Highlights(1) & (2)
- Group results reflect the strong recovery in Driveline, Powder Metallurgy and Land Systems, a good performance in Aerospace and the on-going benefits from restructuring:
- sales up 22% (£975 million) to £5.4 billion
- trading profit of £411 million, up £255 million, and trading margin of 7.6%.
- Driveline sales up 35%, with 6.9% trading margin.
- Powder Metallurgy sales up 48%, with 7.1% trading margin.
- Aerospace sales 2% lower, trading margin 11.2%.
- Land Systems sales up 18%, with 5.3% trading margin.
- New business:
- Driveline achieves 80% win rate on new driveshaft business;
- Aerospace wins $1.5 billion of new contracts.
- Positive free cash flow of £188 million (2009: £136 million).
- Net debt down £149 million to £151 million (31 December 2009: £300 million).
- Earnings per share of 20.7 pence per share (2009(2): 5.7 pence per share).
- Final dividend of 3.5 pence per share, giving a total dividend for 2010 of 5.0 pence per share (2009: no dividend).
- Return on average invested capital of 17% (2009(2): 6%) reflecting higher profitability.
Sir Kevin Smith, Chief Executive of GKN plc, commented:
“GKN has continued to make strong progress in financial performance and in building the future of our global market-leading businesses. The trading environment has seen an improving trend for GKN’s Driveline, Powder Metallurgy and Land Systems businesses. The aerospace market has remained subdued although civil aerospace is now moving into a strong growth phase with volume increases on existing platforms and new aircraft moving into production.
The Group’s restructuring actions have enabled us to improve our competitiveness and margins and the continued focus on cash generation has resulted in a halving of net debt.
As a result of the strong performance, the Board is recommending a final dividend of 3.5 pence per share, making a total dividend of 5.0 pence for 2010.
GKN’s strong market positions and leading technology and the conclusion of restructuring leave us extremely well positioned for sustainable growth and margin expansion.”
Outlook
GKN's Markets
The outlook for our major markets is positive although some uncertainty remains, particularly around macro-economic conditions.
In automotive, external forecasts suggest that global light vehicle production should reach just over 78 million vehicles in 2011, an increase of 5%, with the strongest growth in China and India and continuing market recovery in North America. Production in Western Europe is expected to be broadly flat.
In aerospace, US military aircraft market demand is expected to show a small reduction as the rundown of the F-22 programme and a decrease on the C-17 are partially offset by increases on other programmes. Civil aircraft production is expected to return to growth in 2011 as both Airbus and Boeing increase production schedules.
The markets for Land Systems should continue to improve, with European agricultural equipment, which has been lagging other agricultural markets, forecast to enjoy good growth.
GKN's Performance
Against this background, Driveline and Powder Metallurgy are expected to show further good improvement in 2011. The conclusion of Driveline’s restructuring actions will also provide some additional benefits to operating performance.
Aerospace sales are expected to be broadly flat as second half increases in revenue from civil aircraft offset reduced military sales. The ramp up of a number of new aircraft programmes and further increases in civil volumes should return Aerospace to its strong growth trend in 2012.
Land Systems performance should continue to improve, benefiting particularly from the expected increase in European agricultural equipment markets, which represent around a quarter of Land Systems sales.
Free cash flow is again expected to be positive, giving a further reduction in net debt for the year.
Purchase of key raw material supplies has been largely contracted for the whole of 2011 for Aerospace and Driveline against current expectations of demand at similar price levels to 2010. Land Systems procurement policies vary by business unit and we would expect any additional material costs to be substantially recovered in pricing. The scrap steel surcharge, which particularly impacts Powder Metallurgy and also Driveline, has increased sharply in the early part of the year and both Divisions have mechanisms in place which should recover about 80% of any increase over the course of the year. As a result, the impact of increased material costs on Group profits is currently expected to be relatively small.
Summary
In summary, GKN expects 2011 to be a year of good progress for the Group. As end markets continue to improve, the strength of our market positions and order books leaves GKN well placed for a period of sustained growth, margin expansion and strong free cash flow generation.
Cautionary Statement
This announcement contains forward looking statements which are made in good faith based on the information available to 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.
Notes
Financial information set out in this announcement, unless otherwise stated, is presented on a management basis which aggregates the sales and trading profit of subsidiaries (excluding subsidiary businesses sold and closed) with the Group’s share of the sales and trading profit of joint ventures. References to trading margins are to trading profit expressed as a percentage of sales. Management profit or loss before tax is management trading profit less net subsidiary interest payable and receivable and the Group’s share of net interest payable and receivable and taxation of joint ventures. These figures better reflect performance of continuing businesses. Where appropriate, reference is made to underlying results which exclude the impact of acquisitions as well as currency translation on the results of overseas operations. Operating cash flow is cash generated from operations adjusted for capital expenditure, government capital grants, proceeds from disposal of fixed assets and government refundable advances. Free cash flow is operating cash flow including interest, tax, joint venture dividends and dividends paid to non-controlling interests, but excluding dividends paid to GKN shareholders. Return on average invested capital is management trading profit as a percentage of total net assets of continuing subsidiaries and joint ventures deducting current and deferred tax, net debt, post-employment obligations and derivative financial instruments. Comparative data has been restated following the announcement to exit the Axles operations of the former OffHighway segment.
Further Enquiries
Guy Stainer
Director, Investor Relations and External Communications
GKN plc
T: +44 (0)207 463 2382
M: +44 (0)7739 778 187
E: guy.stainer@gkn.com
Andrew Lorenz
Financial Dynamics
T: +44 (0)20 7269 7113
M: +44 (0)7775 641 807
There will be an analyst and investor meeting today at 10.00am at UBS, Ground Floor Presentation Suite, 1 Finsbury Avenue, London EC2M 2PP
A live audiocast of the presentation will be available at http://www.gkn.com/investorrelations/Pages/Webcasts.aspx. Slides will be put onto the GKN website approximately 15 minutes before the presentation is due to begin http://www.gkn.com/investorrelations/Pages/results-and-presentations.aspx?year=2010
Questions will be taken at the event.
A live dial in facility will be available by telephoning one of the following numbers:
Standard International Dial In: +44 (0) 1452 555 566
UK Free Dial in: 0800 694 0257
USA Free Dial in: 1866 966 9439
Conf ID: 43991603
A replay of the conference call will be available until 14 March 2011 on the following numbers:
Standard International Number: +44 (0) 1452 55 00 00
UK Free Dial in: 0800 953 1533
USA Free Dial in: 1866 247 4222
Replay Access Number: 43991603# |