JAGUAR DROPS A COG ON ROAD TO RICHES
By Philip Robinson
Sir John Egan, the man steering Jaguar through privatisation to success, drove an XJ40 through the company’s share price yesterday. It fell sharply 14p to 52p as hc warned that launching the new wonder car aimed at the American market will kcnock £20 million off the group’s second half earnings and keep profits flat. And he refused to confirm that the new model will be unveiled at the Motor Show in October. So far £3 million of development costs have been charged to Jaguar’s profits.
That held the total for the six months to last June to £67.4 miilion, marginally ahead of the same period last year and at the bottom of the market’s expectations. The motor trade has been rife with teething trouble stories over the XJ40, the car that will take Jaguar into the 1990s. Sir John said :” The new model will have an outstanding reception. Everything is running smoothly now.”
City analysts who watch Jaguar closely say any production hitches there may have been were solved in tho Spring. Sales of existing models continue to rise at 10% a year, and should top 42,000 vehicles this year. Sir John has a more immediate problem to solve before the XJ40 launch. He opens wage negotiations with the unions shortly.
Sir John says the company’s 10,000 workforce – among the highest paid in the motor industry – has increased production from 1.3 to 4 cars per man over the last six years. He pays tribute to near trouble-free labour relations. But Sir John knows that his closest rival, Mercedes Benz has just signed a modest pay deal and it is likely he will want to keep labour costs to similar levels. Jaguar employees own about 5% of Jaguar shares which this year they have seen up from 335p, a rise of 57%.
They have been an extremely good investment. The employees got their shares free at the time of the privatisation two years ago. For the past 10 days they have been at liberty to sell half their holding, but so far few have decided to sell. They should stay aboard. Jaguar increased the half time dividend by 10% for the year to 3.3p and there is every reason to expect a further increase at the full year stage even if profits fail to rise above last year’s £121 million.
Every £100 invested in Jaguar two years ago would now be worth £315. Jaguar is widely held by American investors where the car firm is appreciated much more than in the U.K. Americans own 46% of the company and continue to appear when the shares are cheap. They look that way now and could top 600p.