Several British stocks rose on July 24, and this iconic British automaker is among the most productive. Why then?
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Aston Martin (LSE:AML) shares rose 10% in early morning trading, putting it among the active British shares on Wednesday 24 July.
So why is inventory performing so well? Well, the company’s effects – published on July 24 – for the first part of the year were much greater than expected.
And those effects put the company in a strong position as it moves toward an improved vehicle lineup.
Let’s take a look.
Aston Martin’s effects in the first quarter didn’t give us any explanation to be optimistic, unless it was for the promise that things would happen later in the year. In fact, the company has hinted that things might not progress much until the second half.
Thus, the effects for the second quarter and the first part of the year were strangely strong.
For the first six months, the company reported a gross profit of £232. 9 million. This represents a cut of only 1% in 12 months and was achieved despite the delivery of 32% fewer cars.
Revenue fell 11% to £603 million, but the higher gross margin has probably pushed the company in the right direction. In the second quarter, Aston’s gross margin hit the enviable 39. 7%. It’s not there yet, but it’s getting closer. to Ferrari.
Of course, some effects were worrisome, greater than expected. The company’s pre-tax losses increased by more than 50% to £217 million, and net debt now stands at £1. 19 billion.
CEO Lawrence Stroll has promised to revamp Aston Martin. Under his leadership and ownership, the company has achieved impressive feats from a product perspective, most notably with the launch of the DBX SUV.
However, from a monetary point of view, things are still not going well. The initial strategic target is to increase deliveries to 10,000 cars consistently with the year to 2024/2025, and to reach £2 billion in profit and £500 million in EBITDA. However, the figure of 10,000 deliveries was later reduced to 8,000 as margin projections improved.
As a reminder, Aston delivered just 1,998 cars in the first part of 2024 (down from 2,954 in the first part of 2023), with a profit of £603 million and £62. 2 million of adjusted EBITDA.
This knowledge suggests that Aston is very close to reaching the target. However, Stroll’s company is going through a “core portfolio transition” with two new models already launching this year and two more to come.
The company said wholesale volumes would be hit hard in the second half. In turn, this would drive an expansion in gross profit and EBITDA in the second half, Aston Martin said.
I own Aston Martin shares, but I already own enough volatile shares for my liking. I am sure that the strength of the logo will propel the company forward and that it will one day trade at fixed multiples.
However, I admit that the debt burden and electrification are deeply concerning. It is not certain that Aston Martin will survive. I don’t think the company will file for bankruptcy, but it’s an option that all investors are considering.
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James Fox has positions in Aston Martin. The Motley Fool UK has no positions in any of the stocks analyzed. The reviews expressed about the corporations discussed in this article are those of the author and therefore may differ from the official recommendations we make on our subscription facilities, such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we know that Taking into account a wide diversity of data makes us better investors.
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