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Abu Dhabi, UAEThursday 18 October 2018

Aston Martin seeks IPO valuation of more than £5bn

Maker of fictional secret agent James Bond's favoured ride also prepares for messy UK divorce from EU

FILE PHOTO: Andy Palmer, CEO of Aston Martin, poses for a photograph next to the company's new Vantage car in Gaydon, Britain November 20, 2017. REUTERS/Phil Noble/File Photo
FILE PHOTO: Andy Palmer, CEO of Aston Martin, poses for a photograph next to the company's new Vantage car in Gaydon, Britain November 20, 2017. REUTERS/Phil Noble/File Photo

Luxury British car maker Aston Martin is seeking a valuation of up to £5.07 billion (Dh24.55bn) from its stock market flotation and has taken steps to prepare for any eventuality over Brexit, it said on Thursday.

The company, famous for making the sports car driven by fictional secret agent James Bond, said last month it was pursuing an initial public offering, the first British car maker to do so for decades.

The sports car manufacturer was due to publish a prospectus later on Thursday and hopes to announce its final pricing next week. It expects its shares to be admitted to the London Stock Exchange around October 8.

Car makers have warned about the impact of any customs checks introduced as a result of a no deal or hard Brexit, which could slow down production and add costs when Britain leaves the European Union in March 2019.

The boss of Aston Martin, which builds all its cars in Britain, said the company had boosted its stock of engines and components in case free and unfettered trade with the bloc ends in a few months' time, according to Reuters.

"We're up to five days of engine stock for example and we've got a very large warehouse in Wellesbourne [in central England] where we have at least five days of car stock," chief executive Andy Palmer said, an increase from the previous three days' worth of components held by the firm.

"If there are tariffs, for every car we lose because of a 10 per cent tariff into Europe, we presumably pick up from Ferrari and Lamborghini in the other direction because obviously their cars become more expensive in the UK," he said.

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London and Brussels hope to conclude a Brexit agreement by the end of the year but fellow car makers such as BMW and Jaguar Land Rover are worried that failure to agree could lead to snarl-ups at motorways and ports disrupting production.

JLR boss Ralf Speth warned last week that the wrong Brexit deal could cost tens of thousands of jobs and risk production at the company, Britain's biggest car maker.

Aston, which has set a price range of £17.50 to £22.50 per share for the 25 per cent of stock it is floating, is targeting a market capitalisation of between £4.02bn and £5.07bn.

The company’s first 4x4 is coming out in 2020, giving it access to the Chinese market and a head start over Ferrari, which this week postponed its Purosangue 4x4 to 2022, Mr Palmer said. Luxury car makers are crowding into the 4x4 segment to capture high profit margins that will fund initiatives such as electrification.

Based on its first-half earnings, Aston Martin could be valued at more than 24 times adjusted earnings before interest, tax, depreciation and amortisation, a calculation that does not take into account company’s debt and research spending - which would push the multiple higher. Ferrari trades at about 20.5 times its expected adjusted ebitda for 2018, based on Bloomberg data - a figure that is closer to luxury good companies than to car makers.

Analysts, however, are sceptical that Aston Martin’s business can command a valuation like Ferrari’s, according to Bloomberg.

“We love the brand. We respect the management team. But we simply can’t see how a Ferrari multiple looks realistic," Max Warburton, an analyst at Sanford C. Bernstein & Co, said in a research note. “They are selling a business that is loss-making on a US GAAP basis, with a weak profitability record and a fragile balance sheet, selling cars at much lower price points, to a much less dedicated audience.”

The car maker, which has long said it could pursue a listing, has undergone a turnaround plan since Mr Palmer took over in 2014 as it boosts its volumes and expands into new segments with a new factory due to open in 2019.

FILE: An employee checks the rear of an Aston Martin DB11 luxury automobile in the quality inspection area at Aston Martin Lagonda Ltd.'s manufacturing and assembly plant in Gaydon, U.K., on Tuesday, June 6, 2017. Aston Martin is targeting a valuation of as much as 5 billion pounds ($6.8 billion) in a potential initial public offering of the British sports car maker, according to people familiar with the matter. Photographer: Chris Ratcliffe/Bloomberg
Aston Martins in the quality inspection area at the firm's plant in Gaydon, UK. Bloomberg

He said investor interest had been "unprecedented" so far as he hits the road to tap into demand with his message that there is more growth to come, Reuters reported.

"The tendency of the investors are 'long only' type investors, people that understand that this is a growth story" Mr Palmer said when asked who he would be meeting.

"The aeroplane is half way down the runway but there's still half the runway to go."