GKN plc overview
Farnborough Airshow 2012
Strategic Goals
Building a portfolio of market leaders with:
leading market shares in chosen segments
above market growth in each division
margin expanding through the target ranges
technology leadership – engineering for the future
2011 - Sales by region
2011 - Sales by division
£1,003m
£885m
£2,795m
£2,232m
£1,481m
£845m
Total 2011 Sales
£6,112m
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£2,877m
Global Positioning
44,000 employees in over 30 countries
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GKN Driveline
From driveshaft to driveline – repositioned globally
2011 sales by region
Asia
31%
Unrivalled capability – global no 1
Europe
40%
Americas
29%
2011 sales by customer
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GKN Powder Metallurgy
2011 sales by region
0%
Sinter - Rest
of world
7%
Hoeganaes
17%
Sinter
Americas
38%
Sinter
Europe
38%
2011 sales by customer
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Land Systems
2011 sales by market
Market Leading
Positions
2011 sales by customer
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GKN Aerospace
$2.5bn international aerospace enterprise
29 sites - 9,000 people
GKN Aerospace
Marcus Bryson
Aerospace
North America
Kevin Cummings
Aerospace
Europe
Phil Swash
Aerospace North America
Aerospace Europe & Special Products Group
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GKN Aerospace
A leader in composites and lightweight
aircraft structures and engine products
Strong performance in 2011
Grew to £1.5bn sales
Increased margin to 11.6% (before
central costs)
Secured orders of ~£2.4bn
Expanded customer base and
platform distribution
Added 3 new customers: Dassault,
Triumph, Bell
Further aligned portfolio (58% Civil,
42% Military) to focus on growth
markets
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Priorities of the business
SAFETY
DRIVING
PERFORMANCE
TECHNOLOGY
DRIVING
GROWTH
CUSTOMERS
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GKN Aerospace
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GKN Aerospace – Previous Key
key growth
Growthevents
Events:
St Louis-2002
Secure military position
Major Boeing Military relationship
Pilkington Aerospace-2004
Secure Military Transparency leadership
Stellex-2005
Complimentary to St. Louis
Boeing Commercial position on B787
Teleflex-2007
Extend to engine hot section
Secure major GE relationship
Rolls-Royce Composite Fan Blade JV-2008
Positioning for Next Gen Single Aisle
Strategic Partnership with RR
Filton-2009
Major capability expansion and A350 position
Strategic position with Airbus
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GKN Aerospace – Strong sales and margin delivery
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GKN Aerospace – World class product portfolio
Airframe
Subassemblies
Hondajet Fuselage
Assembly
Composite
Structures
Metallic
Structures
F/A-22 Titanium
Aft Boom
Exhaust Systems
A400M Composite
Wing Spar
Main Landing Gear
Beam Assembly
Airbus Fixed Trailing
Edge
Engine
Products
Nacelles
Gulfstream
G100/G150/
Dassault Falcon
50EX
Canopies and Fuel & Flotation
Transparencies
Systems
Military Canopies
and Windshields
Fuel Systems
Fan Modules
Aircraft Flotation
Devices
A330 Trent 700
Fan Cowl Door
GEnx Composite
Fan Case
B787 Passenger
Windows
B787 Section 41
Floor Assembly
F-135 Fan Inlet
Case
F-35 JSF Titanium
Bulkhead
Fan Blades
Bombardier
Dash 8 - 400
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Seals & Gaskets
Airframe and niche product portfolio
Winglets
Wing Leading & Trailing
Edge Assemblies
Integrated Floor
Structures
Vertical/Horizontal
Tail Planes
Composite Fuselage
Structures
Commercial &
Military
Commercial
Military
Wing Structures
& Surfaces
Metallic Fuselage
Structures
Canopies &
Windows
Nacelle Systems
Ice Protection for
Wings & Engines
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Fuel & Flotation
Systems
Engine product portfolio
Commercial &
Military
Commercial
Military
Composite &
Metallic Fan
Blades
Blisks/IBR’s
Diffusers
Turbine Casings
Exhaust
Systems
HPIP Structures
Composite & Metallic
Fan Cases
Tail Bearing
Housing
Composite
Fan Inlet Frame
Inner Core
Fairings
Compressor
Cases
Engine Ducts
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Compressor & Turbine
Vanes & Blades
Technology – Targeted innovation
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GKN Aerospace – Well positioned for the future
A320
A330
A350
A380
A400M
B787
B747-8
F15
F18
C17
Blackhawk
CH53K
F35
C130J
V22
HTF7000
*
1
*
*
*
*
*
*
*
2
*
*
*
3
4
5
6
7
8
Ship set values $m
*
Life of Programme
Significant proportion of life of programme
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Acquisition of Volvo Aero
Volvo Aero acquisition – transaction overview
Strong financial rationale
Enterprise Value SEK 6.9bn (£633m)
− Consideration of £513m
£140m equity placing (c.5%) and debt
6.3x expected 2012 Volvo Aero
EBITDA
0.9x expected 2012 sales of £670m
Expect in first full year*
− Accretive to management EPS
− Margin to meet GKN Aerospace target of
11-13%
− Generate ROIC above GKN’s WACC of
12%
Excellent strategic fit
Creates a market leader – No.3 in
engine components
Business has invested heavily to
secure positions on new engine
programmes
Combines complementary product and
technology focus
Access to well-respected engineering
capability
Creates a balanced GKN Aerospace –
structures and engine products
Strengthens and broadens OEM
relationships.
Value enhancing acquisition for GKN
Note: £1 = SEK10.9
* Nothing in this presentation is intended to be a profit estimate for any period or a forecast of future profits and statements relating to earnings accretion should not be
interpreted to mean that the earnings per GKN share for the current or future financial periods will necessarily match or exceed its historical published earnings per share.
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Volvo Aero – leading producer of aero-engine components
Designs, engineers and manufactures
components and sub-assemblies for
aircraft engine turbines
Invested heavily to secure positions on
new engine programmes – £290m over last
4 years
Key customers are all the major aero
engine manufacturers
Positions on most major civil aerospace
platforms – will benefit as build increase
Employs some 3,000 people,
including 500 engineers
Risk and revenue sharing partner (RRSP)
business model, provides life-ofprogramme participation
Based in Sweden, Norway and USA
Focus on civil aerospace
Significant aftermarket content providing
profitable long-term revenue streams
High-quality customer base
Sales of c.£600m in 2011
Government, 14%
Source: FY11, Management
information, excludes rental income
Note: MTU represents joint
programmes with PW
Source: FY11, Management information, excludes rental income
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GKN and Volvo Aero: complementary product portfolio
Volvo Aero designs and
manufactures components
for aircraft engine turbines.
Range of components
includes:
−
−
−
−
−
−
−
−
−
−
−
Volvo Aero: BLACK
GKN: RED
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Fan/compressor cases
Bearing/housings
Hubs
Spools
Fan/compressor
structures
Compressor rear
frame/diffuser cases
Combustion
chamber/after burner
liners
Low pressure turbine
cases (LPT’s)
Turbine structures
Shafts
Vanes
Combination of complementary technologies
Volvo Aero: Lightweight metallic
New technologies
GKN: Composites
High performance structures
−
Optimised fabrication
−
−
Weld simulation
Composite fan cases
−
Automated laser welding
Advanced manufacturing
−
Metal deposition
− Advanced fibre placement
Composite fan blades (JV with Rolls-Royce)
Advanced machining and automation capabilities
could be transferred to GKN US sites
Environmental technology
Additive layer technology good match to GKN’s
current development
Multifunctional technologies
− Winglets
− Electro-thermal ice protection
GKN: Composite fan blades
Volvo Aero: Compressor rotors
Volvo Aero: Turbine structures
GKN: Composite fan frame
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Volvo Aero business model
Circa 70% of Volvo Aero is based on
RRSP model
Lower Margin
High Margin
RRSP
RRSP mirrors the OEM model – risks
and rewards are shared based on %
participation
Upfront costs are rewarded by strong
participation in aftermarket sales
LTA /
LOP*
Year 5
Year 10
Year 20
Year 30 &
more
Time
Provides long-term profitability and
cash flows
Good timing for acquisition
Significant upfront investments in new
programmes already incurred
Reflects
Volvo Aero
contract
positions
Trent 500
Time
Trent 900
* LTA contracts are typically for up to 10 years and
renewed / recomposed through product life cycle
Junior RRSP
Traditional RRSP
Source: Vendor due diligence report and GKN management estimates
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Attractive programme portfolio drives revenue
Secure long-term revenue on civil engines
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Transaction strengthens GKN Aerospace
GKN Aerospace product and market mix
OEM Relationships
Sales before £1.5bn
Sales before
Sales pro forma £2.1bn
Sales pro forma
Other 7%
Government, 4%
Balanced business
Increased civil
2011 data. Source: GKN Aerospace 2011 results, 2011 Volvo Aero internal financial information (excludes rental income)
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Broader customer mix
A leading business with high-quality revenue streams
GKN Group trading profit1
GKN Group sales
Before
Before
Pro forma
Pro forma
Greater aerospace contribution
2011 data. Source: GKN 2011 management information, Volvo Group 2011 Annual Report
1 Trading profit excluding corporate costs and impact of Gallatin
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Summary – GKN Aerospace
Proven track record of growth and margin progression into 11% 13% range
Strong position on existing programmes with increasing build rates
New programmes now set to ramp-up production
Technology development remains a focus and is positioning GKN
for future programmes
Filton acquisition and integration very successful and A350
capabilities now being proven
Volvo Aero brings strong engine component technology and good
positions on most engine programmes
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Disclaimer
Disclaimer
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This presentation does not constitute or form the basis of any investment decision, nor does it constitute or form, or should it be construed as, any part of any offer or
invitation for the sale or purchase of, or the solicitation of any offer to acquire or subscribe for, any shares in GKN, nor shall any part of the Information be relied on in
connection with any contract or investment decision relating to any securities, nor does it constitute any recommendation regarding securities of GKN. This presentation
does not purport to be comprehensive and has not been independently verified.
Certain statements, beliefs and opinions in this presentation are based on information provided by the target (“Volvo Aero”) or its parent company, AB Volvo. While the
presentation has been prepared in good faith, no representation, warranty or undertaking, express or implied, is or will be given and no responsibility or liability is or will
be accepted by GKN or any of their respective directors, officers, employees, affiliates, advisers or agents (together with GKN, the "GKN Persons") relating to the
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Past performance cannot be relied on as a guide to future performance.
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correct any inaccuracies which may become apparent. To the extent permitted by law, no liability whatsoever is accepted by any of the GKN Persons for any loss
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Certain statements, beliefs and opinions in this presentation are forward-looking, which reflect GKN's or, as appropriate, its directors’ current expectations and
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their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those
expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans
and events described herein.
Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking
statements speak only as at the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the
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GKN does not undertake any obligation to update or revise any forward-looking statements, whether as a result of inaccuracies which may become apparent, new
information, future events or otherwise.
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