Sales up almost a quarter for GKN
Strong business by its civil aerospace and automotive divisions has continued to drive growth for West Midlands engineering group, GKN.
However, the Redditch-based group’s land systems division continues to be a drag on the business due to declining sales in the agricultural sector.
Full year results for the year ended December 31, 2016 show sales of £9.414m, up 22% (2015: £7,689m), while pre-tax profit rose 12% to £678m (2015: £603m). Earnings per share rose by a similar amount from 27.8p to 31.0p. The group has declared a 2% increase in dividend to 8.85p per share (2015: 8.7p).
GKN Aerospace showed strong headline sales growth, reflecting a full year of ownership of Dutch business, Fokker, while organic growth was above the market.
Organic sales growth in commercial aerospace was up 3%, although this was partially offset by a 2% decline in the military sector.
Margins were down slightly at 10.2% (2015: 10.9%), excluding the £10m restructuring, primarily impacted by the acquisition of Fokker, ramp up costs on new engines and mature programmes declining.
The group said it was pleased with the performance by Fokker, which had sales and margin ahead of expectations.
At Birmingham-based GKN Driveline there was organic sales growth of 6%, ahead of global auto production, which the group said was helped by its broad geographic footprint and increased content per vehicle.
Trading margin of 7.9% (2015: 8.2%), excluded the £10m restructuring charge, with a good performance in Europe and China offset by excess launch costs on a significant US all-wheel drive (AWD) programme.
The division has won around £1bn of annualised new and replacement business.
Its Powder Metallurgy operation saw organic sales growth of 1% and a slightly reduced trading margin of 11.7% (2015: 12.0%), reflecting a powder investment in China and a weaker North America.
However, it was in Land Systems where the business struggled, with organic sales down 8% due to the challenging agricultural and construction equipment markets and the ending of two chassis contracts.
The group opted to absorb the Land Systems division into its GKN Driveline and Other Businesses from the beginning of the year.
Looking ahead, the group said the overall aerospace market was expected to be up 2% during 2017, with commercial deliveries 1% lower and military sales up 14%. Against that backdrop, GKN Aerospace’s 2017 organic sales are expected to grow slightly above the market.
In automotive, external forecasts predict growth in global light vehicle production of around 2% with increases in China and Europe, but down in North America.
Against this, GKN Driveline and GKN Powder Metallurgy are expected to grow organically above the market.
Nigel Stein, chief executive of GKN, said: “This is a good set of results with GKN continuing to make underlying progress in line with our expectations. We performed well against our key markets, overcoming some demand weakness and demonstrating once again the strength of our businesses, strong market positions and leading technology.
“Strategically we made good progress, including smoothly integrating Fokker and completing the disposal of Stromag – evidence of our sharper focus on capital allocation towards Aerospace and Automotive markets.
“We expect 2017 to be another year of further growth, helped by the benefits of the actions taken in 2016 and GKN’s constant focus on continuous improvement.”
