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| Sales growth(a)(b) |
Management sales(c) measured both in absolute terms and on an underlying basis (i.e. excluding the effects of currency translation, acquisitions and divestments) relative to the prior year. |
To achieve growth rates at both a Group and divisional level (in absolute terms and on an underlying basis) in excess of the growth in our major automotive, aerospace and land systems markets. |
Group management
sales(c) grew by 13% on an absolute basis and 10% on an underlying basis. The corresponding figures
for GKN Driveline were increases of 15% and 10% respectively, for GKN Powder Metallurgy 11% and 13% respectively, for
GKN Aerospace 2% and 4% respectively, and for GKN Land Systems 27% and 21% respectively. |
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| Earnings per share (EPS)(b) |
Management earnings for the Group (as set out in note 3(a) to the financial statements) divided by the weighted average number of ordinary shares in issue (excluding treasury shares). |
To achieve absolute growth in EPS each year and in the longer term, recognising the nature and cyclicality of our major markets, to achieve average annual compound growth of at least 6%. |
Management EPS in 2011 was 22.6p compared with 20.7p in 2010, an increase of 9%. |
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| Trading margins(a) |
Management trading profit(c) as a percentage of management sales(c). |
To achieve medium-term trading margins of between 8% and 10% for GKN Driveline, 9% and 11% for GKN Powder Metallurgy,
11% and 13% for GKN Aerospace and 8% and 11% for GKN Land Systems, giving an overall Group trading margin of between 8% and 10%. |
The Group trading margin in 2011 of 7.7% reflects good performance in all four divisions.
Excluding the effect of acquisitions, the divisional trading margins were: GKN Driveline – 7.1%, GKN Powder Metallurgy –
8.5%, GKN Aerospace – 11.2% and GKN Land Systems – 8.0%.
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| Free cash flow |
Cash flows from operating activities (excluding special pension contributions) after capital expenditure and including fixed asset disposal proceeds, receipts of government capital grants and refundable advances and non-controlling dividends. |
To generate positive free cash flow sufficient to cover dividend payments and provide funding resources to support organic and
acquisitive earnings growth. |
Free cash flow amounted to £147 million, following a
continued focus on operating cash generation throughout 2011 offset by an increase in capital expenditure and the first
distribution of £23 million from the Pension partnership to the UK Pension scheme. |
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| Return on average invested capital (ROIC)(a) |
Ratio of management trading profit(c) to average total net assets including the appropriate share of joint ventures but excluding current and deferred tax, cash, borrowings, post-employment obligations and derivative financial instruments. |
To achieve ROIC at both a Group and divisional level which exceeds the weighted cost of capital of the Group (12% as a pre-tax threshold and between 9% and 10% on a post-tax basis). The Group target is to achieve ROIC of 20% or above (pre-tax). |
Group ROIC increased to 18.3%* in 2011 as a result of significantly improved profitability against a relatively stable asset base. Divisional ROIC performance is as follows: GKN Driveline – 17.0%,
GKN Powder Metallurgy – 16.7%, GKN Aerospace – 22.7% and GKN Land Systems – 29.5%.
* excluding 2011 acquisitions. |
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| Dividend per share(b) |
Amount declared as payable by way of dividend divided by the number of ordinary shares in issue (excluding treasury shares). |
A progressive dividend policy aligning dividends with the long-term trend in management earnings whilst achieving a sustainable management earnings-to-dividend cover ratio of around 2.5 times. |
2011 saw progress in the dividend payment, reflecting strong earnings and cash performance. The dividend for the year, at 6.0p, is covered 3.8 times by management earnings. |
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