Aston Martin is a brand synonymous with luxury and exclusivity, made iconic by its associations with royalty as Prince Charles’ favourite car make, and as James Bond’s vehicle of choice since Goldfinger.
But while this esteemed car manufacturer has been around for 104 years, it hasn’t always been profitable, oscillating between prosperity and hardship and has gone bankrupt seven times. This is in part due to the risks of high capital intensity, low volume scarcity and macroeconomics, according to Aston Martin’s CFO, Mark Wilson.
At CFO Agenda, Wilson gave a talk about the turnaround of an iconic brand, explaining the internal transformation the car retailer is currently undergoing under their “Second Century Plan”.
Wilson outlined two key rules to a successful transformation: Firstly, have a plan and stick rigidly to it. Secondly, repeat this plan constantly. He stressed that repetition is crucial, because when you are bored of repeating yourself, the rest of the company is only just getting it.
Part of this transformation involved self-reflection in order to redefine the brand’s purpose, asking the question: why do we exist? By homing in on the company’s core purpose of manufacturing cars that are beautiful, impeccably designed and desirable, without compromising on exclusivity, they were able to implement the Second Century Plan with purpose and focus.
This plan aims to elevate the brand from just a car manufacturer to a self-sustaining luxury business. The stages of the plan outlined by Wilson are: business stabilisation, core strengthening and portfolio expansion, with the final result being a self-sustaining luxury brand.
The business stabilisation phase played out over 2014-2016, and involved restructuring, a new leadership and setting in place the relevant processes and preparations for the plan, including securing funding.
The business is now in the midst of the core strengthening phase, which was launched in October 2016 and due to complete in 2018. This phase involves the launch of the DB11 car and expanding and enhancing Aston Martin’s dealership network and global reach.
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Reflecting on a period of underperformance, Wilson spoke about how the brand lost its way and found itself on the wrong end of the supply / demand chain, by flooding dealerships with stock.
The business became primarily focused on the marketplace and were no longer innovating, just selling. Part of Aston Martin’s current transformation involves a return to innovation, with the company heavily investing in new models and portfolio expansion, despite a dip in profits. This includes the establishment of a £200million plant in Wales as part of its growth strategy.
One of the tenets of Aston Martin’s brand is exclusivity. Since 1913, 85,000 Aston Martin cars have been made – by comparison this number represents just two days of production for Toyota. Wilson said that the goal of a luxury brand is to always make one less product than the economy demands.
Another part of the Second Century Plan involves the brand diversifying into different vehicle categories and segments, meaning it is able to increase production of its cars while not compromising on exclusivity. In its current phase the business is reinvigorating its sports car portfolio, with a view to switch focus to SUV development in the next phase.
Wilson explained that success in delivering the plan involves a simple set of core strategies that can be repeated again and again. The Second Century Plan is driven by six core strategies: inspiring customer-focused luxury products, strengthened global brand and sales power, world class value and processes, top class quality, robust financing and corporate governance.
The key measures of performance at executive level are earnings before interest, tax, depreciation and amortization (EBITDA), earnings before tax (EBT) and free cash flow (FCF), according to Wilson. By that measure the brand is already reaping the benefits of the Second Century Plan, as its first quarter results show an increased EBITDA margin of 23%, which is expected to increase over the year.
After finally returning to profitability in 2017, Aston Martin are a testament to the virtue of having a plan and sticking to it resolutely.