JLR again delivered on its targets and achieved positive free cash flow and profitability in Q4 as chip supply constraints continued to ease. Revenues in Q4 FY23 were £7.1 bln, up 28% vs. Q3 FY23 and up 49% vs. Q4 FY22, reflecting strong model mix and pricing, as the production ramp up of the New Range Rover and New Range Rover Sport continued with 33k units wholesaled in the quarter, up from 27k in Q3.
Profit before tax and exceptional items in the quarter was £368 mln, up from a profit of £9 mln a year ago with a positive EBIT margin of 6.5%, up from 2.0% in Q4 FY22. The higher profitability reflects increased wholesale volumes with favourable mix, pricing and foreign exchange revaluation offset partially by higher inflation and supplier claims largely related to volume constraints in the year. Profit after tax in the quarter was £259 mln, up from a loss of £(95) mln in Q4 FY22. Free cash flow was £815 mln in Q4 FY23, up from £340 mln in Q4 FY22.
For the full year (FY23), free cash flow was £521 mln with a positive EBIT margin of 2.4%, compared to negative cash flow and EBIT margin in FY22. Profit before tax and £161 mln of favourable exceptional items was a loss of £(64) mln, £348 mln better than a year ago. The loss after tax for the full year was £(60) mln, £762 mln better than a year ago.
As a result of the strong cashflow, net debt reduced to £3.0 bln with cash of £3.8 bln, even after repaying about £0.9 bln of debt in Q4. Total liquidity was at £5.3 bln including the £1.52 bln undrawn revolving credit facility.
The improved results in the quarter reflect a significant improvement in volumes as chip constraints have continued to ease. Wholesale volumes for the fourth quarter were 94,649 units (excluding the Chery Jaguar Land Rover China joint venture), up 19% compared to the prior quarter ending 31 December 2022 and 24% compared to the same quarter a year ago. Compared to the prior year, wholesale volumes were higher in all markets led by Overseas (+62%), UK (+24%), Europe (+22%), China (+17%) and North America (+2%).
The order book remained strong with about 200,000 client orders at quarter end, down from a peak of about 215,000 in Q3 FY23, as anticipated, reflecting higher retails and fulfilled orders this quarter. Range Rover, Range Rover Sport and Defender demand remains particularly strong with about 152,000 client orders (76% of the order book).
The Refocus transformation programme delivered £250 million of value in Q4 and exceeded the target of £1 bln improvements in the year with £1.1 bln delivered to help mitigate the impact of inflation.
We expect the gradual improvements in chip supply to continue during the next fiscal year. While supply challenges and macro risks remain, we are targeting to grow wholesales through the year and achieve EBIT margins of over 6% in FY24. Investment spending is expected to increase to about £3 bln in the fiscal year, but free cash flow is expected to be over £2 bln and net debt is expected to reduce to below £1 bln by FY24.