The new owners of Aston Martin have identified accounting errors at its US business that led the luxury carmaker to understate the scale of last year’s losses.
The discrepancies saw payments to US dealers booked later than they should have been, which inflated profits and affected the company’s balance sheet. The errors date back to 2018, the year Aston held its initial public offering, the company said on Wednesday.
As a result of the accounting problems, pre-tax losses in 2019 were understated by £15.3m. The revision means Aston made a loss last year of £70.9m compared with the £55.6m initially reported.
“There are a number of different potential ways the incentives are accounted for, so there are different ways it can be done,” Aston’s chief financial officer Kenneth Gregor, who joined in June, told the Financial Times. He added he believed the decisions were a “simple error or misunderstanding”.
Aston has been racing to repair its profitability since last year, when the company revealed it had too many cars unsold in dealerships. The pandemic, which forced it to close dealerships around the world and shut its factories, exacerbated the company’s problems.
In the first half of this year, revenues fell 64 per cent to £146m, with total cars sold to customers dropping 40 per cent to 1,770 vehicles. It reported a pre-tax loss of £227m over the period, compared with a loss of £80m during the same time in 2019.
“This has been a very intense and challenging six months,” said Lawrence Stroll, executive chairman, on Wednesday.
Mr Stroll, who came in through a £540m rescue deal earlier this year, plans to revive the brand by cutting sales to dealerships and overhauling the management team. He has already replaced the chief executive, finance boss and chairman. The group’s new chief executive, former AMG boss Tobias Moers, joins at the end of this week.
During the past six months, Aston cut the inventory at its dealers by 869 cars, but the process of clearing out forecourts of unsold vehicles will last “well into 2021”, the company said on Wednesday.
As a result of the destocking, the group’s flagship Gaydon plant, which makes its sports cars, will remain closed until late August, making it one of the last auto plants in the UK to reopen following the shutdown in March.
“We don’t need to produce vehicles that would just add to the [inventory] problem,” said Mr Gregor. “It’s painful, but it’s the right thing to do.”
The business has not given formal profit guidance for the year, because it is “too early to tell” the full impact of coronavirus, as well as the uncertainty over additional lockdowns, he added.
Deliveries of the DBX, Aston’s first sport utility vehicle and a crucial product for the company’s success, began several weeks ago, though the business did not give an up to date number for customer orders.
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