Aston Martin has to sort out problems in the engine room

The whiff of leather upholstery and throaty rumble of a 12-cylinder engine can lead otherwise rational people to take leave of their senses. Add in a link to James Bond, and total insanity ensues. That was certainly true of investors six years ago when they paid £45 a share (adjusted) for Aston Martin Lagonda.
Those who have stayed the course have lost 97 per cent of their capital after Monday’s 25 per cent slide to £1.20. Britain’s supposed answer to Ferrari has been a catalogue of setbacks, missed forecasts and refinancings. The latest warning will do nothing to reassure investors that better times are coming.
The company has been a bit unlucky this time. A flood at one supplier, a fire at another and several bankruptcies have produced a traffic jam of nearly finished cars at the factory in Gaydon, Warwickshire. An awful lot would be ready to ship — but for the awkward fact that they lack door handles and trims to the steering wheel and gearstick.
Inconveniently, the plutocrats and oligarchs who pay up to £350,000 a pop for these cars do like these details to be right. The company could make up for the delays by flying the vehicles to their customer destinations, but this costs anything up to $10,000. Demand in China, a key market, has at the same time weakened.
Better therefore, reckons the new chief executive Adrian Hallmark, to accept the inevitable and ship fewer vehicles than hoped — or, in one of the most preposterous euphemisms of corporate reporting this year, “smooth the cadence of wholesale volumes”. The announcement certainly “smoothed the cadence” of the share price.
Hallmark, the former Bentley executive, only arrived on September 1, so he cannot be blamed for the setback. He is wise to slam the brakes on investors’ expectations early in his role. But he urgently needs to address these supply-chain vulnerabilities. Aston Martin remains heavily loss-making and uncomfortably leveraged.
Rubbing shoulders in Venice the other day with Daniel Craig and George Clooney at the bellini-glugging launch of the new V12 Vanquish is all very well, but the job is also about the boring stuff of making sure the components shed is well stocked.
This column has made much of the terrible listings vintage of 2020-21, that surreal era of lockdown and generous state support, when investors were persuaded to back numerous disappointments including The Hut Group, Dr Martens, Deliveroo and the now-defunct Made.com.
Thanks to Aston Martin, the vintage of 2018 is looking even worse. It was the era of Finablr, the foreign exchange shops group that soon went bust in murky circumstances, and Funding Circle (down 69 per cent since its float, though on an upward trajectory now). Another float of that year was RBG, the listed law firm that issued another profit warning on Monday and is now down 96 per cent from its issue price.
The London Stock Exchange’s record in hosting such a string of turkeys deserves more scrutiny. When brokers wail about the lack of appetite for London floats, they don’t seem to understand that one reason is their lack of discipline in weeding out the rubbish in the first place and pricing conservatively.
It’s also a reason why some pension funds are concerned about the government’s plans to pressure them into more UK investment. The cart has been put before the horse. Business-friendly supply-side reforms need to come first, and then demand for London listings will pick up again.
An immediate new test will be the reception afforded to the Liverpool-based dietary supplements supplier Applied Nutrition, which formally announced its float plans on Monday. A price tag of £500 million has been mooted.
After the early success of Raspberry Pi, up 37 per cent since its IPO in June, another respectable float would help to dispel the investor cynicism. One positive note is that Applied Nutrition is chaired by Andy Bell, the Bell in AJ Bell, a cheerleader for shareholders and one of the few notable companies from that 2018 vintage to do right by its backers (up 180 per cent).
One thought about the fiscal rules in light of speculation that Rachel Reeves could decide to tweak them to make it easier to justify more borrowing. One idea is to take goodies on the asset side of the government balance sheet, such as the student loan book, and use them as an offset to reduce the reported net size of government debt.
The danger, however, of changing the rules to include off-balance sheet assets for the first time is that it draws attention to off-balance sheet liabilities too. The greatest of these is, of course, unfunded pension promises to public sector workers. These amount to £1.5 trillion, according to one estimate from the pension consultant John Ralfe, dwarfing the £50 billion of “headroom” that the student loans accounting wheeze might generate.
Reeves should remember Warren Buffett’s favourite riddle. How many legs does a dog have if you call a tail a leg? Answer: four, because a tail isn’t a leg. Something the gilt market well understands.
The FTSE 250 index is bidding farewell to Virgin Money, now disappearing into Nationwide Building Society, and welcoming PRS Reit, the £500 million vehicle for investing in rented accommodation.
Top marks for chutzpah must go to the outgoing PRS chairman, Steve Smith, who in a formal statement trumpeted this “landmark achievement”, praising the company’s business model and the outside manager Sigma Capital, among others.
This is delusional. Promotion to the index was all about the 25 per cent increase in the PRS share price over the past few weeks — which was down to a successful revolt by investors to install new blood on the board, jettison a resistant Smith and hold Sigma’s feet to the fire.