Jim Armitage: Racy car backers dial down drive to rival Ferrari price

Aston Martin seems to have dropped down a gear on the racy £5 billion valuation it was hoping for in its forthcoming stock market float.

It now says it may go for £4 billion if it’s priced at the bottom of the range.

Good. Potential investors were rightly sceptical about paying a higher multiple than even Ferrari, the much better comparable business. Analysts are also concerned — at least, those not affiliated to the 11 banks Aston roped in to advise on the deal.

It looked like the private equity backers were being greedy. One, Investindustrial, has form in outlandish returns: it tripled its money when it sold Ducati to VW.

Concerns about Aston Martin are legion. Not only are its cars less in demand than Ferraris, but it accounts for R&D costs more aggressively too. Added to which, it has £815 million of debt.

Having said that, Aston Martin’s turnaround has been impressive, and its ambitious growth plans will set it on a path to grow faster than Ferrari.

If the company ends up being priced closer to £4 billion this float starts looking a more interesting prospect.

Diageo should count its blessings

If Diageo is suffering from the recent collapse in emerging market currencies, pity ABInbev.

The Guinness-to-Johnnie Walker giant today said currency volatility would wipe £45 million from its profits this year. That is from when it translates profits made in Turkey, India, South Africa and Brazil into its home currency of sterling.

It could be worse. Mostly, where Diageo loses on the currency swings, it wins on the roundabouts. Half its business is in developed markets where currencies are strong, and half in emerging. The US, for example, makes up 40% of its sales. So, the two sides of the business hedge against each other.

Some rivals are not so lucky. Budweiser giant ABInBev gets 70% of its profit from emerging markets. It won’t be pretty when they translate those earnings back into dollars.

With US interest rates only at the start of their likely rise, it feels like just the beginning of the emerging markets currency story. Time to look more closely at where the multinationals in your shares portfolio are making their money.

Anyone out there with a lot of bottle?

Entrepreneur David Spencer-Percival is convinced his healthy botanical drinks can be as big as Fever-Tree. One problem: Fever-Tree has been so successful, so quickly, that bottling plants are full to capacity making the stuff.

DS-P will have to scrabble around for capacity from mom and pop outfits if he’s to take on the tonics giant as he wants to. That’s a tedious process, which means he’ll probably end up selling the business to one of the giant bottlers such as Coke.

A pity, and surely a loud message that there’s opportunity for new bottlers to enter the market. Any entrepreneurs interested out there?