Overview(1)
- Group results significantly impacted by the decline in Automotive and OffHighway sales, notwithstanding extensive cost cutting
- Sales down 9%, underlying down 31% (£904 million)
- Trading profit of £23 million, down £138 million.
- Automotive (including Powder Metallurgy) underlying sales down 41% - return to profit in June.
- Good performance in Aerospace continued with underlying sales up 5%. Trading profit, including Filton, of £79 million.
- Strong start from Filton with £169 million of sales and 9% underlying trading margin.
- OffHighway underlying sales down 34% - reports £2 million trading loss.
- Restructuring programme accelerated and extended with a further 2,500 people leaving the Group.
- New business wins
- Electric rear axle for PSA Hybrid 4 - strong interest for hybrid/electronic drive products.
- Additional revenue secured on Joint Strike Fighter and A350 programmes.
- Positive free cash flow of £23 million (2008: £29 million outflow).
- Net debt of £800 million at 30 June 2009.
- Rights issue net proceeds of £403 million received in July, significantly strengthens capital structure.
- No interim dividend to be paid.
Sir Kevin Smith, Chief Executive of GKN plc, commented:
“The first half trading environment has been very challenging for GKN as the global recession impacted our businesses, initially Automotive and Powder Metallurgy and more recently in OffHighway. In response, we have aggressively cut costs, with a further 2,500 people leaving the Group in the first half of 2009, and conserved cash, by reducing capital expenditure and working capital. Towards the end of the period, as production schedules stabilised and with the benefits of the restructuring, Automotive (including Powder Metallurgy) returned to profitability. In Aerospace, we have achieved another set of strong results, with the Filton acquisition performing ahead of expectations. In OffHighway, underlying sales deteriorated throughout the period and were more than 50% down in June compared with June 2008.
The £423 million rights issue launched in June has been successfully concluded, with the proceeds used to repay our revolving credit facilities. This significantly strengthens our capital base. We continue to pursue opportunities to develop our strong market positions and, with continuing benefits from restructuring, we are well positioned to take full advantage as markets recover.”
Outlook for the second half
Markets
The outlook for our major markets remains mixed.
In automotive, inventory reductions in most regions have led to a more stable operating environment and expectations are for some improvement in production demand through the second half, as the gap between global sales and production volumes continues to narrow.
In aerospace, military aircraft production is expected to remain solid through the balance of the year, whilst further reductions in this year’s large civil aircraft schedules appear unlikely. Business jet demand is expected to remain weak.
Demand in off-highway markets has fallen sharply in the second quarter. External forecasters expect output to be severely depressed through the third quarter before beginning to stabilise towards the end of the year.
GKN
Looking forward to the second half, in our Automotive and Powder Metallurgy businesses we expect demand in the third quarter to remain at similar levels to the second quarter due to a quiet August, and improvements in September carrying through to the fourth quarter.
Aerospace sales are expected to remain strong in the second half, with any further weakening in large commercial aircraft production schedules now unlikely before 2010.
OffHighway sales are expected to remain more than 50% lower in the third quarter. A more stable operating environment is expected in the fourth quarter, with some recovery in demand as inventories continue to reduce.
Restructuring
As markets have weakened, restructuring has been extended and accelerated. 3,600 employees will leave the Group during this year and next, an increase of 1,200 over previously announced plans. Additional costs of approximately £17 million are expected to be incurred and annualised benefits increased by a similar amount. A further review of operations will be undertaken at the end of the third quarter.
Summary
GKN has made significant progress in realigning its operations to weaker markets. Automotive (including Powder Metallurgy) has returned to profitability and Aerospace continues to perform strongly, whilst increasing stability in OffHighway is expected in the fourth quarter. As a result, the Group expects to make good progress in the second half.
Notes
| (1) | Financial information set out in this announcement, unless otherwise stated, is presented on a management basis which aggregates the sales and trading profit, as applicable, of subsidiaries and the Group’s proportionate share of joint ventures. References to margins are to trading profit expressed as a percentage of sales. Management profit or loss before tax is Group profit or loss before tax adjusted to exclude restructuring and impairment charges, profits and losses on sale or closures of businesses, amortisation of non-operating intangible assets arising on business combinations, change in value of derivative and other financial instruments and other net financing charges. 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. |
Further Enquiries
Guy Stainer
Director, Investor Relations and External Communications
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 0900 at UBS, Ground Floor Presentation Suite, 1 Finsbury Avenue, London EC2M 2PP.
A live audiocast of the presentation will be available at www.gkn.com. Slides will be put onto the GKN website approximately 15 minutes before the presentation is due to begin.
A live dial in facility will be available by telephoning one of the following numbers:
Standard International Dial In: +44 (0) 1452 555 566
Conf ID: 21386399#
A replay of the conference call will be available for 14 days at the following numbers:
Standard International Number: +44 (0) 1452 55 00 00
Replay Access Number: 21386399#
The full text of this announcement together with the attached financial statements and notes thereto may be downloaded below.
Download Full Press Release PDF
Download Appendices PDF
Download Principal Risks and Uncertainties from Prospectus PDF
|
