A brief financial analysis of Aston Martin

Today news emerged from internet that Aston Martin is filing petition that to exempt its Vantage and DB9 models from the new NHTSA side crash safety standards. Its reasons are in two aspects: 1. the company does not have money to make modifications to those two models; 2. very few of those models will be sold in US in the next several years.

In the documents Aston Martin submitted to the government, which can be publicly viewed online, I have the following interesting findings.

1. For 2012, Aston Martin’s gross profit margin is 32.12% (148,138/461,237). This ratio measures the profit margin that without considering the selling/distribution/administrative/R&D expenses.

2. If taken selling/distribution/administrative/R&D costs into consideration, Aston Martin not only do not make any money, but it also owe a little bit – these costs are 34.01% of the total revenue. You may think Aston Martin paid excessive compensation to its employees, but I do attribute this to the fact that it sold too few cars in 2012, which makes its revenue too low;

3. Aston Martin has a GBP 34 million pre tax loss for 2012, the biggest factor contributed to such big loss is its financing expense of GBP 40.6 million. What is financing expense? Simple answer: interests and principles you need to pay to the people who lend you the money. Large financing expense indicates Aston Martin has a lot of debts.

4. Looking at its balance sheet confirms the large debt for the company. In 2012, Aston Martin borrowed GBP 30.6 million.

Therefore, no wonder why Aston Martin is so desperate to sell the Vantage GT for less than $100k in US market recently, because it need cash badly to service its debt. The more frequent it delay/default its financing payments, the more difficult it can raise capital in the future.

Because the documents does not contain the cash flow statement, I am unable to analyse its financial situation in terms of cash. Cash is the most important fact, since it is the only way to service a company’s debt – you can not pay interests to your lender via other methods. For example Aston Martin cannot pay the interest by means of a Vantage GT.

For the documents that Aston Martin files with NHTSA, it can be downloaded here and here.

 

 

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