01 Mar 11. GKN Group results reflect the strong recovery in Driveline, Powder Metallurgy and Land Systems, a good performance in Aerospace and the on-going benefits from restructuring:
*Sales up 22% (£975m) to £5.4bn
*Trading profit of £411m, up £255m, and trading margin of 7.6%.
*Driveline sales up 35%, with 6.9% trading margin.
*Powder Metallurgy sales up 48%, with 7.1% trading margin.
*Aerospace sales 2% lower, trading margin 11.2%.
*Land Systems sales up 18%, with 5.3% trading margin.
New business:
*Driveline achieves 80% win rate on new driveshaft business;
*Aerospace wins $1.5bn of new contracts.
*Positive free cash flow of £188m (2009: £136m).
*Net debt down £149m to £151m (31 December 2009: £300m).
*Earnings per share of 20.7 pence per share (2009(2): 5.7 pence per share).
*Final dividend of 3.5 pence per share, giving a total dividend for 2010 of 5.0 pence per share (2009: no dividend).
*Return on average invested capital of 17% (2009(2): 6%) reflecting higher profitability.
Sir Kevin Smith, Chief Executive of GKN plc, commented: “GKN has continued to make strong progress in financial performance and in building the future of our global market-leading businesses. The trading environment has seen an improving trend 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. The Group’s restructuring actions have enabled us to improve our competitiveness and margins and the continued focus on cash generation has resulted in a halving of net debt. As a result of the strong performance, the Board is recommending a final dividend of 3.5 pence per share, making a total dividend of 5.0 pence for 2010. GKN’s strong market positions and leading technology and the conclusion of restructuring leave us extremely well positioned for sustainable growth and margin expansion.”
The outlook for our major markets is positive although some uncertainty remains, particularly around macro-economic conditions. In automotive, external forecasts suggest that global light vehicle production should reach just over 78m vehicles in 2011, an increase of 5%, with the strongest growth in China and India and continuing market recovery in North America. Production in Western Europe is expected to be broadly flat. In aerospace, US military aircraft market demand is expected to show a small reduction as the rundown of the F-22 programme and a decrease on the C-17 are partially offset by increases on other programmes. Civil aircraft production is expected to return to growth in 2011 as both Airbus and Boeing increase production schedules. The markets for Land Systems should continue to improve, with European agricultural equipment, which has been lagging other agricultural markets, forecast to enjoy good growth. Against this background, Driveline and Powder Metallurgy are expected to show further good improvement in 2011. The conclusion of Driveline’s restructuring actions will also provide some additional benefits to operating performance. Aerospace sales are expected to be broadly flat as second half increases in revenue from civil aircraft offset reduced military sales. The ramp up of a number of new aircraft programmes and further increases in civil volumes should return Aerospace to its strong growth trend in 2012. Land Systems performance should continue to improve, benefiting particularly from the expected increase in European agricultural equipment markets, which represent around a quarter of Land Systems sales. Free cash flow is again expected to be positive, giving a further reduction in net debt for the year. Purchase of key raw material supplies has been largely contracted for the whole of 2011 for Aerospace and Driveline against current expectations of demand at similar price levels to 2010. Land Systems procurement