NEWS RELEASE
GKN plc
Interim Management Statement
21 October 2014
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 2014.
Market Overview
Demand in the Group’s principal markets has been broadly consistent with our expectations at the
time of our half year results. The commercial aerospace market was robust and global light vehicle
production was up 2%. Agricultural equipment demand fell sharply while military aerospace,
construction and industrial markets were broadly flat.
Group Results
Against this backdrop and in our seasonally lower quarter, GKN continued to make good progress
with sales for the three months ended 30 September 2014 reaching £1,789 million. This
represented a 3% organic increase which was offset by £119 million (6%) adverse currency
translation, due to sterling’s strength against most major currencies. The net impact of acquisitions
and divestments was a reduction in sales of £15 million.
Third quarter trading profit increased to £160 million. Organic trading profit increased by £20
million (14%) while the adverse currency translation impact was £11 million and the reduction due
to acquisitions/divestments was £1 million. Trading margin increased to 8.9%. Group profit before
taxation increased 6% to £139 million.
2014
(1)
Management basis
Sales
Trading profit
Trading margin (%)
Profit before tax
2013
Q3
9m YTD
Q3
9m YTD
£m
£m
£m
£m
1,789
5,617
1,865
5,734
160
500
152
472
8.9%
8.9%
8.2%
8.2%
139
435
131
409
Outlook
We see little change in our markets for the remainder of the year. The automotive market is
forecast to remain positive with a lower rate of growth in the final quarter. Aerospace markets are
robust whilst the agricultural equipment market looks set to continue its recent decline. As
previously stated, the strength of sterling will adversely affect reported results, but the Group
continues to expect 2014 overall to show another year of progress.
Summary
Nigel Stein, Chief Executive, GKN plc, commented:
"We have delivered a good performance in the third quarter despite adverse currency translation
continuing to impact reported sterling results. Looking forward to the rest of the year, tougher prior
year comparators mean that organic growth is likely to be more modest but we expect our market
leading positions, advanced technology and extensive global footprint to make 2014 another year
of progress."
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Divisional Markets and Performance
GKN Aerospace
Sales
Trading profit
Trading margin
2014
Q3 9m YTD
£m
£m
542
1,642
72
193
13.3%
11.8%
2013
Q3 9m YTD
£m
£m
555
1,678
61
179
11.0%
10.7%
GKN Aerospace achieved organic sales growth of 3% driven by good commercial demand, military
remaining flat, and offset by adverse currency translation of 5%. Trading profit increased 18% to
£72 million, benefitting from a £14 million organic increase, including income of £4 million for a
further milestone achieved in relation to Composite Technology and Applications Limited, the joint
venture that was disposed of in December 2013. There was a positive benefit from disposals of £1
million while adverse currency translation was £4 million (7%). The trading margin improved to
13.3%.
Automotive
Global light vehicle production in the third quarter of around 20.7 million vehicles was 2% ahead of
the comparable period in 2013 with good growth in China (+8%), North America (+8%) and India
(+4%) and declines in Europe (-1%), Japan (-3%) and Brazil (-17%).
Due to stronger prior year comparators, this rate of growth is forecast to slow to 1% in the fourth
quarter.
GKN Driveline
Sales
Trading profit
Trading margin
2014
Q3 9m YTD
£m
£m
829
2,594
62
204
7.5%
7.9%
2013
Q3 9m YTD
£m
£m
842
2,570
58
175
6.9%
6.8%
GKN Driveline delivered a good third quarter result with organic sales increasing 7%, ahead of
global automotive production, offset by 8% adverse currency translation impact. Trading profit was
£62 million with the organic increase of £9 million being partly offset by £5 million adverse currency
translation. Trading margin was 7.5% (2013: 6.9%). The results benefited from a strong
performance in China, North America and Europe although sales in Japan and Brazil were down in
line with the market.
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GKN Powder Metallurgy
Sales
Trading profit
Trading margin
2014
Q3 9m YTD
£m
£m
225
696
21
74
9.3%
10.6%
2013
Q3 9m YTD
£m
£m
234
714
23
71
9.8%
9.9%
GKN Powder Metallurgy’s organic sales increased 3%. Adverse currency translation reduced
sales by 7% and trading profit by £2 million. Trading margin was slightly lower due to a major
equipment failure at one plant and softer sales in Brazilian industrial markets.
GKN Land Systems
Sales
Trading profit
Trading margin
2014
Q3 9m YTD
£m
£m
176
602
8
39
4.5%
6.5%
2013
Q3 9m YTD
£m
£m
208
695
16
61
7.7%
8.8%
GKN Land Systems markets fell sharply, particularly for Agricultural equipment demand where the
outlook progressively worsened during the period. Demand remained broadly flat for construction
and industrial equipment.
Sales were down 15%, representing a 10% organic decline and 5% adverse currency translation.
Trading profit and margin were lower due to the rapid decline in sales.
Other businesses
Sales in the quarter for GKN’s other businesses reduced to £17 million (2013: £26 million)
reflecting the disposal of the Group’s share of the Emitec joint venture.
Financing
There has been no material change to the Group’s financial position with net debt at 30 September
2014 of £857 million (30 June 2014: £813 million).
Immediately after the quarter end, on 1 October, the credit rating agency, Moody’s, upgraded GKN
from a non-investment grade rating of Ba1 (positive), to the investment grade rating Baa3 (stable).
GKN’s three credit ratings are now Baa3 stable outlook (Moody’s), BBB- stable outlook (Fitch) and
BB+ positive outlook (S&P).
Management Changes
During the period it was announced that Marcus Bryson, CBE, Chief Executive Aerospace and
Land Systems is retiring from the Group and, with effect from 31 December 2014, will step down
from the Board. From that date, Kevin Cummings, CEO GKN Aerospace and Phil Swash, CEO
GKN Land Systems will report directly to Nigel Stein, Chief Executive.
Page 3 of 5
IMS Call
There will be a call for analysts and investors at 09.00am today. Dial in details are:
Direct dial:
UK toll-free:
Conference ID:
+44 (0) 203 139 4830
0808 237 0030
55858705#
Participants dialling into the call from outside the UK can find a local number in the following file:
http://wpc.1726.planetstream.net/001726/FEL_Events_International_Access_List.pdf
Conference ID as above.
A replay of the conference call will be available for 30 days at the following numbers or will be
available thereafter on the Group’s website. Audio Playback:
Direct dial:
UK toll-free:
Conference ID:
+44 (0) 203 426 2807
0808 237 0026
651177#
Final Results Announcement
The Group intends to issue its 2014 full year results announcement on 24 February 2015.
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.
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
Page 4 of 5
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 £7.6 billion in the year ended 31 December 2013. GKN plc is
listed on the London Stock Exchange (LSE: GKN).
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