18 May 2021: Jaguar Land Rover Automotive plc today reported strong underlying profitability and cash flow for the three months to 31 March 2021 (Fiscal Q4), and solid results for the full year.
The business continued to recover following the onset of the Covid-19 pandemic and retail sales in the fourth quarter were 123,483 vehicles, up 12.4% year-on-year. This was supported by a strong recovery in China, where sales grew 127% over Q4 last year when the impact of Covid-19 peaked in that market.
Full-year retails of 439,588 vehicles were still down 13.6%, although sales in China increased 23.4% year-on-year. The award-winning new Land Rover Defender contributed significantly to retail sales, with 16,963 units sold in Q4 and 45,244 units for the full year.
Pre-tax profit before exceptional charges increased significantly to £534 million in Fiscal Q4 and £662 million for the full year, reversing losses in the same periods a year ago which were impacted by the start of the pandemic.
The EBIT margin improved to 7.5% in Q4 and 2.6% for the full year, up 10.7 and 2.5 points respectively year-on-year. The improving performance mainly reflects recovering volumes, and favourable mix, cost performance (including lower marketing spend) and foreign exchange.
In February 2021 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.
As previously communicated, this will entail £1.5 billion of exceptional charges in the fourth quarter, including £952 million of non-cash write-downs of prior investments and £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 £952 million for the quarter and £861 million for the full year.
Free cash flow of £729 million was generated in Q4 to achieve a positive free cash flow of £185 million, after investment spending of £2.3 billion, for the full year. Cash flow for Q2 to Q4 totalled £1.8 billion to more than offset the £1.6 billion cash outflow in Q1 when Jaguar Land Rover’s plants were closed for two months due to Covid.
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. It was particularly satisfying to achieve a 7.5% 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+.
Profit and cash improvements from Charge+ in the quarter totalled over £332 million, including £155 million of cost efficiencies and a £177 million reduction in investment spending. This brings Charge+ savings to £2.5 billion in Fiscal 2020/21 and £6.0 billion since the programme was launched in September 2018, substantially exceeding the initial targets set.
Jaguar Land Rover ended the year with total cash and short-term investments of £4.8 billion, resulting in total liquidity of £6.7 billion including a £1.9 billion undrawn revolving credit facility (RCF), which runs to July 2022. Jaguar Land Rover has also completed an extension for £1.31 billion of the RCF to March 2024.
During the year, Jaguar Land Rover 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% of sales, including 8 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. The company is working closely with affected suppliers to resolve the issues and minimise the effect on customers.
For Fiscal 2021/22, Jaguar Land Rover expects sales to continue to recover. The company is still targeting an EBIT margin of at least 4.0% and break-even free cash flow after c.£2.5 billion of investment and c.£0.5 billion of restructuring costs that have already been accrued.
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. 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.