26 07 2017 Financial

GKN plc Results Announcement for the six months ended 30 June 2017

Download full press release

Group highlights(*)

  • Another period of growth delivering earnings momentum
    • Sales up 15% (organic sales up 5%) and management eps increased 14%
    • Profit before tax (management basis) up 14% to £393 million (2016: £344 million), helped by currency
    • Reported profit before tax £559 million (2016: £182 million)
    • Free cash flow of £116 million (2016: £40 million)
    • Interim dividend increased 5% to 3.1 pence per share
    • UK defined benefit pension closed to future accrual, £250 million lump sum payment planned to address the deficit and reduce future deficit recovery payments
  • Continued investment in technology
    • Strong technology pipeline; innovation recognised by customer and industry awards
    • Focus on electrified drivetrains and additive manufacturing (3D printing)
    • Industry 4.0 - expect to reduce cost and increase margin
 Management basis(*)As reported
 20172016Change20172016Change
 £m£m%£m£m%
Sales 5,212 4,518 +15 4,879 4,237 +15
Operating profit 436 390 +12 591 209 +183(2)
Trading margin (%) 8.4% 8.6% -20bps      
Profit before tax 393 344 +14 559 182 +207(2)
Earnings per share (p) 17.7p 15.5p +14 24.8p 9.5p +161(2)
Dividend per share (p) 3.10p 2.95p +5 3.10p 2.95p +5
Free cash flow 116 40        
Net debt 697 704(1)        

(*) Financial information set out on this page, unless otherwise stated, is presented on a management basis
(1) As at 31 December 2016
(2) Primarily higher due to mark to market valuation of FX contracts

Commenting on the results, Nigel Stein, Chief Executive of GKN said:

“We made progress in the first half and are on track for the full year. We are performing well against our key markets, demonstrating once again the strength of our businesses, strong market positions and leading technology. We continue to invest for growth and have made significant progress to address our UK pension deficit.

Our focus on innovation in key areas such as electrified drivetrains, additive manufacturing and Industry 4.0 is paying dividends and underpins our confidence in the longer term.

2017 is expected to be another year of growth. Our reputation for technological leadership in our key markets, our focus on driving flexibility and productivity through our manufacturing plants and our market leading position in all three divisions mean we are well placed for the future.”

Divisional Highlights

GKN Aerospace

  • Headline sales growth of 11%, reflecting a benefit from currency translation and organic growth in line with the market
  • Organic sales growth of 1%, comprising slower commercial sales (-3%) more than offset by an increase in military (+15%)
  • Margin of 9.3% (2016: 9.9%), primarily impacted by higher UK pension costs, lower profits resulting from asset write-downs at SABCA (equity accounted investment) and programme transitions and operational challenges in North America, partly offset by a benefit from programme pricing adjustments
  • New and replacement work packages won of c.$2.3 billion over contract lives

GKN Driveline

  • Organic sales growth of 8%, significantly ahead of global auto production, helped by our broad geographic footprint and increased content per vehicle
  • Trading margin of 7.8% (2016: 7.9%, restated to include part of GKN Land Systems), with a good performance in Europe offset by lower margins in China, as expected, and increased costs to support the high number of launches in the Americas
  • Around £230 million of annualised new and replacement business won

GKN Powder Metallurgy

  • Organic sales growth of 4%, including the pass-through of higher raw material surcharges
  • Trading margin of 11.3% (2016: 12.6%), reflecting principally the higher raw material surcharge and an investment in powder capability in China
  • Strong focus on technology and £110 million of annualised new and replacement business won

Outlook

According to Teal forecasts, in 2017, the overall aerospace market is expected to be up 1%, with commercial deliveries 1% lower and military sales up 8%. Against that backdrop, GKN Aerospace’s 2017 organic sales are expected to grow slightly above the market.

In automotive, external forecasts predict annual growth in global light vehicle production of around 2% with increases in China and Europe, but decreases in North America. Against this background, GKN Driveline and GKN Powder Metallurgy are expected to grow organically above the market.

2017 is expected to be another year of growth, helped by the benefits of actions taken in 2016 and GKN’s constant focus on continuous improvement.

Notes

(*) Financial information set out in this announcement, unless otherwise stated, is presented on a management basis as defined on pages 13 and 14.

Cautionary Statement

This announcement contains forward looking statements which are made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward looking statement which could cause actual results to differ materially from those currently anticipated. Nothing in this document should be regarded as a profits forecast.

Further Enquiries

Analysts/Investors:

Guy Stainer, Investor Relations Director, GKN plc
T: +44 (0)207 463 2382
M: +44 (0)7739 778187
E: guy.stainer@gkn.com

Media:

Nicola Foster, Head of Group Communications, GKN plc
T: +44 (0)1527 533495
M: +44 (0)7795 618320
E: nicola.foster@gkn.com

Andrew Lorenz, FTI Consulting
T: +44 (0)203 727 1323
M: +44 (0)7775 641807

There will be an analyst and investor meeting today at 09.00am at UBS, 5 Broadgate, London, EC2M 2QS in their Conference Suite located on the first floor.

A live videocast of the presentation will be available at http://www.gkn.com/en/investors/results-centre/webcasts/.
Slides will be put onto the GKN website approximately 60 minutes before the presentation is due to begin, and will be available to download from the GKN website at: http://www.gkn.com/en/investors/results-centre/.

Questions will only be taken at the event.

A live dial in facility will be available by telephoning: +44 (0) 1452 555 566, Conf ID: 53120005

Following the event, a replay of the conference call will be uploaded onto the GKN website and the on-demand archive webcast will be available via the link
http://www.gkn.com/en/investors/results-centre/results-and-presentations/.

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