NOTES TO THE FINANCIAL STATEMENTS CONTINUED S S 23 FINANCIAL INSTRUMENTS CONTINUED TR23 FINANCIAL INSTRUMENTS CONTINUED TR Estimation of fair values ACapital management A As at 31 December 2023 As at 31 December 2022 TEThe Board’s policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain the future development of the TE G G Nominal value Book value Fair value Nominal value Book value Fair value I I C business. Given this, the objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and C £m £m £m £m £m £m Rmaximise shareholder value. The capital structure of the Group consists of debt which includes the borrowings disclosed in this note, cash and cash R E E Included in assets P equivalents and equity attributable to equity holders of the parent, comprising share capital and reserves as disclosed in the Consolidated Statement of P O O Level 2 R Changes in Equity. R T T Forward foreign exchange contracts – 3.3 3.3 – 2.3 2.3 Loan assets – – – 0.6 0.6 0.6 24 NET DEBT The Group defines net debt as current and non-current borrowings in addition to inventory repurchase arrangements and lease liabilities, less cash and cash G G Level 3 O equivalents including cash held not available for short-term use. The additional cash flow disclosures required under IAS 7 are made in note 28. O VE VE Investments – 18.2 18.2 – – – 2023 2022 R R Other derivative contracts – – – – 5.6 5.6 £m £m NAN NAN – 21.5 21.5 0.6 8.5 8.5 Cash and cash equivalents 392.4 583.3 C Cash held not available for short-term use – 0.3 C E Inventory repurchase arrangement (39.7) (38.2) E Included in liabilities Level 1 Lease liabilities – current (8.8) (7.4) F F I I $1,143.7m (2022: $1,143.7m) 10.5% US dollar NANLease liabilities – non-current (88.5) (92.4) NAN First Lien Notes 897.2 890.0 906.7 950.8 935.0 893.0 Loans and other borrowings – current (89.4) (107.1) C C $121.7m (2022: $229.1m) 15.0% US dollar IALLoans and other borrowings – non-current (980.3) (1,104.0) IAL S S Second Lien Split Coupon Notes 95.4 90.3 103.6 190.5 169.0 194.4 Net debt (814.3) (765.5) T T A A T T E E Level 2 M Movement in net debt M E E Forward exchange contracts – 2.1 2.1 – 0.7 0.7 N Net (decrease)/increase in cash and cash equivalents (190.9) 164.4 N T T Derivative option over own shares 33.1 23.1 23.1 48.1 22.6 22.6 S Add back cash flows in respect of other components of net debt: S 1,025.7 1,005.5 1,035.5 1,189.4 1,127.3 1,110.7 New borrowings (11.5) – F Proceeds from inventory repurchase arrangement (38.0) (75.7) F U U The nominal value, book value and fair value of the Second Lien SSNs includes $9.8m, $10.5m, $10.8m, $6.8m, $7.0m and $7.2m of PIK notes issued in April 2021, November 2021, April 2022, R R T Repayment of existing borrowings 129.7 172.7 T November 2022, April 2023 and November 2023 respectively. The total number of Second Lien SSNs in issuance has been reduced by repayments of $143.8m and $121.7m in 2022 and 2023 H H respectively. The book value includes accrued PIK notes not issued at each reporting date. ERepayment of inventory repurchase arrangement 40.0 60.0 E R R Under IFRS 7, such assets and liabilities are classified by the way in which their fair value is calculated. The interest-bearing loans and borrowings are INFLease liability payments 7.9 10.0 INF considered to be level 1 liabilities with forward exchange contracts being level 2 assets and liabilities. IFRS 7 defines each level as follows: ORMovement in cash held not available for short-term use (0.3) (1.5) OR M (Increase)/decrease in net debt arising from cash flows (63.1) 329.9 M – Level 1 assets and liabilities have inputs observable through quoted prices. A A T Non-cash movements: T I I – Level 2 assets and liabilities have inputs observable, other than quoted prices, either directly (i.e. as prices) or indirectly (i.e. derived from prices). ONForeign exchange gain/(loss) on secured loan 60.8 (156.2) ON – Level 3 assets and liabilities are those with inputs not based on observable market data. Interest added to debt (14.2) (15.7) Trade and other receivables, current borrowings and trade and other payables are deemed to have the same fair value as their book value and, as such, the Borrowing fee amortisation (26.9) (25.4) table above only includes assets and liabilities held at fair value, and borrowings. The forward currency contracts are carried at fair value based on pricing Lease liability interest charge (4.1) (4.5) models and discounted cash flow techniques derived from assumptions provided by third-party banks. Loan assets are held at cost less any expected credit loss provision (note 18). The SSNs are all valued at amortised cost retranslated at the year-end foreign exchange rate. The fair value of these SSNs at the Lease modifications (0.6) (3.5) current and comparative period ends are determined by reference to the quoted price on The International Stock Exchange Authority in St Peter Port, New leases (5.8) (2.2) Guernsey. The fair value and nominal value exclude the impact of transaction costs. Foreign exchange gain and other movements 5.1 3.7 The other derivative contracts related to one option and one issuable derivative for the Group to acquire a minority shareholding in AMR GP Holdings (Increase)/decrease in net debt (48.8) 126.1 Limited (see note 20). Two derivatives were exercised in the period giving rise to an investment (note 15). Net debt at beginning of the year (765.5) (891.6) The derivative option over own shares reflects the detachable warrants issued alongside the Second Lien SSNs (see borrowings section of note 23) enabling Net debt at the end of the year (814.3) (765.5) the warrant holders to subscribe for a number of ordinary shares in the Company. The fair value is calculated using a binomial model and updated at each period end, reflecting the latest market conditions. The inputs used in the valuation model include the quoted share price, market volatility, exercise ratio and risk-free rate. The reduction in nominal value represents options exercised by warrant holders during the year. For all other receivables and payables, the carrying amount is deemed to reflect the fair value. ASTON MARTIN LAGONDA ANNUAL REPORT AND ACCOUNTS 2023 185