Jaguar Land Rover posts huge financial loss

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DiscoDriver
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Re: Jaguar Land Rover posts huge financial loss

Post by DiscoDriver » Sat Jun 22, 2019 5:39 am

This is a trend across the whole automotive sector.

Daimler warns on profits for second time this year.
Shares fall to five-year low as German carmaker reports 27% drop in earnings.

https://www.ft.com/content/d3e6a4ec-d3a ... 74db66bcd5

Full article:

https://www.google.com/amp/s/amp.ft.com ... 74db66bcd5

Three of the world’s largest automakers added to the industry’s gloom on Wednesday by warning that 2019 is looking increasingly bleak, with little hope of an end to a Chinese slowdown or the changing customer tastes that are forcing costly overhauls to their model lines.

The pessimistic outlook for the year ahead from Toyota, General Motors and Daimler — which together account for one in five.

https://www.ft.com/content/57c6f03a-29e ... 8ef2b976c7

Full article:

https://www.google.co.uk/amp/s/amp.ft.c ... 8ef2b976c7
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Settling Brexit good for JLR UK

Post by VeryDiscoSport » Fri Jun 28, 2019 10:50 am

No such pessimism is being shown by Rawdon Glover, JLR UK Managing Director, as his sales continue to rise contrary to the general trend.

Jaguar Land Rover boss: Settling Brexit will be good for us

“There is so much uncertainty and all the indicators suggest consumer confidence is down, so there is reasonable cause to look to those concerns as a reason for depressing the car market. So, thinking positively, you could say that any resolution to the Brexit impasse could help us emerge into a more favourable mindset, possibly even with pricing advantages for anyone building their cars in Britain. It’s a one-sided view, but my job is to sell Jaguars and Land Rovers in the UK, and I can look therefore at potential upsides to us emerging from Brexit, hopefully with a clear vision for the future that gives people confidence.”

Autocar 28.06.19
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JLR UK sales rise again in June

Post by PhilMabbots17 » Wed Jul 10, 2019 12:08 pm

The UK sales division of Jaguar Land Rover continued to lead the pack in June, increasing its total sales by 4.6%. Well done, Mr. Glover.

But sales to the EU, USA, China and the rest of the world again fell sharply, wiping out the UK gains to leave corporate numbers down 10.1% for Land Rover and 8.5% for Jaguar. Total sales for June stood at 47,060 units, down 9.6 per cent year-on-year. The model by model analysis will be available from JLR head office later today.

The news took 3% off Tata's stock in Mumbai while in New York TTM starts Wednesday trading at $11.25.

Data from Marketbeat
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Re: JLR UK sales rise again in June

Post by TeddyBear » Wed Jul 10, 2019 1:49 pm

DiscoDriver wrote:
Sat Jun 22, 2019 5:39 am
This is a trend across the whole automotive sector.
PhilMabbots17 wrote:
Wed Jul 10, 2019 12:08 pm
The UK sales division of Jaguar Land Rover continued to lead the pack in June, increasing its total sales by 4.6%. Well done, Mr. Glover.

But sales to the EU, USA, China and the rest of the world again fell sharply, wiping out the UK gains to leave corporate numbers down 10.1% for Land Rover and 8.5% for Jaguar. Total sales for June stood at 47,060 units, down 9.6 per cent year-on-year. The model by model analysis will be available from JLR head office later today.

The news took 3% off Tata's stock in Mumbai while in New York TTM starts Wednesday trading at $11.25.

Data from Marketbeat
There is definitely a trend but its impact can be decidedly different. I've been following Neil Winton recently https://www.wintonsworld.com/

A recent Winton column from Forbes magazine explains why results like these are inevitable for smaller companies and what the consequences - and therefore the business imperatives - will be. Too many over-lapping models competing for the same space is wasteful of resources while immatue hybrid powertrain tech fools no-body except the badge blind and credit addicts.

"Poor Financial Results Will Make Automotive Industry Vulnerable To Predators"

https://www.forbes.com/sites/neilwinton ... predators/


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Re: JLR UK sales rise again in June

Post by PhilMabbots17 » Wed Jul 10, 2019 11:07 pm

TeddyBear wrote:
Wed Jul 10, 2019 1:49 pm
There is definitely a trend. . .
But is this the reason for JLR's problems?

The last time Jaguar Land Rover's overall first quarter sales were lower than the figures released today was June 2015.
For Land Rover / Range Rover cars you have to go back 6 years to June 2013 to find lower first quarter sales.
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Re: Jaguar Land Rover posts huge financial loss

Post by TeddyBear » Fri Jul 12, 2019 11:22 pm

The Intelligence Group at ET has re-voiced serious concerns about JLR's level of R&D capitalisation and escalating warranty provisions. These comments apparently came after taking into account the £3.1 billion write-down.

ET Intelligence Group:
But the balance sheet also requires a bit of scrutiny. JLR’s earnings took a beating of around £3.1 billion in FY19 due to impairment of assets. The current environment and consumer preference have meant that several of its R&D projects were not yielding desired returns. JLR capitalises nearly 80 per cent of its R&D spend. It means the amount invested in R&D adds to gross assets of the company rather than flowing through profit and loss account as expenses.

This strategy works perfectly if the asset created has no obsolescence risk. However, when the company finds that R&D assets created may not be commercially viable, it needs to be written off. The FY19 annual report shows that JLR continues to capitalise about 80 per cent of R&D expenditure, while BMW and Daimler follow the policy of capitalising in the range of 30-40 per cent. Consequently, the net fixed assets to the percentage of sales have been consistently rising.

According to CLSA, JLR’s net fixed asset to sales ratio stood at 50 per cent in FY19 against 32-35 per cent of its peers. Higher proportion of capitalisation despite huge write-offs in the last fiscal has elevated the risk perception or probability of further write-offs. Besides, the warranty and provision ratio of JLR rose to a nine-year high, while this ratio has been relatively unchanged for its German peers. This further weighs on financial performance and brand perception.


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Re: Jaguar Land Rover posts huge financial loss

Post by DiscoDriver » Sat Jul 13, 2019 6:56 am

JLR’s earnings took a beating of around £3.1 billion.
Unfortunately that is just bad journalism. The £3.1 billion was a write down. This means that they adjusted the actual value of buildings, technology etc. This is not a write off but reflects the drop in property values and that diesel technology isn’t worth as much as it was.
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Re: Jaguar Land Rover posts huge financial loss

Post by TeddyBear » Sat Jul 13, 2019 10:23 am

If you are an investor - or a car buyer looking for a manufacturer with deep pockets - it amounts to the same thing.

What this Indian source seems to be implying is that another writedown could be inevitable because there's still stuff on the balance sheet that should have already gone through the P&L. It didn't because the JLR board took conscious decisions to capitalise R&D at double the rate used by other car makers - £8 out of every £10 spent on R&D was supposed to have come back later in sales. But global sales are currently at the same level as 2015 (2013 for Land Rover models) and a vicious circle has developed.

The £3.1 billion writedown has already cancelled out the declared profits for the four years FY16, FY17, FY18 and FY19. If any more imaginary assets have to be flushed through the P&L, how many more years of profit will evaporate? This is why JLR debt is considered "junk bonds" while Tata's stock price values the whole enterprise including JLR at just $7.5 billion.


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Re: Jaguar Land Rover posts huge financial loss

Post by Barnsh » Sat Jul 13, 2019 10:58 am

TeddyBear wrote:
Sat Jul 13, 2019 10:23 am
If you are an investor - or a car buyer looking for a manufacturer with deep pockets - it amounts to the same thing.

What this Indian source seems to be implying is that another writedown could be inevitable because there's still stuff on the balance sheet that should have already gone through the P&L. It didn't because the JLR board took conscious decisions to capitalise R&D at double the rate used by other car makers - £8 out of every £10 spent on R&D was supposed to have come back later in sales. But global sales are currently at the same level as 2015 (2013 for Land Rover models) and a vicious circle has developed.

The £3.1 billion writedown has already cancelled out the declared profits for the four years FY16, FY17, FY18 and FY19. If any more imaginary assets have to be flushed through the P&L, how many more years of profit will evaporate? This is why JLR debt is considered "junk bonds" while Tata's stock price values the whole enterprise including JLR at just $7.5 billion.
And these “hidden write downs”/ are why car companies are sold for £1
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Taxpayer to guarantee £500m JLR loan

Post by TeddyBear » Mon Jul 15, 2019 7:55 pm

PhilMabbots17 wrote:
Sat Jun 22, 2019 1:33 am
Shorting stock is a bit rich for my tastes, I think someone might have been watching too much Billions. In any case, thanks to JLR's mis-management and lack of market foresight, the TTM stock is trading close to a 15-year low at just $11.34 at close of business today. How would anyone who didn't already hold positions make any money from that ?

Image
Liquidity Profile

JLR's liquidity profile remains adequate notwithstanding the ongoing sizeable cash consumption. As of March 2019, the company had GBP3.8 billion of cash on the balance sheet and access to the fully undrawn and committed GBP1.9 billion revolving credit facility due July 2022 with no financial covenants. However, Moody's also expects the company to remain materially free cash flow negative in fiscal 2020 and 2021 while meaningful working capital volatility, particularly between Q4 (January to March) and Q1 (April to June) due to higher seasonal sales and manufacturing activity in Q4 require meaningful ongoing cash. While the company's debt maturity profile is generally well balanced, there are also two $500 million bonds becoming due in November 2019 and March 2020, respectively. The company has also announced that it is exploring further funding options.
Last year the price of JLR CDSs quadrupled which scared off the buyers of senior notes so instead they raised $1 billion in syndicated bank loans. £2,436 million of existing bond debts must be repaid from capital by March 2023 and there is another interesting little debt of circa £200 million that appears to represent "factoring" of discounted invoices within the group. Anyone that's had to resort to factoring in business will know what this means.
JLR has found a consortium of banks prepared to lend it £500 million that it needs by November to pay back other lenders. But the bankers refused to play ball without a guarantee from the UK government that it would step in and repay the money should JLR go into receivership or otherwise default on the debt.

Daily Telegraph 17th JUly 2019:
The Government will guarantee loans of £500m to Jaguar Land Rover after Britain’s biggest car maker said it would develop and produce new electric vehicles in the UK. The guarantee is being provided by UK Export Finance, the state-backed credit agency, under a new “general export facility” intended to boost exports. It will be used to underwrite a £625m loan facility that JLR has secured with commercial banks, with the taxpayer-backed support being used if the car maker defaults on payments. The new loan will ease the strain on its balance sheet as the company seeks to save £2.5bn in the wake of sliding sales and the diesel backlash.
The money is NOT linked to the recent announcement about EV and battery production, so neither is the EF guarantee, despite journalists who try to establish a link. Both sides involved have denied there is any connection.


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