£400m wiped off value of manufacturing giant after it reveals claims
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£400m has been wiped off the value of engineering group GKN after it revealed it is facing unspecified claims totalling £40m.
The global manufacturing group would only say the “commercially sensitive” claims related to GKN Aerospace and GKN Driveline and that it expects it will incur the charges before the end of the year.
The claims have caused the Redditch-based group to issue a trading update with reduced profit expectations.
In response, its shares were down 9% just after the markets opened, before recovering slightly to end Friday down 7%, at 328p, reducing the group’s market value to £5.7bn.
GKN now expects management pre-tax profit – resulting from a combination of sales and trading profit of subsidiaries – for 2017 to now be “slightly above 2016”.
Chief executive Nigel Stein said: “GKN continues to grow well against its end markets although recent margin performance has not met our expectations. In addition, it is disappointing that we expect to have to provide for two unexpected claims which will slow our steady growth in profits.”
GKN is also having problems in its North Amercian aerospace division. It will incur a £15m non-cash charge at its Alabama caused by changed to its inventory and receivables balances, which will have an impact outside of the management pre-tax profit figure.
It is the latest upheaval at GKN following the announcement last month that Stein and group finance director Adam Walker were leaving.
Stein added: “In light of the trading performance in North American Aerospace, we are redoubling our efforts to improve our operational performance in that business, as well as developing actions to accelerate margin improvement plans across the group, including through the broader adoption of Industry 4.0.”
GKN has three divisions, GKN Aerospace, GKN Driveline and GKN Powder Metallurgy, which operate in the aerospace and automotive markets. The group employs 58,000 people working in more than 30 countries.