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GKN Annual Results
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GKN plc 2008 Full Year Results Announcement
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Business performance - see notes (1) and (2) below |
As reported (note 1) |
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2008
£m |
2007
£m |
Change
% |
2008
£m |
2007
£m |
Change
£m
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| Sales - including share of joint ventures |
4,617 |
4,122 |
12 |
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| Less share of joint ventures |
(241) |
(253) |
(5) |
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| Sales - subsidiaries |
4,376 |
3,869 |
13 |
4,376 |
3,869 |
507 |
| Trading profit - subsidiaries |
201 |
277 |
(27) |
201 |
277 |
(76) |
| Operating profit / (loss) |
201 |
277 |
(27) |
(86) |
221 |
(307) |
| Share of joint ventures (post-tax) |
16 |
24 |
(33) |
6 |
24 |
(18) |
| Net financing costs |
(50) |
(46) |
(9) |
(50) |
(46) |
(4) |
| Profit / (loss) before tax |
167 |
255 |
(35) |
(130) |
199 |
(329) |
| Profit / (loss) after tax |
170 |
249 |
(32) |
(120) |
198 |
(318) |
| Discontinued operations |
- |
- |
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13 |
- |
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| Earnings per share - p |
23.8 |
35.1 |
(32) |
(17.3) |
27.9 |
(45.2)p |
| Full year dividend per share -p |
4.5 |
13.5 |
(67) |
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Business performance (2)
- Sales up 12%, profit before tax down 35%, earnings per share down 32%.
- Group results significantly impacted by the decline in automotive related sales in the final quarter.
- Strong performance in non-automotive business
- Aerospace sales up 22% and trading profit up 27%.
- OffHighway sales up 32% and trading profit up 38%.
- New business wins
- Driveline secures 77% of available driveshafts business.
- Over $3 billion of new business secured by Aerospace.
- Filton acquisition completed – creating growth opportunities for future.
- Net debt of £708 million as at 31 December 2008, leaves headroom of £402 million.
- Board decided not to pay a final dividend.
- Restructuring programme was implemented with 3,450 job losses in 2008 and further plans announced for 2009.
Sir Kevin Smith, Chief Executive of GKN plc, commented:
"We entered 2008 with good order books across all divisions and expectations of continued growth for the Group. In Aerospace we have had an excellent year with double digit growth in both sales and profits and our OffHighway business achieved record results. Automotive sales, however, deteriorated rapidly in the fourth quarter as a result of the global financial crisis. We have taken swift action to reposition the business with 3,450 jobs cut during the year, 2,800 of which occurred in the fourth quarter. Further restructuring is already underway in 2009.
We are delighted to have completed the Filton Aerospace acquisition on 5 January 2009 which will provide excellent growth opportunities for the Group. This year our focus will continue to be on providing exceptional customer service, further reducing our cost base and preserving cash. The Board has accordingly decided not to pay a final dividend. The quality of the Group’s businesses and the management action being implemented will position us strongly to benefit when markets recover."
2009 Outlook
Markets and environment
The outlook for our major markets is both challenging and uncertain as the global economic recession continues to severely impact demand in most of our end markets.
The outlook for Automotive production is extremely uncertain. Forecasters expect weakness across virtually all regions with global light vehicle output to fall within a range of 55 to 59 million vehicles – a decline of between 12 and 20%.
OffHighway markets have weakened over the last few months and forecasters now expect a substantial decline in demand for heavy construction, mining and agricultural equipment.
Aerospace markets are mixed. Military aircraft demand is expected to remain solid through the year. In the civil sector, regional and business jet demand has fallen sharply and some reduction in production rates for large civil aircraft is expected in the second half.
Restructuring
In the final quarter of 2008 the Group launched a major restructuring and cost reduction plan across all divisions to align operations more closely with expected demand. This resulted in 2,800 job losses.
In 2009, global headcount will be reduced further by around 2,400 people, of which around 300 had already left the Group by the end of January. A number of manufacturing sites will be closed and short-time working and plant shutdowns implemented widely.
The programme will be completed by July 2010 and cash costs of approximately £140 million and non cash asset impairments of approximately £150 million will be incurred. The plan is expected to reduce full year operating costs by approximately £190 million.
GKN's businesses
Production volumes in the Group’s Automotive and Powder Metallurgy businesses have been particularly soft in the first quarter as vehicle manufacturers reduce inventories and realign output with consumer demand. Some recovery is expected from the second quarter onward and the Group will increasingly benefit from its cost reduction programme.
OffHighway sales are expected to fall as demand declines rapidly through the second quarter.
Aerospace sales are expected to continue to grow strongly as the Filton acquisition is consolidated into the division.
If Sterling were to remain at current levels against major international currencies, there would be a translational benefit to Group results.
Financing
The Group entered 2009 with net debt of £708 million. This was largely funded in the UK through £675 million of bonds and committed bank facilities totalling £445 million, £43 million of which was utilised, leaving headroom of £402 million. A further £180 million of facilities were secured on completion of the acquisition of Filton for which the initial payment was £96 million. EBITDA/net interest cover was 8 times, well ahead of the 3.5 times banking covenant.
The Group expects a significant increase in the non-cash IAS19 pension financing charge to around £50 million (2008 - £3 million).
Outlook
Although the Group expects 2009 to be a very challenging year, GKN’s financial position is sound and actions taken to reduce costs and improve cashflow should position us to benefit strongly when markets recover.
Notes
(1) 2007 comparative sales figure includes the sales of the UK cylinder liner business, closed in that year. Trading results of that business are shown in the Income Statement within "Profits and losses on sale or closures of businesses".
(2) Figures exclude the impact of restructuring and impairment charges, amortisation of non-operating intangible assets arising on business combinations, profits and losses on sale or closures of businesses and changes in fair value of derivative financial instruments. These figures represent underlying performance of continuing businesses.
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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 at 0930 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
UK Freecall Dial In: 0800 694 0257
Conf ID: 84733274#
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
UK Freecall Dial In: 0800 953 1533
Conf ID: 84733274#
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