GKN sees 11% improvement in interim revenues
MIDLANDS based engineering group GKN has announced an 11% improvement in first half sales driven by continued growth in its Driveline, Powder Metallurgy and Land Systems operations plus an upturn in its Aerospace business.
In total, sales grew £287m to £2.988bn. Trading profit rose £45m to £247m but this was before the £23m one-off charge relating to the temporary plant closure of the group’s Hoeganaes plant in Gallatin, US.
Birmingham based GKN Driveline delivered a 12% improvement in sales with a 7.1% trading margin. This came despite a £12m profit impact resulting from the Japanese earthquake.
Powder Metallurgy saw sales increase 15%, with 9.0% trading margin and in Aerospace although underlying sales were broadly flat, trading margin increased from 10.9% to 11.1%. Land Systems, which covers agriculture, construction, mining, defence and automotive, saw sales increase 24% with 8.8% trading margin.
The group was buoyed by new business such as $2.8bn worth of contract extensions, new programme wins and work scope expansions in Aerospace. There was also a 74% win rate on driveshafts and important wins in all-wheel-drive (AWD), transaxle and eDrive products.
Investment in EVO and a joint venture to manufacture axial flux electric motors and drive systems for hybrid and all-electric vehicles offers good prospects for long term growth.
The group’s JV with COMAC to manufacture exclusively the horizontal tailplane for C919 aircraft also offers encouragement for the group’s Aerospace business.
The group generated positive free cash flow of £25m (2010: £107m), which it said reflected investment to support growth.
Net debt grew to £174m (December 31, 2010: £151m) but the interim dividend has increased 2p per share (2010: 1.5p). Earnings per share rose 23% to 11.8p (2010: 9.6p).
New acquisitions since June 30, 2011 include: an agreement to acquire Stromag, a market leading engineer of industrial power management components, and German-owned Getrag Driveline Products Business, a leading global supplier of AWD driveline products.
Sir Kevin Smith, chief executive of GKN, said: “GKN has continued to make strong progress both in terms of financial performance and in building the future of our global market-leading businesses.
“The first half trading environment has seen strong market outperformance 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.
“We are also pleased to further strengthen our Driveline and Land Systems businesses with two highly complementary acquisitions in Stromag and Getrag Driveline Products.”
He said as a result of the strong performance and outlook, the board had decided to pay the interim dividend of 2p per share.
In outlook, he said GKN’s excellent global market positions, strong order books and leading technology left it well positioned for sustainable growth and further margin expansion.
