GKN – As Old As The Industry, As Modern As The Hour!
By Howard Wheeldon, Senior Strategist at BGC Partners

24 Sep 10. Needless to say I am much heartened by news that GKN has replaced the now acquired Tomkins in the FTSE100 index. Not that having watched (FH) Tomkins since way back in 1983 when Greg Hutchings bought into what was then an ailing Midland based button and buckle manufacturer and spending the next 15 years turning this into a sizeable international conglomerate I am particularly pleased to see yet another familiar name drop out from what remains of the engineering company list. Nevertheless, GKN is something else and with necessary apologies for pinching of the Riley Motor Cars motto the words ‘as old as the industry, as modern as the hour’ apply, in my view, equally well to GKN. Indeed, GKN is not only the great UK based manufacturing survivor, maybe the only founding member of the FT30 index left above all it has proved to be one of the most flexible and adaptable manufacturing company’s that I have ever known with regard to meeting the challenge of ever changing circumstances.

As the very first large engineering company that I followed in my analyst career and having also had the pleasure of knowing virtually all senior board members of the company since the late 1960’s I admit to having a huge soft spot for this one. Indeed, out of habit and no doubt to the annoyance of some one is to this day often tempted to use the original Guest Keen Nettlefold name but I hope that I can be forgiven for that!

The GKN of today is a truly global manufacturing business – automotive, aerospace, powder metallurgy and off-highway components and products. Apart from the UK based manufacturing interests GKN businesses can be found across the USA, Japan, China, South Africa, Argentina, across Europe plus other international locations. This is a business that was of course born around the iron and steel industry and that over the years expanded through a variety of other industrial manufactured product. With roots going back to the mid eighteenth century the common denominator of manufacturing that was very apparent then remains just as important for GKN in the twenty-first century.

Apart from one particular aspect which I touch on below I will not go into the specific history of GKN here and now save to say that right from the time of the three way merger that formed the present day company in back in 1902 GKN has rarely stood still. It wasn’t always easy of course and over the years it has faced some very torrid times including parts of the business being nationalised and other that for years lived under threat. Shareholders have often had to endure a bumpy ride too but as the company goes back into the FTSE100 yet again we should recall that various managements over the years have always appeared to do their level best to look after shareholders to that back in the 1980’s the dividend was all but uncovered. As with any manufacturing business a degree of cyclicality exists and nowhere is this more true perhaps than across the various auto component and driveline businesses that GKN has developed since 1946. That said, as one specific market showed a degree of maturity you could always bet that another was opening up for GKN. Aerospace has also come a very long way too and yet this also has very many years of growth and further development left to come.

Having written many times before on the modern day GKN almost always concluding that with a sound balance sheet, excellent management and a strategy that few could question this company had great opportunities to perform well across virtually all of the many international interests I will not dwell that much further on the current day company. However, just last evening I was reminded that back in 1852 after her husband and chairman Sir John Guest had died rather suddenly that despite having no less than ten children his wife, Lady Charlotte Guest, took the hel