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Edited Transcript of AML.L earnings conference call or presentation 13-May-20 8:00am GMT

Q1 2020 Aston Martin Lagonda Global Holdings PLC Earnings Call

Jun 21, 2020 (Thomson StreetEvents) -- Edited Transcript of Aston Martin Lagonda Global Holdings PLC earnings conference call or presentation Wednesday, May 13, 2020 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Charlotte Cowley

Aston Martin Lagonda Global Holdings plc - Director of IR

* Vikram Bhatia

Aston Martin Lagonda Global Holdings plc - Interim CFO

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Conference Call Participants

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* Angus Vere Tweedie

Citigroup Inc, Research Division - Director

* Charles Coldicott

Redburn (Europe) Limited, Research Division - Research Analyst

* Christophe George Boulanger

Barclays Bank PLC, Research Division - MD of Credit Research

* Dominic Convey

Peel Hunt LLP, Research Division - Analyst

* George Anthony Galliers-Pratt

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Giulio Arualdo Pescatore

HSBC, Research Division - Analyst

* Kai Alexander Mueller

BofA Merrill Lynch, Research Division - Associate and Analyst

* Michael Dean

Bloomberg Intelligence - Analyst

* Phillip Roy Bagguley

BofA Merrill Lynch, Research Division - Research Analyst

* Sanjay Jha

Panmure Gordon (UK) Limited, Research Division - Capital Goods Analyst

* Stephanie Ann Vincent

JP Morgan Chase & Co, Research Division - Senior Analyst

* Thomas Besson

Kepler Cheuvreux, Research Division - Head of Automobile Sector

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Aston Martin Q1 2020 Results Conference Call. (Operator Instructions)

I would now like to hand the conference over to your first speaker today, Ms. Charlotte Cowley. Thank you. Please go ahead.

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [2]

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Good morning, everyone, and welcome to the Aston Martin Lagonda Q1 2020 Results Call. Firstly, I hope that you and all your families are safe and well. I'm Charlotte Cowley, Head of IR, and I'm joined today by Vicky Bhatia, our interim CFO, who joined the business just 3 weeks ago on the 20th of April.

First, Vicky is going to run through the presentation. This is also available on our IR section of our website, and then we'll both be very happy to take your questions. So over to you, Vicky.

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [3]

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Good morning, ladies and gentlemen. As Charlotte has mentioned, I joined Aston Martin about 3 months ago. So I am -- I've been at Aston Martin before in 2015. So I know the business, and I'm delighted to be back working with the team, some of whom I know quite well.

Slide 1. As for all businesses, the ongoing COVID-19 pandemic has had a substantial impact on Aston Martin Lagonda during this quarter. And it certainly increases the uncertainty and risks to the financial performance in 2020.

The company is in the process of implementing a strategic plan to decrease dealer inventory towards the luxury norm and the advance of COVID-19 impacted dealer demand for cars, which added to the planned wholesale unit decline.

With retail sales outpacing wholesales in unit terms, we significantly destocked the dealer network by 200 -- 428 units. For context, this compares to circa 190 units that the company destocked in the full year 2019. As you know, another key focus has been the continued development towards start of production for DBX, which I'll come back to later in this presentation.

Finally, amidst the uncertainty of COVID-19, we were able to successfully complete the capital raise of GBP 536 million on the 20th of April, significantly increasing the company's liquidity and strength of the balance sheet. Alongside this, we also welcome our new Executive Chairman, Mr. Lawrence Stroll to the business with his wealth of luxury brand and auto experience and his passion for racing and F1.

Slide 2. Turning to the wholesales in detail. The core decline of 44% was impacted by COVID-19 pandemic, but equally importantly, by our strategic destocking plan. Our most significant regional decrease was seen in APAC, down 74% or 267 units. Within APAC, China was down 86%. We had planned for no wholesales in January and February to rebalance dealer inventory. And during March, of course, we felt a significant impact from COVID-19. The U.K. was the best-performing market with a decline of only 3% year-on-year, benefiting from lower dealer stock at the start of the year, enabling pull-through of wholesales to meet retail demand.

The chart on the top left highlights that we had no Specials in the quarter as planned, compared with 32 in the same period in 2019, which is an additional headwind for us this quarter and will continue into quarter 2.

Turning to average selling price, which is bottom left here. There was a 98,000 -- this was GBP 98,000 for both goals and total given, no Specials. In support of the strategic destock, our most significant headwind to ASP was the elevated customer and financing support for retail sales. This, we have agreed to support the destocking strategy and the brand and the retailer network. With the relative proportion of higher retails to lower-end wholesales, this had a significant impact in the quarter.

Core geographic and product mix were also ASP headwinds with lower China volumes and higher vantage sales as a proportion of overall units.

On the next slide, we talk about EBITDA and EBIT. Moving to the key profit metrics of adjusted EBITDA and adjusted EBIT. Looking at the EBITDA walk, the lower wholesale volumes had the impact of -- had the biggest impact of GBP 47 million compounded by no Specials in the quarter. Price/mix was also a headwind, as I've said, when discussing ASP. Non-vehicle declines of GBP 9 million were primarily due to decreases in other revenue streams such as brands and motorsport, servicing of vehicles and aftermarket parts. The lower cost reflects some volume-related flow through, but also rephasing of marketing spend. Finally, FX was a GBP 7 million headwind to adjusted EBITDA.

Over to EBITDA on the right, D&A of GBP 29 million was slightly lower than the prior year, reflecting the lack of Specials this year, and the adjusted operating loss was GBP 76 million. Net interest costs of GBP 42 million were up from GBP 14 million in the prior year, reflecting the GBP 340 million of new notes issued in 2019, and given the U.S. denomination of these notes, there was an FX impact of GBP 17 million in the P&L charge. The loss before tax was GBP 119 million.

Turning to cash. A key focus for all of us and all companies at this time of uncertainty. Cash at the end of the period was GBP 172 million, up from GBP 108 million at the end of December. The biggest movement was a net financing inflow of GBP 156 million, with GBP 171 million placing to the Lawrence Stroll-led consortium on the 31st of March. The consortium has provided GBP 75.5 million of short-term working capital financing during the quarter, which was refunded at the placing. CapEx was lower than guidance at GBP 85 million, with spending primarily focused on St Athan, DBX and Aston Martin Valkyrie and some rephasing to later in the year, although we do expect investment to be H1 weighted.

The smallest net cash movement was from operations with a cash operating loss in the period, largely offset by working capital movements, an inflow of GBP 48 million. The largest part of this was GBP 63 million receivables inflow, reflected as an unwind of the quarter 2019 overhang of GBP 35 million and lower wholesales.

An inventory outflow of GBP 35 million was primarily due to buildup of part supply for products due to deliver in the second half. In terms of deposit, they increased slightly due to V12 Speedster.

Turning to debt. Now we have a year of comparable data. We are presenting this, including leases as per IFRS 16. The fair value movement of GBP 41 million of the SSNs offset some of the 40 -- GBP 64 million net cash inflow. Net debt was GBP 32 million lower than the year-end at GBP 956 million. The last 12 months adjusted EBITDA for leverage was significantly lower, resulting in adjusted leverage of 16.2x. However, the timing of closing the equity raise was split over the quarter end. Reflecting the full GBP 536 million equity raise, pro forma cash would have been GBP 514 million and adjusted net debt would have been GBP 614 million and leveraged at 10.4x.

As with everyone, we have been managing through the impacts of the spread of COVID-19, firstly, ensuring the health and safety of our employees, our partners and local communities in which we operate.

We've also taken action to manage proactively across our supply chain and businesses more broadly. We temporarily suspended production at our manufacturing facility on 25th of March.

At St Athan, we reopened on the 5th of May as we work with the Welsh Government and health officials to ensure a safe working environment and protect the wellbeing of our employees, which include providing appropriate PPE and social distancing measures. Gaydon will follow as we use learnings from St Athan reopening to apply the required health and safety measures for Gaydon's restart.

We have a number of staff volunteering to support frontline NHS workers, making gowns, scrubs and other much-needed PPE at our sites, as well as providing maintenance and repair services for NHS worker cars at our Newport Pagnell workshop.

In terms of our dealers, at points, 93% of our network were either closed or running with limited capacity. However, we are happy to report that this number is improving with all 18 Chinese dealers open and more than 15% of dealers fully opened globally, as I talk to you today.

Turning to cash conservation. I have talked about some of the rephasing of spend in the financial review but in addition to that, most of our employees were furloughed prior to the reopening of St Athan and have been using the financial support offered by the government's job retention scheme. And as reported a few weeks ago, for 3 months from April 1, our senior team have volunteered to waive some of their salaries and/or fees.

Our key focus, of course, delivering the 2 pivotal cars that will provide a platform for the future. Firstly, the DBX, a key new product launch for us as we diversify and enter the luxury SUV segment of the market. Despite the temporary suspension of operation at St Athan, with the site reopened last week, we are still on track for summer deliveries and start of production scheduled in the next few weeks, a testament to the strength and the measures made by the team as we prepared for this key delivery. The order book continues to build and extends into 2021. Building on this strength, new derivatives will be unveiled from 2021. And some of you may have seen some of our test fleet out and about on the roads recently, some of which were making deliveries of the equipment we have been providing to support the NHS.

Then top right is the Aston Martin Valkyrie, which will pave the way for our mid-engine platform, which, as you know, will be further supported by our in-house works F1 team from next year. The development schedule for Aston Martin Valkyrie was impacted by the closure of test facilities in the last month. So deliveries will now start later than originally planned in the half year -- in the second half year.

Finally, on this slide, the other cars coming in this year are the Vantage Roadster, bottom left, which launched at our virtual Geneva reveal in March, both Roadster and Coupe are now available with either our iconic vane grille or the track-inspired hunter grille. We are particularly pleased with strong order book already for this. Then there are the 2 Specials, the DBS GT Zagato and the Goldfinger DBS Continuation are both coming in, in the second half on plan.

Before we open up for questions, 2020 is the year in which the business is being reset to enable it to operate as a true luxury company. What we and no one else had planned was for COVID-19. The uncertainty surrounding the duration and the impact of the virus on the global economy increases uncertainty for financial results for the year and makes determining a full firm year outlook not possible at this time.

We are planning on the assumption that trading remains challenging and are therefore implementing measures to take further action on operating costs and focus on controlling cash.

We are also, as is prudent, continuing to review all future funding and refinancing options to increase our liquidity.

Having just completed the capital raise, we are clearly in a stronger position than we were. But as announced last month, we are looking at additional options to increase liquidity, including retaining the option to draw up to $100 million of delayed draw notes, assessing additional working capital facilities, and we are exploring options on further support from the government.

While it's a worrying time, there is a lot going on in the business as we execute our plan to build Aston Martin Lagonda into one of the preeminent luxury car brands globally. This includes a strong front-engined sports car offering, where we are taking action on to destock the dealer network and rebalance supply to demand and regain price positioning. A strong SUV offering with the DBX production due to start in the next few weeks and deliveries in the summer, with orders growing and the order book extended into 2021. A strong mid-engined offering, starting with the Aston Martin Valkyrie deliveries this year, followed by the Valhalla and then the Vanquish. Our mid-engined platform will further be supported by our own F1 team from 2021, giving us a fantastic marketing platform to further build the brand.

2020 is a year of reset. And yes, 2020 has additional challenges with COVID-19, but our enthusiasm and ambition for the future remains significant.

Thank you for your attention, and we will now be happy to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Kai Mueller from Bank of America.

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Kai Alexander Mueller, BofA Merrill Lynch, Research Division - Associate and Analyst [2]

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Thank you very much for taking the call and running through it even if you've been only there for a couple of months. The first question is really on your inventory levels. So you obviously outlined quite well, the reduction in dealer inventory you've done, 430 units at the incentive programs you've done in terms of supporting that.

Can you give us a little bit of color in terms of how much more is there to do to get where you want to get to? Or even give us some sort of idea how much overhang in terms of inventory there still is? I.e., how much longer are we -- should we be expecting a massive undershooting in your wholesale numbers compared to retail going forward?

And the second point is when you started now, obviously, Q1, you said the dealership network in China was closed in January and February, basically. We probably had the same thing in April in the western world. When we think about Q2 versus Q1, can you give us a little bit of color in terms of the magnitude of impact that should have on your business? And I think that, in particular, with regards to the commentary you've made, if we run a couple of numbers, are you happy with this GBP 500 million in cash you have, that, that can sustain you through a more prolonged period of slowdown or does it really mean you need to go and pull the other credit line and ask the government for support?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [3]

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On the destock, we destocked 428 cars, our wholesale cars, and this was double -- more than double of what we did in 2019. We will continue destocking during the course of 2020 because, as you know, our strategic plan is to become a luxury brand. And we will, therefore, build cars to order once we've completed our destock of cars.

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [4]

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And then Kai, I thought that you were asking, what do we think looking forward into Q2? Now clearly, as you know, we never comment on current trading. What we can say, yes, all the dealers have opened in China and we're pleased with what we're seeing in China.

Now the uncertainty around the duration and the impact of COVID makes it really difficult to determine what the full year looks like. What is clear is that a number of our major markets were not in lockdown for most of Q1, and they have been so for all of Q2 so far. So of course, you would expect that the impact would be more severely felt in Q2. It really does just depends on when and how lockdown measures are eased in our key markets. Beyond that, it's quite difficult for me to be able to help, I'm afraid.

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Operator [5]

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Your next question comes from the line of George Galliers from Goldman Sachs.

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George Anthony Galliers-Pratt, Goldman Sachs Group Inc., Research Division - Equity Analyst [6]

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The first question I had was whether you could just confirm where you finished in terms of cash at the end of April? Obviously, there's a little bit of kind of movements around the quarter because of the closing of the equity. So if you could provide the cash balance at the end of April, I think that would be extremely helpful to the market.

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [7]

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As I mentioned in my earlier statement, the pro forma cash balance at the end of April was GBP 514 million -- I beg your pardon, at end of March was GBP 514 million. And that's what brought the ratio down to 10.3%.

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George Anthony Galliers-Pratt, Goldman Sachs Group Inc., Research Division - Equity Analyst [8]

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And would you be willing to disclose the end of April number? I guess you are monitoring this on a daily basis given the environment that we're in?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [9]

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Yes, George, I'm not sure it would help you very much because we don't tend to report monthly cash balances ever in a year. So we try to give you at least the step that you can see that net debt and the cash, including the full rights issue proceeds.

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George Anthony Galliers-Pratt, Goldman Sachs Group Inc., Research Division - Equity Analyst [10]

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Okay. And then secondly, just on the ASP evolution. Clearly, if we take the GBP 98,000 and we apply sales tax, we end up at a price point, which would appear to be below the kind of base price of the Vantage. Can you give us some indication of the quantum of discounts or sales incentives you're providing on the vehicles you're destocking? And what should we expect for ASPs in the second half of this year, excluding the DBX?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [11]

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Yes. So George, the key thing to think about on the ASPs is, of course, that the negative impact of the retail financing support is clearly due to -- linked into the retail sales. So you've got this quarter, really pleasing to see retail significantly ahead of wholesale, which has allowed us to do that 428 unit destock. So you've got that retail incentive on those sort of higher-than-wholesale retail numbers spread across a lower number of wholesales. So you've got a disproportionate impact on that lower wholesale number, which is clearly all aligned to the strategy of reducing to the luxury norm. So you've got your wholesales at a level retails ahead of that and hence, why you've got that negative impact of the financing.

I would expect that to continue as we do still have work to do on the destock as we go through the year. Now when you think about through the second half, of course, you have DBX coming in on the second half and that being built to the order book, as will all new Aston Martins just built to order. So you're not going to have a headwind coming in from DBX in terms of any sort of -- any retail financing support on that in the second half.

The other thing to think about is, of course, if you don't track straight across from the retail price of a car because, of course, you've got a dealer margin in there that you've got to think about as well, you've got tax to think about as well. So you don't get too tied in knots in terms of trying to do those calculations.

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George Anthony Galliers-Pratt, Goldman Sachs Group Inc., Research Division - Equity Analyst [12]

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And then just quickly 2 housekeepings. I think you guided for full year CapEx of GBP 285 million, and you said around half of that would come in, in Q1. You obviously came in lower than that. Does the GBP 285 million for the full year still stand? Or does the rephasing actually lead to some deferral into 2021?

And then just on net interest expense. Again, I think you guided for the full year to be something in the region of GBP 90 million, but we've seen GBP 42 million in Q1. Are there some incremental costs in that Q1 number? Or is GBP 90 million not the right number for the full year?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [13]

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Okay. George, given the timing of the key 2020 programs of DBX and the Valkyrie, we still expect CapEx to be first-half weighted, first-half-year weighted. We are continuing to investigate efficiencies and cost savings in both operating costs and capital expenditure.

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [14]

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And back to what we said in the statement, George, of course, with -- just given the uncertainty at the moment with any previous guidance, we'll come back to you when we've got a firm view on any firm numbers.

And just on the net interest quickly, you have picked up in the statement that there was GBP 17 million of FX in that interest, that P&L interest charge in the quarter. So depending on where FX rates move for the rest of the year, that could be -- that will be a variable against that GBP 90 million guidance, but nothing's changed in terms of the GBP 90 million constant currency guidance.

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George Anthony Galliers-Pratt, Goldman Sachs Group Inc., Research Division - Equity Analyst [15]

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Okay. Great. So just to summarize, GBP 90 million remains for the net interest and CapEx will be H1 weighted, but you'll update us on the full year number at Q2?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [16]

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Yes, on the CapEx. But on the interest, that GBP 90 million is in the mythical constant currency world. So of course, we've booked an additional GBP 17 million on top of that because of FX in the quarter. If that GBP 17 million happens to hold for the whole of the rest of the year, then do the GBP 90 million plus GBP 17 million but of course, FX rates will move around.

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Operator [17]

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Your next question comes from the line of Giulio Pescatore from HSBC.

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Giulio Arualdo Pescatore, HSBC, Research Division - Analyst [18]

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The first one on the DBX. Can you just share maybe some details around the order book in terms of regional exposure? I think it'd be interesting to see where the order book is going.

And then the second one on the Speedster. I know you were meant to be selling 88. Maybe -- can you give us an update on how many have you already sold and how many are still -- I mean, you mentioned the order book is still building, right? So maybe can you give us a percentage of how much have you already sold versus how much you still plan to sell? And then last one on the Valkyrie, I read in the press release that the Valkyrie was pushed back in H2. Maybe can you share how much do you think you can produce and sell this year? And how does that compare in terms of previous plan?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [19]

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Okay. On -- I think in the previous guidance, we did say that we have a very strong order book on the DBX, and we are still picking up orders for the DBX going into 2021. Production -- the manufacturing of the DBX has now started at St Athan, and the first cars should be rolling off pretty quickly. And then will be delivered to the customers via the dealers in the summer. We've made that clear in various statements -- yes, that's. On the Valkyrie, Charlotte is going to take that.

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [20]

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On the Valkyrie, really simply put, some of the test facilities have been closed due to COVID. So it's nudged us back a little bit, so it will be coming later in H2 than we originally planned. So yes, some of that will clearly shift into 2021. And we'll work that through as we get closer through to the end of the year. And then the other Special, of course, we said that we're pleased with the response to the V12 Speedster that launched in March.

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Giulio Arualdo Pescatore, HSBC, Research Division - Analyst [21]

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Okay. So, can I squeeze in maybe one other one. On the Formula One, can you maybe go back on the rationale behind going back into the competition? I understand the marketing point. But from a cost perspective, can you really afford to run your own team? And how is that changing in terms of cost base? Will that increase your operating leverage, for example?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [22]

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Yes. So Giulio, remember, so there's actually no difference sort of in the financial impact to us going with the new team and our own team and the relationship we currently have. I think we said at the time that the financial terms are commensurate with that, that we have at the minute. But of course, the benefit that we get is that we get the team name, chassis name. So it is an Aston Martin works team, so significant benefit from that, that we can use to leverage the whole brand globally and use those moments to engage with our customers and drive significant value from that.

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Operator [23]

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Our next question comes from the line of Charles Coldicott from Redburn.

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Charles Coldicott, Redburn (Europe) Limited, Research Division - Research Analyst [24]

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I've just got 2 questions, please. Firstly, on Q2 and the working capital, I think -- is there anything you can say on that? I think you previously said that you would have GBP 100 million of inventory build in H1 because of the DBX and St. Athan, is that -- should we still expect that to happen, so that GBP 65 million in Q2? And maybe you could just also comment on the receivables inflow in Q1. Is that all explained by the unwind of overhang from Q4 or does that reverse a bit in Q2?

And then secondly, I wanted to ask about residual values. I mean, could you comment anything you've seen, I guess, particularly in the U.S., given the high degree of leasing there? And have you seen that your financing partners, FCA and JP Morgan, have they changed their terms at all?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [25]

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So Q2, yes. So inventory, we would still expect to have some inventory build through -- into the second quarter because whilst St. Athan has started production of the bodies of DBX today, we start full production in the next few weeks. So yes, there will still be some inventory build in Q2 and also for Valkyrie, I can't give you a firm number, but certainly, I would expect it to build from where we were at the end of Q1.

In terms of the receivables inflow, about GBP 35 million of it was associated with the Q4 overhang. So that's almost entirely unwound. There's still a little bit more of that to go, though. And that was mostly attributed to trade receivables in late December 2019. And then, of course, just the sort of the trading impact, by the fact we had lower year-on-year sales in March as we had COVID-19 starting to impact. So our actual sort of ending balance at the end of March was relatively low. So that's probably on the working capital piece.

On residual values, clearly, by reducing the inventory, then we'll be able to reduce the amount of sort of customer and retail financing support that we'll have to put into the market. We can see that already. We've got a better picture in Q1 than we had in Q4. It will continue. I'm not saying that it is 0, but it's certainly in better shape in Q1 than it was in Q4. So we would expect ASPs to gradually rise. But clearly, later on now, as we get through the destock and then that, as you say, will feed through into residual values.

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Operator [26]

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Your next question comes from the line of Sanjay Jha from Panmure Gordon.

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Sanjay Jha, Panmure Gordon (UK) Limited, Research Division - Capital Goods Analyst [27]

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I just want to get my head around the working capital again. I know you talked about inventories and receivables. Can you talk about payables? Because I thought that you had quite a bit of payables to deal with in the first half? Can you sort of throw some light on that?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [28]

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Yes, the payables are there and payables have increased slightly because we are buying stock in for the build of the DBX. We are paying our suppliers on time as we build our stocks up. So I don't see a problem as far as where I sit with the payables at all.

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Sanjay Jha, Panmure Gordon (UK) Limited, Research Division - Capital Goods Analyst [29]

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Sorry, you said your payables are going up. So that means you're not paying on time. I'm sorry...

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [30]

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No. No. We are paying in line with the terms of the payables, the payables are going up because you are building -- buying materials for the DBX. So if they go up, and we've got terms with suppliers, so we pay suppliers on time in line with their terms.

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Sanjay Jha, Panmure Gordon (UK) Limited, Research Division - Capital Goods Analyst [31]

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Okay. So -- and when are these payables due to be paid? Sorry can I -- what I'm trying to figure out is, is there going to be -- because there's nothing been happening for the last few weeks. I'm guessing, at some stage, you are paying these payables. And I just wanted to get a feel for working capital movement in quarter 2.

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [32]

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We pay all payables on time. We run our payable runs twice a month, in the middle of the month and at the end of the month and in line with the terms that have been set up on our system, we pay our suppliers.

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Sanjay Jha, Panmure Gordon (UK) Limited, Research Division - Capital Goods Analyst [33]

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Okay. And my second question is, could you give us some idea about what's happening with the supply chain? Particularly, I know some of your suppliers are in Italy, I just wanted to get a feel for where you are in terms of -- I know last time, you -- we had a call, you talked about how you could see supply chain up to June or something. Or it was up to end of March, I can't remember. But what's it looking like now?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [34]

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You can imagine, Sanjay, our supply chain team are working very closely with all of our suppliers. One of the reasons we were able to start production of DBX yesterday was the fact that our supply chain team had ensured we'd secured supply for DBX. And that factory is, as I say, it starts its full production -- starts in a few weeks. So they are very busy, but we're in a good place.

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Operator [35]

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The next question comes from the line of Thomas Besson from Kepler Cheuvreux.

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [36]

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Thank you very much. Sorry, if I'm French, but I'm going to try and ask precise questions, if I can. Could you give us an idea of how many DBX you believe you can deliver in 2020? You're suggesting your order intake has built up into 2021, but I don't think we've had a figure. Apparently, you mean summer it starts for delivery. It can be July or September. Could we have an idea if it's going to be -- whether it's going to be 500 -- 1,500 DBX deliveries in 2020, please? And could you as well confirm the number of Specials you think you're going to be able to deliver in 2020, including the Valkyrie number, please?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [37]

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Thomas, okay. So I'll take the DBX. I mean, clearly, when we said that the order book had exceeded 2,000 and we were covered for our retail demand for 2020, that gives you an indication in terms of numbers. I don't think we've given a specific target on DBX wholesales for the year, but that will probably give you a bit of scope, I suppose, to help. Apologies I can't be exactly precise for you, but that's probably as precise as I can be. In terms of Specials, of course, we've got the 19 of the DBS Zagatos coming through. And they're coming through, I think, it's Q4, those cars come in. And of course, the other half of that Centenary pair that we started to deliver with the Continuations, Q4 last year.

We've then got -- I think it's 25 of the DB5 Continuations. The majority of those, I would expect to go in the second half of this year as well. And then Valkyrie, clearly, I don't think we've ever shared a number on that, but with the testing facility delay, then we've slightly fewer of those Valkyries expected to be delivered than our original expectation for the second half, but those, of course, will be picked up in 2021.

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [38]

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So broadly, we can count on approximately 50 Specials, I guess, and whatever number of Aston DBX. Okay. Second question, please. Your aspirational Italian peer has talked about some consolidations in its order intake in the quarter. Can you comment on whether you have seen as well cancellations at Aston? And specifically, I've been a bit surprised, I must, by the strength of your U.K. business, knowing the situation in the country. Could you talk about group cancellations and make a specific comment on the U.K. market and what we should expect for the next 3 quarters after such a strong Q1, please?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [39]

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Yes. I can make a comment on the cancellations. There have been 1 or 2 on the Specials, all of which have been backfilled by other customer orders. So nothing to call out there. In terms of core cars, the DBX order book has continued to build, but I can't sit here hand-on-heart and say that a dealer hasn't had a cancellation from a customer. But as you know, the orders to us are placed by the dealers, and we haven't had anything coming through. We've just had that order book increasing over the last few weeks and now extending, as I think we said, into 2021.

In terms of the U.K. specifically, I don't think I have any great color there. I mean the performance clearly, it was the best region. It started the year with the kind of the best stock position. So that certainly helped that. We'll have to wait and see how the easing of the current lockdown restrictions really impact the demand, but as per -- I can't remember whose question it was, but the Q2, it really will just depend on how and when lockdown fully eases in each market, and that will be as relevant for the U.K. as it is for any other market.

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [40]

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Okay. I have a very easy one to finish, please. Do you have a date in mind for the new team to present a plan that would replace, I guess, the preexisting one and would set up midterm targets within the new setup, please?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [41]

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I'm not sure -- entirely sure if people will be expecting us to present a new plan per se, given we gave the plan which centers around getting supply and demand rebalance for sports cars and destocking the sports car network. And we've made the good progress on that in the first quarter and still more work to do there. Then getting an SUV launched. You've heard today that DBX has started production yesterday. So -- and the reviews of that car and the strength of the order book is making us feel confident about that. Then, of course, the investment in the mid-engine. So starting with the Aston Martin Valkyrie coming later this year and then Valhalla and Vanquish thereafter. So kind of that is the plan. That's what we're out delivering. And so I'm not quite sure...

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [42]

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Sorry if I not -- if I wasn't clear, I meant financial targets. I understand what you're trying to do but the original financial targets. Yes, sorry, it's my French...

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [43]

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I think -- yes. No, I think at the minute, I mean, you've got to just please bear with us. I don't think we're alone in not putting specific targets out for this year.

So let us get through the uncertainty, have a clear view for this year. And then once we're in a position to be able to update then that -- then I should think we might be able to give some appropriate new guidance into the market. But I can't give you a date and say, we don't know how different markets are going to perform over the next few weeks. So you'll just have to bear with us, I'm afraid.

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Operator [44]

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Next question comes from the line of Christophe Boulanger.

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Christophe George Boulanger, Barclays Bank PLC, Research Division - MD of Credit Research [45]

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I will have a follow-up question on liquidity. You mentioned that liquidity at the end of March on a pro forma basis is at GBP 514 million. Could you help us understand what is the additional available liquidity that you have as well at the end of March? I'm talking about undrawn facilities like RCF and so on. That's the first question. And I will have 2 follow-up questions as well.

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [46]

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Yes, we have additional facilities, which we are reviewing every day. We have the $100 million DDNs, which we can -- which are available to us. We are also talking to government for support if they can -- if there is any support available. And we are also looking at additional access to working capital facilities. That's as much as I can say today. But we've got these facilities and our requirements very much in our focus.

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Christophe George Boulanger, Barclays Bank PLC, Research Division - MD of Credit Research [47]

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And on the RCF, is it fully drawn?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [48]

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The RCF is, yes, and it's there very much so.

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Christophe George Boulanger, Barclays Bank PLC, Research Division - MD of Credit Research [49]

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So you mean it's there, is it available?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [50]

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A small amount is available, but we've drawn quite a lot of it.

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Christophe George Boulanger, Barclays Bank PLC, Research Division - MD of Credit Research [51]

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Can you share with us how much is available?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [52]

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It's about GBP 20 million.

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Christophe George Boulanger, Barclays Bank PLC, Research Division - MD of Credit Research [53]

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GBP 20 million. Okay. Okay. Then the second question is really to try to understand the pace of cash burn and how flexible you are in the structure. So first, do you have any figures you can share with us in terms of monthly cash burn rate on 0 production? And if not, what is the share of your variable versus fixed cost?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [54]

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Yes. So on that, I mean, you've seen that we've taken some action on costs in terms of taking advantage of the government scheme in terms of the job retention scheme for our staff for furloughs because you can imagine in terms of numbers of employees, our manufacturing colleagues are a high proportion of employee costs. So we've taken action there to mitigate spend.

You can imagine that we've been thinking carefully about what we're placing in terms of building the inventory and planning on what inventory we're bringing in, while we've not been manufacturing in France, but ensuring that we do have the supply that we need for when we do start, as we have done in St. Athan. So I think we're looking at -- and you've seen the senior team waive some of their fees, all of these are incremental factors that we can -- levers that we can pull to control spend. And you've also seen the outlook statement that we've made a specific comment about looking for further actions on costs and being extremely focused on cash conservation. And we've seen some of that with some of the rephasing of CapEx as well in the quarter that we just reported.

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Christophe George Boulanger, Barclays Bank PLC, Research Division - MD of Credit Research [55]

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So do you have like a broad percentage you could give me in terms of variable cost based on all what you said here?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [56]

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Yes. So there have been some flow throughs of manufacturing costs. Clearly because if you've not been manufacturing, then you've got variable manufacturing costs that have supported in the quarter, and you'd expect that to be doing so in April. And then looking at all other areas of variable spend, there's been some rephasing of marketing spend in the quarter. And some of that, we said, was about Formula One sponsorship, given some of the timings of those races this year. We've already said that we're looking at our site footprint. So we'll be looking to close 6 of our sites. So a proper deep dive looking through different lines on the operating cost base.

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Christophe George Boulanger, Barclays Bank PLC, Research Division - MD of Credit Research [57]

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Okay. And then maybe the last question is really on the DBX. Can you maybe share with us what will be your broad number of DBX delivery for 2020?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [58]

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I think somebody else already asked us that, and I gave really as much help as I can. I'm afraid I haven't got any more to add.

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Christophe George Boulanger, Barclays Bank PLC, Research Division - MD of Credit Research [59]

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All right. And then maybe for the last 2 months, what has been the pace of order book growth for the DBX? Have you seen a slowdown compared to, let's say, December and January for February and March?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [60]

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Yes. I mean, naturally, given we had, I think it was 93% of our dealer network that was closed at some points and obviously, you would have expected somewhat of a slowdown. But net-net, we have more orders now than we had when we last updated you. And what's really interesting is the social media interaction is extremely high, the configurator usage is extremely high. And we are pleased with what we're seeing with those dealers have got. More than 15% of them are open today, and we're pleased with what we're hearing from those dealers on the ground.

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Christophe George Boulanger, Barclays Bank PLC, Research Division - MD of Credit Research [61]

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And then in China, following the reopening there, have you seen a pickup in order intake on the DBX over the past 2 weeks?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [62]

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Yes.

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Operator [63]

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Your next question comes from the line of Stephanie Vincent from JP Morgan.

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Stephanie Ann Vincent, JP Morgan Chase & Co, Research Division - Senior Analyst [64]

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I have 2, if I may. Just on the production cadence for this year. I think it would be helpful given we're in such an uncertain time if you can talk about the breakdown of part supply coming from the various regions, so specifically, U.K., EU, U.S. and China. And then this is longer term, but how can a non-marketing person look at the marketing effort for your products going into the new normal? And how successful can social media and online marketing be? And it would be really helpful to talk about KPIs, something that we can get into our heads to maybe track this going forward given the marketing experience will be quite different.

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [65]

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Stephanie, So in terms of where the parts are coming from, quite a big bit of work that we did when we were very focused fully on country of origin and I don't really want to bring out the B word, but when we did all our Brexit contingency planning. So we've got a very high percentage that's U.K., although we do also then have quite high by value European parts, and you'll have seen that in terms of some of the -- that big chunk of that, GBP 7 million FX headwind, in this quarter was associated with the COGS, where we're bringing high-value parts in from Europe. We do have suppliers, clearly in other regions. I think the stats are over 60% is U.K. local content and 95% of our parts are Europe or U.K. So hopefully, that helps on that.

And in terms of the marketing efforts, it's a great start. I'm not quite sure what you're going to do with it, but we had a 700% increase on our social media engagement. So there's a stat for you, but you can imagine that Pete and his marketing team are very focused on how do we ensure that we are spending our money appropriately, given you're not -- we're not running events, which are normally quite a high proportion of our spend. And so ensuring that we're maximizing that, as are all our dealers, so our brand marketing, but also all our dealer partners supporting them in the "new normal of engagement" as we work through this.

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Stephanie Ann Vincent, JP Morgan Chase & Co, Research Division - Senior Analyst [66]

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Do you mind if I toss in another question just in terms of the maybe percentage or sort of KPIs you look at as a percentage of orders that you believe come from these automotive shows and events?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [67]

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It's very difficult to track, Stephanie, with any marketing funnel, of course you've got your reach and engagement right at the top of it, and then you work down through the funnel in terms of working through from interest into leads, into active engagement, then working all the way through in terms of people coming into the active interest, processing an order and then booking an order with us. We've got our in-house system that logs that in terms of dealers registering interest or registering footfall and then actually getting through to that point of contract with the customer. But there's no necessarily hard and fast rule. I think if I knew that, I'd be making a fortune in a marketing job, but key is often the test drive moment and converting that sort of test drive into orders.

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Operator [68]

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The next question comes from the line of Angus Tweedie from Citigroup.

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Angus Vere Tweedie, Citigroup Inc, Research Division - Director [69]

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My questions are on liquidity actually. Can you just talk about the $100 million of delayed draw notes? And whether you'll be relying on those to get through your kind of Q2 liquidity needs? And then secondly, on those, can you confirm if there is any sort of material adverse change clause that's in there? And how confident are you that, that money will be available if it's required?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [70]

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We have no problem with the DDNs at all. We have -- we've got them. If we need the money, we'll draw on them. We don't need the money at the moment, so there's no intention of drawing on them. We have enough liquidity. As I mentioned earlier on, we are looking at other working capital facilities as any good firm would do in the current climate that we live in. We are also exploring options on additional support from the government. We've stated this quite openly today, and we'll see how we go. But we do look at these things because we are a responsible company.

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Angus Vere Tweedie, Citigroup Inc, Research Division - Director [71]

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Okay. And just on the government's point, can you give us any idea of what -- sort of vaguely, what you think that could entail or what you would like to receive?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [72]

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Yes, we are speaking with them. We have a person in-house who liaises with government on our behalf. We are hoping to take advantage of any facilities that the government is willing to offer, provided it suits us. And that's where we are. How long it will take? I honestly don't know. The wheels of government move very slowly, and that's a fact.

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Operator [73]

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The next question comes from the line of Mike Dean from Bloomberg.

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Michael Dean, Bloomberg Intelligence - Analyst [74]

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I hope you all are well. Just another follow-up question on the $100 million of DDNs. When is this facility available until? And then just on Gaydon, sorry, if you mentioned this earlier, but when do you expect to resume production there?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [75]

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Yes. The facility on the DDN is available till July. So that's a given, unless we decide to renew it. The facility at Gaydon has already started. We have people working in Gaydon, but Gaydon is a smaller site than St Athan. So we have to be very careful on social distancing, et cetera, in Gaydon. So we are planning on how we restart the site fully.

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Michael Dean, Bloomberg Intelligence - Analyst [76]

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So you're actually producing cars at Gaydon at the moment?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [77]

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No, we are not producing cars at the moment. We're trying to assess the -- how we can go about that. Because it's a smaller site, it's a tighter line. Therefore, we are assessing that.

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Operator [78]

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The next question comes from the line of Phil Bagguley from Bank of America.

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Phillip Roy Bagguley, BofA Merrill Lynch, Research Division - Research Analyst [79]

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I have 2. The first one is with respect to any and all of the bonds. Has there been any bond purchases, either by the company or by any of the principal shareholders? And then my second question is on the delayed draw notes. Is there any kind of -- I mean you've mentioned the potential to extend that option. Can you just remind us on the terms of that? And is there any kind of MAC clause that the counterparties might try and exercise in that agreement?

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [80]

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Yes. On the bonds, no, there's nothing to report on them. We are not doing anything on the bonds there. On the delayed draw notes, we have a maturity date of July. And that's as far as we know at the moment. We haven't drawn on them. And...

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [81]

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And there's no MAC clause to worry about.

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [82]

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There's nothing like that.

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Operator [83]

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And the next question comes from the line of Kai Mueller from Bank of America.

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Kai Alexander Mueller, BofA Merrill Lynch, Research Division - Associate and Analyst [84]

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Sorry, it's me again. I was on mute earlier when I was just wanting to ask a follow-up question. The point -- it was sort of mentioned earlier in terms of the incentives, obviously, you've given to drive sales. But can you remind us as well on this residual risk-sharing agreement that you have. When we think about your leased vehicles that you've pushed last year and maybe even the leased vehicle that you are pushing this year, when would you see that to materialize? So you obviously are giving incentives right now to make the sale. But how do we have to think about the time the car comes back to the dealer and potentially, the residual values below what had been assumed? Who takes the hit? Or how does that agreement work between you and your lenders or the financing companies?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [85]

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Yes. There's nothing more to come through from our perspective. You're seeing that in the ASP headwind at the minute, Kai. We've got clearly different individual arrangements with the different financing companies in each market, but their -- it's their balance sheet that's taking that risk, not ours.

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Kai Alexander Mueller, BofA Merrill Lynch, Research Division - Associate and Analyst [86]

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Okay. So if vehicles that -- as soon as the lease has been signed, your risk is off the table. But in order to get it signed, you are giving better terms in terms of the original price at the initial point. But there's no risk that they could come back when they come back to the dealers that you are also taking a write-down or a hit on the residual value differential?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [87]

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No, that's correct. That's why it's called subventing the lease. So basically, we do that first upfront, and then the relationship is with that financing partner through to the customer rather than us.

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Kai Alexander Mueller, BofA Merrill Lynch, Research Division - Associate and Analyst [88]

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Okay. And maybe just follow-up anyway is I know you've been tracking from the IPO, sort of your residual value market. And obviously, since you launched some of the new -- the DB11, the residual values held much better than the DB9s. Obviously, over the last year, the residual values and volumes have been the issue. Can you give us an update on sort of what your latest tracking tells you in terms of where residual values are heading?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [89]

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Well, I mean, clearly, I think when I was talking to Charlie, we were talking about the fact that it will take a bit of time for this action to work through the system. But as we are seeing that -- kind of that support improving as we go through the quarters. As we saw this, sort of, better picture in Q1 than we have in Q4, that should start to feed through. But if you think average lease lengths run for a reasonable period of time, so I think it will take a little bit of time to work through for residual values. I -- honestly, that's one of the things I didn't check in my massive fact book in terms of current read on residual value. So I haven't got an up-to-the-minute number to share with you, I'm afraid, sorry.

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Operator [90]

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And the next question comes from the line of Dominic Convey from Peel Hunt.

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Dominic Convey, Peel Hunt LLP, Research Division - Analyst [91]

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Just I might have missed it earlier, but can you just be clear on how many vehicles you still need to take out of the dealer network to achieve your stated objectives? Obviously, you've done over 600 in the last 15 months. But it's critical as to the way we think and model average selling price going forward and perhaps give us a little bit on that same theme. How quickly do you expect to get to that stated target?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [92]

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Well, so on the target, I mean, clearly, we're going for a luxury, best-in-class position, which is lower than where we are. We haven't put a number on it. The fact that we've destocked by -- that 428 this quarter, and we still think we've got work to do. So we're flagging that we do expect that work to continue. In terms of how quickly we'll take to get there. I mean, that's sort of -- we'll have to wait and see how quickly do consumers' buying patterns return once we get through lockdown in different markets. But I'd certainly expect it to take at least the second quarter, if not a bit longer to work through to get to that lower level of dealer stock. Although I would say in some markets, there are -- we are certainly in pretty good shape already in terms of dealer stock, some of those markets that you've seen better performance from in terms of the numbers that we posted this morning.

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Dominic Convey, Peel Hunt LLP, Research Division - Analyst [93]

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Can we infer from that, the U.K., you're where you want to be; Europe, probably getting close to it; Americas and Asia Pac is where you still have work to do?

Can you -- I just guess looking for some sense as to how much -- how many vehicles that is to get you down in those other territories to where you are in the U.K.?

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [94]

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Yes, Dom, I'm really sorry, I mean I'm not trying to be difficult, but we haven't put a number on it. We are -- I don't know, it's a pretty meaningful destock that 428 that we've achieved. There is still work to do against that number. What's really great, I think, is, I think we -- it ended up going -- still staying in the release, but nearly half of that destock was Vantage. So we're pleased with the progress that we're seeing there. Regionally, you can take a bit of a steer in terms of the different regional performances. But I certainly would -- I don't want to build any expectation that we feel we're done in terms of that inventory position yet.

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Operator [95]

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There are no further questions at this time. Please continue.

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [96]

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Super. Thank you very much for your questions. I think...

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Vikram Bhatia, Aston Martin Lagonda Global Holdings plc - Interim CFO [97]

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Thank you very much.

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Charlotte Cowley, Aston Martin Lagonda Global Holdings plc - Director of IR [98]

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And we will look forward to keeping you updated on our progress in due course, and apologies to those who were trying to talk to us and were on mute. Kai, we didn't mean to make you have to go back in the queue. Thanks, all. Bye-bye.

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Operator [99]

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Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.