Jaguar Land Rover announces profit and ‘significant positive cash flow’

Thierry Bolloré
X The Business Desk

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Luxury car maker Jaguar Land Rover has returned to profit, it revealed today.

The manufacturer, which builds cars at sites in Halewood, Merseyside, and Castle Bromwich and Solihull in the West Midlands, announced second quarter results for the three months ended September 30, revealing a return to profit and significant positive cash flow.

Sales and revenues recovered from the impact of COVID-19 in the first quarter, but still remain below pre-pandemic levels a year ago, JLR said.

Retail sales of 113,569 vehicles were up 53.3% from the first quarter, with almost all retailers now open.

However, retail sales in most markets continued to be impacted by COVID-19 and were down 11.9% in total year-on-year.

Encouragingly, China retails were up 14.6% on the prior quarter and 3.7% year-on-year while global retails of the new Defender model rose to 4,508 units in the month of September.

Second quarter revenue was £4.4bn – on wholesales of 73,451 excluding the group’s China joint venture – up 52.2% from the first quarter, although down 28.5% from pre-COVID levels a year ago.

JLR generated a £65m profit before tax in the second quarter, up significantly from a loss of £413m in the prior quarter, but, again, lower than the pre-COVID pre-tax profit of £156m a year ago.

The improvement in the year reflects the recovery in sales, Project Charge+ cost efficiencies and favourable foreign exchange impact.

Margins were also improved from the first quarter with EBITDA at 11.1% and EBIT at 0.3%.

As expected, free cash flow was positive (£463m), after £531m of investment spending. The positive cash flow primarily reflects a £528m recovery in working capital following the restart of production and the reopening of the global retailer network.

Cost and cash improvements from the Project Charge+ transformation programme in the quarter totalled £0.6bn, including £0.3bn of cost and £0.3bn of investment savings.

Total savings year-to-date are now £1.8bn and the company is on track to achieve the £2.5bn target for the full year ending March 31, 2021.

JLR ended the second quarter of 2020/21 with solid liquidity of £5bn, comprising more than £3bn of cash and short-term investments and a £1.9bn undrawn revolving credit facility. The company has since completed a $700m five-year unsecured bond issued in October 2020, increasing pro forma September liquidity to £5.5bn.

Adrian Mardell, JLR chief financial officer, said: “We were pleased to see sales, profitability and cash flow significantly improve in Fiscal Q2 from the prior quarter.

“While sales and profitability have not fully recovered to pre-pandemic levels in most markets, it was particularly encouraging to see China sales up year-on-year and global sales of the new Land Rover Defender starting to ramp up.

“The Charge+ cost and cash efficiency programme also contributed significantly to the better results in the quarter.

“Charge+ remains on track to deliver £2.5bn of saving this year and, with continued strong liquidity, Jaguar Land Rover is well-placed to benefit from further market recovery in the second half and beyond.”

All of JLR’s manufacturing facilities have now resumed production, with the plants at Solihull, Halewood, Nitra, in Slovakia, and the engine manufacturing centre at Wolverhampton now increased to two shifts as demand for the company’s vehicles has continued to recover.

A gradual improvement in sales is expected to continue and will be supported by new and refreshed products, including the short wheel-base Land Rover Defender 90, the refreshed Jaguar F-PACE, as well as 2021 model year Range Rover Velar, Jaguar XF and Jaguar XE.

Furthermore, JLR continues to expand its offering of electrification across its model range.

Of the 13 nameplates in the company’s product portfolio, seven have now been revealed with plug-in hybrids and nine with mild-hybrids, in addition to the full battery electric Jaguar I-PACE.

Although the outlook remains uncertain as a result of COVID-19 and the ongoing negotiations over future UK/EU trading arrangements, JLR expects the recovery in sales, revenue, and profitability to continue in the second half of fiscal year 2020/21, supported by Project Charge+.

The company also continues to expect positive free cash flow over the second half of the year and remains committed to achieving positive free cash flow in fiscal year 2021/22, to reduce net debt and increase financial resilience.

Thierry Bolloré, who became JLR chief executive last month, said: “Although Jaguar Land Rover is not immune to the headwinds impacting the global automotive industry, it has the foundations in place to generate long-term sustainable profitability.

“I have been encouraged by the strengths of the company – reflected by its brand appeal and the capabilities of its employees – that will enable it to seize new opportunities in a rapidly-changing industry.”

He added: “I am confident these qualities and a strong product strategy with a focus on financial discipline will equip Jaguar Land Rover to address challenges in the period ahead.”