship with Lawrence Stroll, the Executive Chairman and largest individual shareholder, has been on shaky ground for some time now (see: AML Q2 & Goodwood FoS).  While Stroll denied he was looking to replace Moers in a statement to the Financial Times Aston Martin chair denies he is looking for a new chief executive.  Stroll’s denial rang pretty hallow when shortly after the FT article came out,  Bloomberg Aston Martin Approaches Ford Executive identified the individual Stroll had approached about replacing Moers and indicated several discussions had already taken place.  I’ve never thought that Moers was going to last long term under Stroll, and it would appear we are now very close to the end of Moers regime. While I do feel for Moers, being made to publicly “twist in the wind” has to be incredibly uncomfortable, it is par for the course for Stroll.  The last Aston Martin CEO, Andy Palmer, found out he had been fired when a reporter from the Financial Times called him up and ask for a comment (see:

).

Summary

Within basically a month now, Aston Martin has had a well-regarded CFO suddenly resign, and now it looks like the CEO will be following him out the door shortly.  Stroll’s denials on his looking to replace Moers are borderline comical at this point. He would have been better served just to have had his PR department issue a statement that Aston Martin does not comment on rumors.  In addition, Aston Martin has had to issue a special Trading Update to basically admit that are continuing to have problems with the Valkyrie program and as a result will miss the EBITDA number by £15m. Looks like Kenneth Gregor, the ex CFO, was wise to, as the Times of London put it (Aston Martin deserves the ejector seat from your portfolio), hit the ejector switch.

Thoughts and comments? Please see the comments section below.

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January 2022

 

Recent Posts

19 Thoughts on Aston Martin: Earnings Warning & Potential CEO Exit
    Richard Gotch
    10 Jan 2022
     2:58pm

    I feel for Mr Moers. Finally we have a CEO with the aggression and the understanding and vision needed to save Aston Martin. I’m right behind him on destocking the dealers, increasing option spend, pushing up average sale prices and creating more derivatives of each model: all things that other manufacturers discovered years ago but wafted past Andy Palmer’s leather-lined dream world. He also understands the need for bought in powertrain (and electrification) technologies, potentially expanding out to other areas like ADAS and E/E architectures and he has a world-class vision for digitalisation of the customer relationship journey. But – to deliver this strategy he has to fight three battles. First, there are tricky elements in the Palmer-era leadership team. Maybe the source of Autocar’s briefing against Mr Moers? And where did the Bloomberg article come from? It’s right that they should be put under pressure to perform or leave. I’ve worked with Aston Martin and, while many of their people are brilliant, I wouldn’t have invested in the business if I thought a few of the less brilliant would be allowed to continue drifting along living on hope and debt. Second, the company he took over was in a real mess financially and in product strategy. The debt is staggering and the product just doesn’t cut it. Solving the latter in the face of the former is a big challenge that takes time. Then third, to add the icing on his layer cake of challenges, he has Mr Stroll looking down on him. I understand that the F1 agreement was part of the deal to get Stroll’s money and support, but it cuts off Aston’s ability to monetise it’s brand in F1 and it comes with Mr Stroll’s insistence that AM changes course from aspirational Sports / GT, the goal of those who have been through the 911 ladder and want something more exclusive (a market Aston Martin should and could own), to facing head-to-head with Ferrari in one of the most hotly contested high-end vehicle sectors. I like new Aston, it has some top rate people and oudles of potential. I’ve never met Mr Moers but I like what I know of him. How successful is AMG compared with Ford of Europe? Let’s hope the rumours are false. If the share price tumbles further I will top up: but only if Mr Moers has the full support of Mr Stroll and it feels like he is staying.

    2
    1
    Np
    10 Jan 2022
     2:39pm

    No one has mentioned how Moers leaving will affect on AMs relationship with Mercedes. What a mess to sort out here. Really needs to let the F1 thing go and focus on keeping things afloat.

    1
    0
    Paul Kithoray
    10 Jan 2022
     7:27am

    Delivery delays are not uncommon at the moment, look at McLaren with the Artura. It’s sensible not to rush product out and this appears to be purely a timing / cut-off issue more than anything else.

    3
    0
      SSO
      11 Jan 2022
       12:23am

      Very true. The difference here is McLaren proactively announced they were delaying deliveries. In Aston’s case, Tobias Moers announced they would be delivering a number of Valkyries prior to the end of the year, and then failed to do so.

      0
      0
      Richard Gotch
      10 Jan 2022
       2:31pm

      Agreed. When I was consulting with Caparo over the T1, another race car for the road, the first thing I suggested was to make sure the quality was right. That lead to months of delay but transformed feedback from prospects. It also ensured warranty costs were minimised as sending people around the world to fix very specialist cars is expensive, especially if even minor design revisions are required post build. Race car designers rarely understand the durability requirements of road cars, even those that hardly ever go out.

      0
      0
      Jon Dobbs
      23 Jan 2022
       5:37am

      Very true, but you can’t bank a margin

      0
      0
    Steven Hopemaster
    10 Jan 2022
     8:08am

    I am looking at the AML story through the glasses of a manager and would like to share some hypothesises:
    – Up to now, the new directors and management are following a very ambitious change program and are very close to achieving their goals.
    – On the way they didn’t only make friends. When you take over a close to bankrupt company and want to turn it around within three years, there will be a lot of disappointed / angry former employees and partners.
    – The most interesting phase will be end of 2022 / first half 2023, when it will come clear which new models will appear and how they will be accepted by the market. The DBX, from my personal perspective, is an astonishing success.
    – Speculation: There might just be a fight in the background going on to keep the stock price low. Some big players are actually holding short positions.
    Personally speaking, I think Stroll’s way to restructure AML is a “no bullshit” approach. That leaves some marks but might be effective in the end.

    We will know more in roughly a year, I guess!

    3
    1
    Ghini
    10 Jan 2022
     9:26am

    Great header photo!
    Final 2021 results will be interesting.
    I am interested in that DBX derivative that they announced, something as simple as another engine option or will they finally announce something bigger to try to save the DBX project?
    About Moers and several senior leaders leaving AM after his appointment: his style of leadership is only one part of that story in my opinion. The one hiring Moers is responsible for that as well.
    Also: nothing on the fact that Stroll, de Picciotto and Moers bought AM stocks when price hit a certain low point?

    0
    0
    Jim Bond
    11 Jan 2022
     11:55pm

    Aston Martin would be worth more if it turned itself into an NFT. I think people buy Ferraris, etc. because they are performance machines AND they are beautiful. Aston Martin is 0 for 2 these days. The Valkyrie’s windshield wiper makes it look like the engine had an uncontrollable erection. The DBX looks like an outdated Genesis SUV, and congratulations Aston Martin for being ranked 18 by Car and Driver in the Luxury SUV segment; btw, a Genesis was ranked #1. Vantage, DBS, DB11? Yawn–especially when you see what you can get for the same money (or less) from more reliable manufacturers that you know will be there to service it in a decade (thank you Ferrari, Porsche, even Lamborghini if you like your car being designed by a protractor). Save your money and buy Aston Martins on Autotrader after they’ve massively depreciated, and by then you’ll also know if you can still get parts for it.

    I too love the Aston Martins of yesterday, but Aston Martin is the Blackberry of high-end cars. The brand is worth something, and it’s time to partner with the Bored Ape Yacht Club NFT folks to maximize that value.

    0
    1
    John
    14 Jan 2022
     12:16pm

    Fantastic summation of recent Aston Martin stories, and it’s something that I haven’t seen other publications bring together either.

    The warning bell for me with Valkyrie “shipped” statement was how we’ve not seen a single one running. If a customer had one it would be big news, yet nothing. Not a peep. I never considered that it would still be held by Aston Martin, but rather to a forgiving new owner who would take it in as a “Garage Queen” and await firmware updates which would enable the car to function, whenever that may be.

    One thing we have to appreciate about Stroll / Moers is Palmer’s plan. Because neither of them have really deviated from that plan, other than pushing Aston further towards being a Mercedes sub-brand. The only material change really has been the adoption of more Mercedes power trains.

    Let’s think of that – Mercedes power trains in a thoroughbred Aston Martin? Some would say why not? Some are horrified by the idea. I can see how with engine technology increasingly becoming difficult to design to the latest emission targets why a crate engine is desirable. But then you have Stroll wanting Aston “to become the British Ferrari”. Can you imagine a Ferrari using a VW engine? Or a Renault? Or a Ford? And even when Aston got a block from Jaguar you couldn’t get the car serviced at Jaguar (i6 DB7). Or the V8 and V12 derived from Jaguar and Ford engines. The knowledge from both were used to create a bespoke Aston engine – and there’s no shame in that at all. But a crate engine you are lumbered with the characteristics of the source, and Astons sound more like AMGs now.

    Moers has apparently taken some of the costs out of producing Astons, and part of Palmer’s plan to duplicate functions at two sites never sat well with me (except paint – don’t have bodies in white going between facilities, paint them as soon as possible). His time at Aston hasn’t been a complete waste.

    But Moers failed to do the one thing which would save Aston that Palmer failed to do – Sack Marek Reichman. No matter how you look at the technical side, or the production side, if the cars aren’t selling sufficiently you have to look at the design. Moers and Palmer failed, both of them, to deal with the problem – Reichman designs don’t sell.

    If Moers had rid Aston of Reichman one day one, as he should have done preferably before lunch, we’d be seeing refreshes of the DB11/s and Vantage right now which are their core products. Engineering is good on them, and refresh to fix the design disasters of Reichman would help both. Although the Vantage needs a bumper to bumper refresh. Then they could do a refresh for the DBX and perhaps it would get the sales it needs.

    1
    0

Leave A Comment

19 Thoughts on Aston Martin: Earnings Warning & Potential CEO Exit
    Richard Gotch
    10 Jan 2022
     2:58pm

    I feel for Mr Moers. Finally we have a CEO with the aggression and the understanding and vision needed to save Aston Martin. I’m right behind him on destocking the dealers, increasing option spend, pushing up average sale prices and creating more derivatives of each model: all things that other manufacturers discovered years ago but wafted past Andy Palmer’s leather-lined dream world. He also understands the need for bought in powertrain (and electrification) technologies, potentially expanding out to other areas like ADAS and E/E architectures and he has a world-class vision for digitalisation of the customer relationship journey. But – to deliver this strategy he has to fight three battles. First, there are tricky elements in the Palmer-era leadership team. Maybe the source of Autocar’s briefing against Mr Moers? And where did the Bloomberg article come from? It’s right that they should be put under pressure to perform or leave. I’ve worked with Aston Martin and, while many of their people are brilliant, I wouldn’t have invested in the business if I thought a few of the less brilliant would be allowed to continue drifting along living on hope and debt. Second, the company he took over was in a real mess financially and in product strategy. The debt is staggering and the product just doesn’t cut it. Solving the latter in the face of the former is a big challenge that takes time. Then third, to add the icing on his layer cake of challenges, he has Mr Stroll looking down on him. I understand that the F1 agreement was part of the deal to get Stroll’s money and support, but it cuts off Aston’s ability to monetise it’s brand in F1 and it comes with Mr Stroll’s insistence that AM changes course from aspirational Sports / GT, the goal of those who have been through the 911 ladder and want something more exclusive (a market Aston Martin should and could own), to facing head-to-head with Ferrari in one of the most hotly contested high-end vehicle sectors. I like new Aston, it has some top rate people and oudles of potential. I’ve never met Mr Moers but I like what I know of him. How successful is AMG compared with Ford of Europe? Let’s hope the rumours are false. If the share price tumbles further I will top up: but only if Mr Moers has the full support of Mr Stroll and it feels like he is staying.

    2
    1
    Np
    10 Jan 2022
     2:39pm

    No one has mentioned how Moers leaving will affect on AMs relationship with Mercedes. What a mess to sort out here. Really needs to let the F1 thing go and focus on keeping things afloat.

    1
    0
    Paul Kithoray
    10 Jan 2022
     7:27am

    Delivery delays are not uncommon at the moment, look at McLaren with the Artura. It’s sensible not to rush product out and this appears to be purely a timing / cut-off issue more than anything else.

    3
    0
      SSO
      11 Jan 2022
       12:23am

      Very true. The difference here is McLaren proactively announced they were delaying deliveries. In Aston’s case, Tobias Moers announced they would be delivering a number of Valkyries prior to the end of the year, and then failed to do so.

      0
      0
      Richard Gotch
      10 Jan 2022
       2:31pm

      Agreed. When I was consulting with Caparo over the T1, another race car for the road, the first thing I suggested was to make sure the quality was right. That lead to months of delay but transformed feedback from prospects. It also ensured warranty costs were minimised as sending people around the world to fix very specialist cars is expensive, especially if even minor design revisions are required post build. Race car designers rarely understand the durability requirements of road cars, even those that hardly ever go out.

      0
      0
      Jon Dobbs
      23 Jan 2022
       5:37am

      Very true, but you can’t bank a margin

      0
      0
    Steven Hopemaster
    10 Jan 2022
     8:08am

    I am looking at the AML story through the glasses of a manager and would like to share some hypothesises:
    – Up to now, the new directors and management are following a very ambitious change program and are very close to achieving their goals.
    – On the way they didn’t only make friends. When you take over a close to bankrupt company and want to turn it around within three years, there will be a lot of disappointed / angry former employees and partners.
    – The most interesting phase will be end of 2022 / first half 2023, when it will come clear which new models will appear and how they will be accepted by the market. The DBX, from my personal perspective, is an astonishing success.
    – Speculation: There might just be a fight in the background going on to keep the stock price low. Some big players are actually holding short positions.
    Personally speaking, I think Stroll’s way to restructure AML is a “no bullshit” approach. That leaves some marks but might be effective in the end.

    We will know more in roughly a year, I guess!

    3
    1
    Ghini
    10 Jan 2022
     9:26am

    Great header photo!
    Final 2021 results will be interesting.
    I am interested in that DBX derivative that they announced, something as simple as another engine option or will they finally announce something bigger to try to save the DBX project?
    About Moers and several senior leaders leaving AM after his appointment: his style of leadership is only one part of that story in my opinion. The one hiring Moers is responsible for that as well.
    Also: nothing on the fact that Stroll, de Picciotto and Moers bought AM stocks when price hit a certain low point?

    0
    0
    Jim Bond
    11 Jan 2022
     11:55pm

    Aston Martin would be worth more if it turned itself into an NFT. I think people buy Ferraris, etc. because they are performance machines AND they are beautiful. Aston Martin is 0 for 2 these days. The Valkyrie’s windshield wiper makes it look like the engine had an uncontrollable erection. The DBX looks like an outdated Genesis SUV, and congratulations Aston Martin for being ranked 18 by Car and Driver in the Luxury SUV segment; btw, a Genesis was ranked #1. Vantage, DBS, DB11? Yawn–especially when you see what you can get for the same money (or less) from more reliable manufacturers that you know will be there to service it in a decade (thank you Ferrari, Porsche, even Lamborghini if you like your car being designed by a protractor). Save your money and buy Aston Martins on Autotrader after they’ve massively depreciated, and by then you’ll also know if you can still get parts for it.

    I too love the Aston Martins of yesterday, but Aston Martin is the Blackberry of high-end cars. The brand is worth something, and it’s time to partner with the Bored Ape Yacht Club NFT folks to maximize that value.

    0
    1
    John
    14 Jan 2022
     12:16pm

    Fantastic summation of recent Aston Martin stories, and it’s something that I haven’t seen other publications bring together either.

    The warning bell for me with Valkyrie “shipped” statement was how we’ve not seen a single one running. If a customer had one it would be big news, yet nothing. Not a peep. I never considered that it would still be held by Aston Martin, but rather to a forgiving new owner who would take it in as a “Garage Queen” and await firmware updates which would enable the car to function, whenever that may be.

    One thing we have to appreciate about Stroll / Moers is Palmer’s plan. Because neither of them have really deviated from that plan, other than pushing Aston further towards being a Mercedes sub-brand. The only material change really has been the adoption of more Mercedes power trains.

    Let’s think of that – Mercedes power trains in a thoroughbred Aston Martin? Some would say why not? Some are horrified by the idea. I can see how with engine technology increasingly becoming difficult to design to the latest emission targets why a crate engine is desirable. But then you have Stroll wanting Aston “to become the British Ferrari”. Can you imagine a Ferrari using a VW engine? Or a Renault? Or a Ford? And even when Aston got a block from Jaguar you couldn’t get the car serviced at Jaguar (i6 DB7). Or the V8 and V12 derived from Jaguar and Ford engines. The knowledge from both were used to create a bespoke Aston engine – and there’s no shame in that at all. But a crate engine you are lumbered with the characteristics of the source, and Astons sound more like AMGs now.

    Moers has apparently taken some of the costs out of producing Astons, and part of Palmer’s plan to duplicate functions at two sites never sat well with me (except paint – don’t have bodies in white going between facilities, paint them as soon as possible). His time at Aston hasn’t been a complete waste.

    But Moers failed to do the one thing which would save Aston that Palmer failed to do – Sack Marek Reichman. No matter how you look at the technical side, or the production side, if the cars aren’t selling sufficiently you have to look at the design. Moers and Palmer failed, both of them, to deal with the problem – Reichman designs don’t sell.

    If Moers had rid Aston of Reichman one day one, as he should have done preferably before lunch, we’d be seeing refreshes of the DB11/s and Vantage right now which are their core products. Engineering is good on them, and refresh to fix the design disasters of Reichman would help both. Although the Vantage needs a bumper to bumper refresh. Then they could do a refresh for the DBX and perhaps it would get the sales it needs.

    1
    0

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