Tata Motors-owned Jaguar Land Rover (JLR) on Tuesday presented strong underlying profitability and cash flow for the three months to the end of March and "solid results" for the full financial year, reflecting a recovery from the impact of the COVID-19 pandemic on its business.
JLR's pre-tax profit before exceptional charges increased significantly to GBP 534 million in the fourth quarter and GBP 662 million for the full year, reversing losses in the same periods a year ago which were impacted by the start of the pandemic.
Retail sales in the fourth quarter were 1,23,483 vehicles, up 12.4 per cent year-on-year, supported by what the luxury carmaker described as strong recovery in China, where sales grew 127 per cent over Q4 last year.
"We are pleased to have been able to continue to generate improved cash flow and profitability in Q4, despite the ongoing challenges of COVID-19 on both retailers and the supply chain," said Adrian Mardell, JLR Chief Financial Officer.
"It was particularly satisfying to achieve a 7.5 per cent EBIT margin in Q4 and positive cash flow for the full year. The strengthened performance reflects the success of our efforts to improve quality of sales and the cost structure of the business, as well as a focus on driving cash flow through Project Charge+," he said.
The improving performance mainly reflects recovering volumes, cost performance - including lower marketing spend - and foreign exchange. Full year retails of 4,39,588 vehicles were still down 13.6 per cent, although sales in China increased 23.4 per cent year-on-year, the company said.
The award-winning new Land Rover Defender was credited with significantly contributing to retail sales, with 16,963 units sold in Q4 and 45,244 units for the full year.
According to the figures, profit and cash improvements from Charge+ in the quarter totalled over GBP 332 million, including GBP 155 million of cost efficiencies and a GBP 177 million reduction in investment spending. This brings Charge+ savings to GBP 2.5 billion in fiscal 2020-21 and GBP 6 billion since the programme was launched in September 2018.
Thierry Bolloré, JLR Chief Executive Officer, said: "In my first set of full-year results as CEO of Jaguar Land Rover, I have been encouraged by the company's resilience and strong recovery during a uniquely challenging year. Despite the pandemic, this year has also seen significant positive change culminating in February with the launch of our Reimagine strategy focused on reimagining our iconic British brands for a future of modern luxury by design." "Our strategy is ambitious and it will make us more agile, efficient and sustainable. Although it is still early days, we have made significant progress in implementing it. This has reaffirmed my confidence that we have the right strategy, the right people and the right product-plans to deliver against our targets," he added. Jaguar Land Rover is well placed to emerge from the pandemic as a stronger and more resilient company that is able to navigate and capitalise on the opportunities ahead, Bollore noted.
In February, the company announced its new global strategy to Reimagine the future of modern luxury by design and deliver double-digit EBIT margins by Fiscal 2025-26. This will entail GBP 1.5 billion of exceptional charges in the fourth quarter, including GBP 952 million of non-cash write downs of prior investments and GBP 534 million of restructuring charges expected to be paid in Fiscal 2021-22.
After these exceptional charges, the company reported a pre-tax loss of GBP 952 million for the quarter and GBP 861 million for the full year.
Free cash flow of GBP 729 million was generated in Q4 to achieve positive free cash flow of GBP 185 million, after investment spending of GBP 2.3 billion, for the full year. Cash flow for Q2 to Q4 totalled GBP 1.8 billion to more than offset the GBP 1.6 billion cash outflow in Q1, when JLR's plants were closed for two months due to the COVID pandemic.
During the year, JLR said it successfully launched its exciting new range of 21 Model Year vehicles, incorporating the very latest technologies. Twelve of the company's models now have an electrified option, contributing to 62 per cent of sales, including eight plug-in hybrids, 11 mild hybrids and the all-electric Jaguar I-PACE.
"The increasing COVID vaccination rates are encouraging for the ultimate recovery of the global economy and automotive industry from the effects of the pandemic. However, cases are still high in many markets while supply chain issues, in particular for semi-conductors, have become more difficult to mitigate and are now impacting production plans for Q1," JLR cautions.
The company said it is working closely with affected suppliers to resolve the issues and minimise the effect on customers.
For Fiscal 2021-22, JLR expects sales to continue to recover. The company is still targeting an EBIT margin of at least 4 per cent and break-even free cash flow after GBP 2.5 billion of investment and GBP 0.5 billion of restructuring costs that have already been accrued.