NEWS RELEASE
GKN plc
Interim Management Statement
15 April 2014
GKN plc, the global engineering business that serves the aerospace, automotive and land systems
markets, today issues its Interim Management Statement covering the period since 1 January
2014.
Market Overview
Demand in the Group’s principal markets has been consistent with our expectations at the time of
the 25 February 2014 results. The commercial aerospace market remains strong while military
aerospace demand is declining. Global light vehicle production was up nearly 5% with good
growth in Japan, China, North America and Europe while markets in India and Brazil declined.
Construction and industrial markets were broadly flat while demand for agricultural equipment fell.
Group Results
Against this backdrop, GKN continued to make good progress with sales for the three months
ended 31 March 2014 reaching £1,915 million. This represented a 7% organic increase which was
offset by 6% adverse currency translation, due to sterling’s strength against most major currencies.
Trading profit increased 19% to £166 million. Organic trading profit increased by £35 million,
helped by the absence of £23 million of restructuring in 2013, while the adverse currency
translation impact was £9 million. Trading margin was 8.7% (2013: 7.4%, or 8.6% excluding the
£23 million restructuring charges).
Net debt at 31 March 2014 was £785 million (31 December 2013: £732 million), reflecting normal
seasonality.
(1)
Management basis
Sales
Trading profit
Trading margin
Profit before tax
2014
Q1
£m
2013
Q1
£m
1,915
1,891
1
166
139
19
8.7%
7.4%
1.3pts
145
119
22
Change
(%)
Outlook
The outlook remains in line with our February statement.
Summary
Nigel Stein, Chief Executive, GKN plc, commented:
"We have delivered a strong performance in the first quarter despite adverse currency translation
impacting the 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. However, our market leading
positions, advanced technology and extensive global footprint should make 2014 another year of
progress."
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Divisional Markets and Performance
GKN Aerospace
Sales
Trading profit
Trading margin
2014
Q1
£m
2013
Q1
£m
Change
(%)
546
544
-
56
54
4
10.3%
9.9%
0.4pts
GKN Aerospace sales showed good organic growth of 5% in the first quarter offset by 5% adverse
currency translation. The organic growth was due to strong sales in commercial aerospace partly
offset by the £15 million impact of the supply chain contract which was taken back in-house by
Airbus in the second quarter of 2013. Military sales were flat on an organic basis, due to the
recovery of sales for certain programmes where, in the prior year, there were temporarily reduced
customer call-offs. We still expect military sales for the year to decline.
Trading profit increased £2 million to £56 million, with an organic increase of £2 million and the
positive benefit of disposals of £2 million, partly offset by £2 million adverse currency translation.
The trading margin improved to 10.3%.
Automotive Market
Global light vehicle production in the first quarter of 22.1 million vehicles, was nearly 5% higher
than the comparable period in 2013, with good growth in Japan (+14%, due to short term
government incentives), China (+10%), North America (+6%) and Europe (+5%, against a poor
prior year comparator) being party offset by declines in India (-10%) and Brazil (-2%). External
forecasters expect this rate of growth to slow to 3% in 2014, with a reversal in growth in Japan, due
to the ending of government incentives, being the largest factor.
GKN Driveline
Sales
Trading profit
Trading margin
2014
Q1
£m
2013
Q1
£m
885
844
5
71
51
39
8.0%
6.0%
2.0pts
Change
(%)
GKN Driveline delivered a strong first quarter result with sales increasing 5% to £885 million.
Organic sales increased 14% which was partly offset by 7% of adverse currency translation
impact. Trading profit was £71 million and trading margin was 8.0% (2013: 6.0%, or 7.7%
excluding £14 million restructuring charges). The results benefited from a strong performance in
China and the one-time benefit of the pull forward of sales in Japan.
Page 2 of 4
GKN Powder Metallurgy
Sales
Trading profit
Trading margin
2014
Q1
£m
2013
Q1
£m
237
235
1
26
20
30
11.0%
8.5%
2.5pts
Change
(%)
GKN Powder Metallurgy also showed a strong first quarter, with organic sales growth of 8% mostly
offset by 7% adverse currency translation. Growth above automotive production was achieved in
all regions except Brazil, where sales fell due to tougher industrial markets. Trading profit
increased to £26 million at a margin of 11.0% (2013: 8.5%, or 10.2% excluding £4 million
restructuring charges).
GKN Land Systems
Sales
Trading profit
Trading margin
2014
Q1
£m
2013
Q1
£m
Change
(%)
217
244
(11)
16
21
(24)
7.4%
8.6%
(1.2)pts
GKN Land Systems sales showed a 9% organic decline and a 3% fall due to adverse currency
translation. Agricultural equipment demand softened and sales were also impacted by £10 million,
due to the previously announced conclusion of two chassis contracts. Trading profit was £16
million, with £4 million organic decline and £1 million adverse currency translation. The trading
margin was 7.4% (2013: 8.6%, or 9.4% excluding £2 million restructuring charges).
Other businesses
Sales in the quarter for GKN’s other businesses increased 25% to £30 million (2013: £24 million)
due to an improvement 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 (2013: trading loss of £3 million, including restructuring charges of £3 million).
Half Year Results Announcement
The first half results will be announced on 29 July 2014.
Page 3 of 4
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
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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