NEWS RELEASE
GKN plc
Interim Management Statement
22 October 2013
GKN plc, the global engineering business that serves the aerospace, automotive and land systems
markets, today issues the following Interim Management Statement covering the period since
1 July 2013.
Overview
Market conditions and the Group’s performance in the third quarter have been consistent with
expectations at the time of our 30 July 2013 statement. Commercial aerospace was strong while
military aerospace and spares showed a continuation of the weaker demand evidenced in the first
half. Global light vehicle production increased 4% with good growth in China and North America
whilst Europe and Japan improved slightly. The weakness in construction and industrial markets
continued while agricultural equipment demand remained broadly flat.
Group Results
GKN made good progress in the three months ended 30 September 2013. Sales totalled £1,865
million, a 16% increase over the comparable period in 2012, including 6% organic growth. The
increase in sales from acquisitions less divestments was £145 million.
Third quarter trading profit increased to £152 million (2012: £113 million). Trading margin
increased to 8.2% (2012: 7.0%), as a result of improved profitability in the underlying business and
a £21 million contribution from GKN Aerospace Engine Systems. Group profit before taxation
increased 34% to £131 million.
There has been no material change to the Group’s financial position with net debt at 30 September
2013 of £973 million (30 June 2013: £928 million), following the payment of the interim dividend
and the final payment for GKN Aerospace Engine Systems.
(2)
2013
(1)
Management basis
Sales
Trading profit
Trading margin (%)
Profit before tax
2012
Q3
9m YTD
Q3
9m YTD
£m
£m
£m
£m
1,865
5,734
1,608
5,067
152
472
113
404
8.2%
8.2%
7.0%
8.0%
131
409
98
362
Outlook
Automotive and commercial aerospace markets are expected to remain robust with industrial and
military aerospace markets soft. As previously stated, the Group expects 2013 overall to show
another year of good progress helped by the contribution of GKN Aerospace Engine Systems.
Summary
Nigel Stein, Chief Executive, GKN plc, commented:
"The third quarter showed good progress, supported by automotive demand in China and North
America and sustained high output levels in commercial aerospace. GKN Aerospace Engine
Systems made a strong contribution to the Group’s 34% growth in profit before tax."
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Divisional Markets and Performance
GKN Aerospace
Sales
Trading profit
Trading margin
2013
Q3 9m YTD
£m
£m
555
1,678
61
179
11.0%
10.7%
2012
Q3 9m YTD
£m
£m
392
1,162
42
128
10.7%
11.0%
GKN Aerospace markets showed strong organic growth in commercial aerospace partly offset by
the continuing decline in military sales. Overall sales increased 42% to £555 million, with organic
growth of 3%. Trading profit increased 45% to £61 million, with the organic change in trading profit
showing a decline of £3 million, largely due to reduced spares sales and unfavourable exchange
rates in the quarter. The trading margin improved to 11.0% due to a strong performance by GKN
Aerospace Engine Systems.
Automotive
Global light vehicle production in the third quarter of around 20.0 million vehicles was 4% ahead of
the comparable period in 2012 with good growth in China (+9%) and North America (+6%) and
more modest growth in Europe (+2%) and Japan (+2%). Brazil (+7%) and India (+5%) continued
to be volatile.
GKN Driveline
Sales
Trading profit
Trading margin
2013
Q3 9m YTD
£m
£m
842
2,570
58
175
6.9%
6.8%
2012
Q3 9m YTD
£m
£m
773
2,437
42
163
5.4%
6.7%
GKN Driveline’s third quarter sales were 9% higher at £842 million (2012: £773 million), with
organic growth well ahead of global automotive production. Trading profit increased to £58 million
(2012: £42 million) and trading margin was 6.9% (2012: 5.4%).
GKN Powder Metallurgy
Sales
Trading profit
Trading margin
2013
Q3 9m YTD
£m
£m
234
714
23
71
9.8%
9.9%
2012
Q3 9m YTD
£m
£m
208
673
20
67
9.6%
10.0%
GKN Powder Metallurgy’s third quarter sales increased 13% to £234 million (2012: £208 million),
with organic sales growth of 10%, outperforming automotive production in both Europe and North
America. Trading profit increased to £23 million (2012: £20 million) at a margin of 9.8% (2012:
9.6%).
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GKN Land Systems
Sales
Trading profit
Trading margin
2013
Q3 9m YTD
£m
£m
208
695
16
61
7.7%
8.8%
2012
Q3 9m YTD
£m
£m
216
728
18
70
8.3%
9.6%
GKN Land Systems markets remained weak, particularly for construction and industrial equipment.
The conclusion of some of the previously announced Structures contracts also led to a drop in
sales. Agricultural equipment demand remained broadly flat.
Sales were down 4% at £208 million, including an 8% organic decline which was similar to the first
half. Trading profit was £16 million and the trading margin was 7.7%, reflecting the more
challenging markets and normal seasonality.
Other businesses
Sales in the quarter for GKN’s other businesses increased to £26 million (2012: £19 million) due to
a rebound in sales from both Cylinder Liners and Emitec as the commercial vehicle market
recovered from the prior year. GKN’s other businesses reported a trading profit of £2 million
(2012: trading loss of £2 million).
Final Results Announcement
The Group intends to issue its 2013 full year results announcement on 25 February 2014.
Notes
(1)
Financial information set out in this announcement, unless otherwise stated, is presented on a
management basis which aggregates the sales and trading profit of subsidiaries (excluding certain
subsidiary businesses sold and closed) with the Group’s share of the sales and trading profit of joint
ventures. References to trading margins are to trading profit expressed as a percentage of sales.
Management profit or loss before tax is management trading profit less net subsidiary interest
payable and receivable and the Group’s share of net interest payable and receivable and taxation of
joint ventures. These figures better reflect performance of continuing businesses. Where
appropriate, reference is made to organic results which exclude the impact of acquisitions/
divestments as well as currency translation on the results of overseas operations.
(2)
The Group has adopted the amendments to IAS 19 Employee benefits, which became effective on 1
January 2013. Consequently, the comparative information has been restated with the effect of
reducing trading profit and management profit before tax by £1 million for the three months ended 30
September 2012 and by £3 million for the nine months ended 30 September 2013.
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Further information:
Analysts/Investors:
Guy Stainer
Investor Relations Director
GKN plc
T: +44 (0)207 463 2382
M: +44 (0)7739 778187
E: guy.stainer@gkn.com
Media:
Chris Fox
Group Communications Director
GKN plc
T: +44 (0)1527 533238
M: +44 (0)7920 540051
E: chris.fox@gkn.com
Cautionary Statement
This announcement contains forward looking statements which are made in good faith based on
the information available at the time of its approval. It is believed that the expectations reflected in
these statements are reasonable but they may be affected by a number of risks and uncertainties
that are inherent in any forward looking statement which could cause actual results to differ
materially from those currently anticipated. Nothing in this document should be regarded as a
profits forecast.
Notes to Editors
GKN plc is a global engineering business serving the aerospace, automotive and land systems
markets. It has operations in more than 30 countries, around 50,000 employees in subsidiaries
and joint ventures and had sales of £6.9 billion in the year ended 31 December 2012. GKN plc is
listed on the London Stock Exchange (LSE: GKN).
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