Introduction The purpose of this report is to review and analyse JLR Company performance. Data from financial reports and external research from various articles will be used to understand their current position concerning profit and performance. This research will help aid planning (strategizing) through forecasting potential future investments. Findings Findings and Investment activity JLR is an automotive company, specialized in luxury vehicle production, and aims to provide customers with experiences they “love for life” (JLR report, 2019). Acquired by Indian owned company Tata Motors in 2008, jaguar and land rover operated separately producing SUVs and sports cars “ but In 2013 jaguar and Land Rover unified to form a single company," (jaguar Landover overview, 2020). Today the company has an estimated “40,000 employees at vehicle production plantsglobally, allowing the business to sell 557,706 vehicles in 127 countries in 2019” (JLR Overview, 2020) The JLR model aims to provide value for all its stakeholders. Customers are the foundation for the business, and when combined with “quality, innovation and profitability” (JLR values and purpose, 2020) they can create incredible experiences for all stakeholders and reach goals like “destination zero" (Jaguarlandrover, 2020) Over recent years electric cars have grown in demand and popularity experience 64% growth at the end of 2018. And with 45% of EVs on the road in China, its clear China is a key player in the EV industry (IEA, 2018) JLR is followed the EV trend investing billions in their own EVs (jaguar I-Pace and range rover sport EV). Investment Between 2018 and 2019 JLR experienced a fall in total investment spending from “£4.2B to £3.8B” a 20.83% decrease from that of the previous financial year. (JLR annual report, 2019) the uncertainty of Brexit disrupted the automotive industry causing slowdowns in key Chinese markets. Despite uncertainties, developing technologies to achieve their zero emission goals remains the primary focus for JLR with their latest I-PACE electric car managing to win all 3 world car titles in 2019. Over the financial year, JLR invested in “skills, training, design, and engineering and mobility services" allowing them to innovate and produce award-winning cars. (JLR report, 2019). Plans to invest £1B and produce batteries in the UK were announced early 2019! Reducing emissions, transport costs and electric battery costs, making them (Campbell’s, 2019) more affordable. Lithium ion batteries are in high demand with limited supply. Future production within the UK would yield high levels of profit. JLRs “battery assembly centre will be the most innovative and technologically advanced in the UK with an installed capacity of 150,000 units” (economic times, 2019). Financial analysis In 2019 JLR experienced a 6% fall in revenue. Despite the increase in income of 6%, the losses incurred were greater due to higher expenses. Plans to reduce employees by 6000 will help better manage costs! A smaller but more productive workforce is the company’s goal. In respect to efficiency, inventory is stable remaining at 84.this suggest JLR are doing well to turn their inventory into sale and are not overspending, which would drive up costs due to excess supply. Trade receivables saw an insignificant change from 23 to 21. The majority of customers can pay back their debts within the given time frame except for a few. This means JLR are effectively managing their credit and this is helping ease their debts Profits - ROCE experienced a significant fall from 6.2% to -2.2% (8.6% fall) this was a result of higher operating costs and a fall in their revenue because fewer sales (revenue) were made while Operation costs increased. During this period, the UK experienced a 12.8% drop in sales due to the Brexit’s uncertainty. (BBC, 2018). - Asset turn over experienced improvements now gaining 2.3 for every £1 invested, previously it had been 1.9 of sales revenue for every £1 invested. The decision to “reduce employees by 6000” allows investments to be made in other areas for long term growth and to “acceleration”. (jaguar report,2019) - Operating profits fell to -1% from 0.3% and this is primarily down to rising costs of employment, capital and depreciation. And although material costs did fall from 16,328 to 15,670, the fall in revenue combined with other costs led to a higher percentage of revenue is taken up by costs. Liquidity - - - Concerning liquidity, a 1.5 – 2.5 would be an ideal current ratio, however, JLR had dropped 0.1. Previously they had £1 of assets for over £1 worth of liabilities but now they have £0.90 for £1 of liabilities. Suggesting JLR are struggling to pay back its debts. This is especially true because, despite the 7% fall in payables, overall total liabilities still increased by 2%. A higher CR would be favourable to allow payments on short term debts. Similarly, QR fell by 0.1 to 0.6 suggesting quick assets lack liquidity. Gearing With gearing, the organisation has gone from low gearing (27.1%) to moderately high (42.8%) implying almost half the capital employed in 2019 was borrowed through various sources such as loans, shown by the increase in debt from 3712 to 4480. With that being said, shareholder dividends are being put at risk. With an interest cover of -2, there is the potential of defaulting on their loans as well as reputational damage which can influence JLR future profitability. However, with more money being allocated to intangible assets (10.6% rise) there is potential for increased profits and efficient use of resources. Thus investment on “employee skills training “could improve better ROCE (JLR Report). This is likely to cause a further increase in expenses such as wages. Conclusion To conclude, JLRs finances, have been significantly influenced by Brexit which has created uncertainty, also the slowdown of chines automotive industry disrupted operations causing costs to increase. With profitability, investments electric cars are highly likely to boost profits and revenues next year. To add to this since Brexit is beginning to stabilise. From analysis of my finding, I can conclude that JLR in the long term will make huge profits due to the rising popularity of EVs that are increasing in sales exponentially. Short term investments may potentially cause a losses due to the UK economy still stabilising. However the long term profits/return should outweigh the losses made. For instance Ralf Speth the chief executive officer stated the Chinese automotive industry is beginning to recover and sales of the latest ford EV are picking up. During Q4 of 2019 Global sales “rose by 30%, cash flow targets exceeded the £2.5B target and over £318 of profits were generated” (jaguarlandrover, 2020). The future is looking profitable and shareholder can expect high returns on their investments. References Jaguarlandrover.com. (2020). Overview | JLR Corporate Website. [Online] Available at: https://www.jaguarlandrover.com/2020/overview. Campbell, P. (2019). Subscribe to read | Financial Times. [Online] www.ft.com. Available at: https://www.ft.com/content/6c539b68-9ea3-11e9-9c06-a4640c9feebb [Accessed 2020 Apr. 23]. http://annualreport2019.jaguarlandrover.com/assets/files/jlr-strategic-report.pdf Global EV Outlook 2019 – Analysis - IEA (2019). Global EV Outlook 2019 – Analysis - IEA. [Online] IEA. Available at: https://www.iea.org/reports/global-ev-outlook-2019 [Accessed 28 Apr. 2020]. BBC News. (2018). Jaguar profits fall as sales slow. [online] 23 May. Available at: https://www.bbc.co.uk/news/business-44225091 [Accessed 28 Apr. 2020]. Jaguarlandrover. (2020). Purpose and Values | JLR Corporate Website. [Online] Available at: https://www.jaguarlandrover.com/2020/purpose-and-values [Accessed 28 Apr. 2020]. The Economic Times. (2019). Tata JLR unveils major electric car investment plans for UK. [Online] 5 Jul. Available at: https://economictimes.indiatimes.com/industry/auto/cars-uvs/tata-jlr-unveilsmajor-electric-car-investment-plans-for-uk/articleshow/70092482.cms [Accessed 30 Apr. 2020]. jaguarlandrover (2020). JAGUAR LAND ROVER PROFIT INCREASES TO £318 MILLION IN THIRD QUARTER OF 2019/2020 FINANCIAL YEAR | JLR Corporate Homepage International. [Online] Available at: https://media.jaguarlandrover.com/news/2020/01/jaguar-land-rover-profit-increasesps318-million-third-quarter-20192020-financial-year [Accessed 30 Apr. 2020].
