Aston Martin director bets on carmaker’s turnround potential

Things look brighter for Aston Martin Lagonda, manufacturer of the British supercar marque favoured by fictional spy James Bond. The company recently reported a 173 per cent increase in revenue for the first nine months of the year to £736.4m, allowing it to cut its pre-tax loss by 39 per cent to £188.6m. 

Aston Martin Lagonda was brought to the market by private equity company Investindustrial in 2018. It has performed poorly since, accelerating pre-tax losses of £68.2m in the year of its float to more than £100m in 2019 and £466m last year.

Canadian billionaire Lawrence Stroll led a consortium in April last year to buy a sizeable chunk of the business as Investindustrial sold its remaining shares.

AML’s high debt levels meant that it had to pay more than 10 per cent interest on five-year dollar and sterling notes issued last year, which has increased its financing costs.

Stroll holds 21.3 per cent of the company’s shares. Non-executive director Michael de Picciotto, a former private banker at Union Bancaire Privée, has also been increasing his stake. He bought £1.74m worth of shares on November 5 through his Swiss-registered investment vehicle, Saint James Invest. This is his fourth large purchase in 2021, totalling £4.2m. He now holds a stake of about 0.66 per cent in the company, according to FactSet.

Warwickshire-based AML has a medium-term target of producing about 10,000 vehicles by 2024/25, on which it expects to make £2bn of revenue and £500m of earnings before interest, depreciation and amortisation. It is forecasting delivery of about 6,000 vehicles this year.

End of lock-up period sparks sales at Darktrace

Darktrace’s lock-up period, which prevented inside investors from selling shares, expired earlier this month. Since then there has been a series of significant share sales that has contributed to the share price falling from a near peak of 950p on October 21 down to 578p on November 15.

On the day lock-up ended private equity firm Vitruvian Investment sold 11m shares worth approximately £63.8m through a secondary placement. Then, between November 8-10, director Vanessa Colomar sold shares worth £9.23m.

Darktrace, which listed in April, is a poster child of the much-maligned British tech industry. The cyber security company uses AI technology to prevent damage once a computer system has been breached. The AI is designed to be self-learning and is needed because hackers are increasingly using AI themselves.

Revenue growth has been impressive but because of high R&D and administrative expenses, the $281m of sales it made in the year to June 2021 bubbled down to an operating loss of $38.5m. Broker Peel Hunt believes there is “a disconnect” between its valuation and the company’s ability to grow. If it is correct, these share sales may be well-timed.

Peel Hunt moved Darktrace’s target price to 473p at the end of October, when the previous week’s closing price was 945p per share. Its justification was that the market size for its Network Detection Response product is just $1.2bn (£875m) according to Gartner (a technology market forecaster) and will only rise to $6.5bn by 2025. Barriers to entry to the market are low and Peel Hunt thinks Darktrace’s low customer review scored means it is unlikely to capture the whole market.

Chair Gordon Hurst’s acquisition of £149,125 of shares last week shows there is still some confidence in the business from insiders, though. The hope will be the company’s high R&D spend does eventually manifest in a higher-quality product that captures most of the market share.