The road to recovery
8 November 2011:
A big misconception of the financial crisis was that luxury wouldn't be touched. But Hanno Kirner, Aston Martin CFO, has a different take. He saw that while the funds to buy luxury were always there, the good feeling and willingness to spend wasn't. That was the reason why, in 2009, the luxury car market suffered heavily as a result of the financial crisis.
"Many of our customers are entrepreneurs, people who invest their wealth," says Kirner. "And if you have to right-size your company, you're not going to reward yourself by buying a luxury sports car."
It was a painful time, yet Aston Martin fared much better than other luxury car makers. "It was a dreadful year for the industry," he says. "We sold 7,500 cars in 2007 and 3,000 in 2009, but we still managed to turn a small profit of £5 million post-tax."
After years of development and investment, the company is once again tasting success, with five new models added to the Aston Martin stable: the Rapide, the Cygnet city car, the One-77 (at £1.4 million), the Virage and the Virage-S. And in June, it secured long-term stability after successfully concluding a £304 million bond issue, which guarantees funding for the next seven years.
But it didn't happen overnight. In 2007, after an investment consortium made it a requirement to finance debt, Aston Martin chairman David Richards and CEO Ulrich Bez leveraged the company with a £200 million debt structure. Eventually, though, they recognised it would have to be replaced with a more strategic solution.
"So we left it until this year when we thought the market sentiment was good and sensible," Kirner explains. "Then the question was what kind of instrument to go for. We thought it was most sensible to go down the bond road because at some point, we need to open ourselves more to the will at large and communicate financially, and the bond offers the first step to fully-fledged investor relations and financial public relations."
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Source: Finance Director Europe
