GKN
Delivering Sustainable Growth
Sir Kevin Smith – Chief Executive
GKN Full Year Results – Year ended 31 December 2010
Highlights
Strong fourth quarter cements really excellent year
Group sales increase 22% - trading margin 7.6%
All divisions make solid contributions
Driveline and Powder Metallurgy sales increase 38% vs 24%
increase in global light vehicle production
Strong free cash flow generation of £188m – net debt
halved from £300m to £151m
Final dividend of 3.5p brings total to 5.0p per share
GKN
Delivering Sustainable Growth
GKN Full Year Results - Year ended 31 December 2010
2
Highlights
Conclusion of restructuring programme – growth the
priority
Driveline - new plants in India and China plus major expansion
in Mexico
Emerging industry trends accelerate demand for Powder
Metallurgy applications
$1.5bn of new wins in Aerospace – across range of airframe
and engine programmes
Land Systems strategy delivering results
GKN
Delivering Sustainable Growth
GKN Full Year Results - Year ended 31 December 2010
3
Results Summary
2010
Sales
Trading profit
Trading margin
Profit before tax
H1
Q3
Q4
Total
£m
£m
£m
£m
2,701
1,336
1,392
5,429
4,454
975
202
100
109
411
156
255
7.5%
7.5%
7.8%
7.6%
3.5%
4.1%
175
88
100
363
87
276
GKN Full Year Results - Year ended 31 December 2010
2009
Increase/
Change
£m Decrease
%
22
4
Global Light Vehicle Production
12.0
10.0
Europe
10.0
8.0
8.0
6.0
6.0
4.0
4.0
2.0
2.0
GLOBAL
40.0
35.0
30.0
25.0
0.0
20.0
0.0
H1
H2
H1
2009 actual - 12.2m
2010 actual - 16.0m
12.0
10.0
45.0
12.0
Americas
H2
2009 actual - 16.8m
2010 actual – 19.5m
12.0
Japan
10.0
5.0
China
10.0
15.0
0.0
8.0
8.0
6.0
6.0
4.0
4.0
2.0
2.0
H1
H2
2009
0.0
2009 actual - 59.9m
2010 actual - 74.6m
0.0
H1
H2
H1
2009 actual - 7.7m
2010 actual - 9.3m
2010
H2
2009 actual - 12.9m
2010 actual - 16.8m
2009
2010
GKN Full Year Results - Year ended 31 December 2010
Source: IHS Automotive
5
Driveline
Subsidiaries & JVs
(constant currency)
Sales
Trading profit
2010
2009
Increase
£2,433m
£1,844m
32%
£169m
£13m
£156m
Sales increased £589m (32%) and trading profit up £156m – 6.9% trading margin
30% increase in driveshaft revenues – 53% increase in non driveshaft products
Additional costs from rapid growth in Europe, China, India and Mexico
Final restructuring actions conclude first half 2011 – further margin progression
New Driveline Products
SX6 high performance
driveshaft for volume vehicle
market
e-Transmission
GKN Full Year Results - Year ended 31 December 2010
Electric Drive
Axles M-4WD
6
Driveline
Market outperformance and strong revenue growth in all regions
60%
40%
52%
31%
33%
30%
16%
20%
50%
22%
20%
0%
Americas
Europe
Americas
Europe
Market (units production)
China
China
Japan
Japan
Driveline sales
Second half performance particularly strong – 21% revenue
growth vs 11% increase in units of production
GKN Full Year Results - Year ended 31 December 2010
7
Driveline
Excellent performance in winning new business
Driveshaft products
80% win rate on new driveshaft business
New plants: India, China, major capacity expansion in Mexico
All Wheel Drive and Transaxle products
AWD/4WD
Couplings
High speed propshafts: Volvo, VW, Mercedes and Audi
Electronic differential locker - two new programmes with Ford
e-Drive systems
Transmissions for electric vehicles and plug-in hybrid
Electric drive axle evaluations with five customers
Limited Slip and
Locking Differentials
Propshafts – new attachment
method Direct Torque Flow
Driveline to continue to outgrow global markets
GKN Full Year Results - Year ended 31 December 2010
8
Powder Metallurgy
Subsidiaries & JVs
(constant currency)
Sales
Trading profit/(loss)
2010
2009
Increase
£759m
£512m
48%
£54m
£(6)m
£60m
Powder Metallurgy sales up £247m (48%), trading profit up £60m - trading
margin 7.1%
Hoeganaes volumes up 46% and Sinter Metals sales increased 43%
Sinter Metals market outperformance and strong revenue growth in major markets
Sales in India, China and Brazil increase by 57%
60%
40%
52%
39%
20%
0%
36%
13%
North America
North America
Market (units production)
Western Europe
Western Europe
Sinter Metal sales
Sinter wins over £100m in annualised sales of new parts
GKN Full Year Results - Year ended 31 December 2010
9
Powder Metallurgy
Powder Metallurgy moving from substitution technology to primary
design solution – “Design for PM”
Automotive industry trends driving new product developments and
powder metal applications
Industry Trends
Energy
Efficiency
Efficient
Transmissions
Reduced
Emissions
Driving Dynamics
Electrification
Electric Power
Steering
Soft Magnetics
and Gears
New Products
Start-Stop
Systems
Dual Clutch
Transmission
Variable Valve
Timing
New PM Applications
GKN Full Year Results - Year ended 31 December 2010
10
Powder Metallurgy
Strong growth in new automotive product applications
Power Steering
Dual Clutch Transmission
Start-Stop
Soft Magnetics
Variable Valve Timing
“Design for PM” to account for 40% of Sinter Metal Revenues by 2015
Powder Metallurgy to deliver strong growth and improving margins
GKN Full Year Results - Year ended 31 December 2010
11
Land Systems
Sales by Market
Improving conditions in all
major markets
US agriculture, mining and
construction enjoyed good
growth
20%
37%
11%
Strong demand in UK
autostructures particularly
Land Rover
European agriculture recovery
commences fourth quarter
32%
Agriculture
Commercial Vehicle / Passenger Car
Construction & Mining
Industrial
GKN Full Year Results - Year ended 31 December 2010
12
Land Systems
Subsidiaries & JVs
(constant currency)
Sales
Trading profit/(loss)
2010
2009
Increase
£699m
£583m
20%
£37m
£(3)m
£40m
Sales by Business
Sales up £116m (20%), trading profit
up £40m – trading margin 5.3%
£256m
£190m
Power Management sales up 18%
Wheels and Structures up 33%
Aftermarket and Services up 10%
£253m
Power Management
Wheels & Structures
Aftermarket & Services
GKN Full Year Results - Year ended 31 December 2010
13
Land Systems
Continuing success in exploiting driveline technology in new markets
Torque sensing device incorporating GPS – accurate and efficient land fertilisation with Rauch
CVJ driveshafts enables independent suspension for tractors
Torque sensing for fertiliser
spreader
Independent suspension
for tractors
Mining Wheels
New product developments securing substantial business
Chinese produced large mining wheels with first Original Equipment customer
Enhanced CVT transmission provides significant efficiency benefits in European combine
harvester
Land Systems will benefit from continued recovery in
traditional markets and further penetration of new products
GKN Full Year Results - Year ended 31 December 2010
14
Aerospace
2010 exciting achievements for GKN Aerospace
Boeing 787
GKN Ice Protection
systems operates on
First Flight
Northrop N-UCAS
First Flight with GKN
composite
structures
Sikorsky CH53K
Delivery of first
composite primary
structure rear
fuselage
HondaJet
Flies with GKN
composite fuselage
Airbus A400M
Flies with GKN
composite wing
spars
A350
First composite
auto fibre placed
wing spar produced
in new GKN facility
2010 development milestones become production
programmes for 2012 and beyond
GKN Full Year Results - Year ended 31 December 2010
15
Aerospace - Civil
Airbus and Boeing Commercial backlog further extended
2009
Net
Orders
2010
Airbus
3,488
64
3,552
Boeing
3,375
68
3,443
6,863
132
6,995
Production rate increases in all large commercial segments
Airbus
Boeing
2012 – A320 single aisle from rate 36
to 38, with review of increase to 40/42
Rate increases on 737/777
2013 - wide body A330 from rate 7 to 10
B787 activity down 2011 – rate
10 in 2013
A380 from 15 in 2011 to 25 in 2013
B747-8 enters production
GKN Full Year Results - Year ended 31 December 2010
16
Aerospace - Military
US defence spending remains
relatively stable
US Dept of Defense Spend
Military aircraft programmes in
transition phase
F22 run down and C17 rate
reduction
F18, F15, C130J and Blackhawk
provide solid backlog
CH53K, JSF and A400M provide
growth
F18, F15 and JSF well positioned
in major international
competitions
Base Budget
Overseas Contingency Operations
OCO Supplemental
Source: IATA
GKN Full Year Results - Year ended 31 December 2010
17
Aerospace
Subsidiaries & JVs
(constant currency)
Sales
Trading profit
2010
2009
Decrease
£1,451m
£1,492m
(3)%
£162m
£170m
(5)%
Sales down £41m (3%), profits down £8m, trading margin of 11.2%
Military sales down. Civil sales broadly flat
$1.5 billion of new contracts across range of airframe and engine
programmes
Engine LTA’s on GenX, CFM56, GP7000 and Trent 700/1000
Airframe contracts: B787, A350, C-series and new large business jet
Long term programme extensions on important platforms
F18 further four year buy
JSF engine structures with Pratt and Whitney
Return to strong organic growth and further margin expansion in 2012
GKN Full Year Results - Year ended 31 December 2010
18
Summary
2010 performance demonstrates a continuing strong recovery
from global recession
Industry trends and market positioning supports sustainable
above market growth in all four divisions
Driveline global positioning and new product penetration
Powder Metallurgy new applications and success of “Design for PM”
Land Systems market recovery and increasing industrial demand for
efficient power management
Aerospace growth in civil aviation and positions on all major new
aircraft and engine programmes
GKN
Delivering Sustainable Growth
GKN Full Year Results - Year ended 31 December 2010
19
GKN
Delivering Sustainable Growth
Bill Seeger – Finance Director
GKN Full Year Results – Year ended 31 December 2010
Strong Performance
Sales growth - ahead of the market with healthy
conversion into profit
Margins up significantly
Strong cashflow generation
Return on investment 17%
GKN
Delivering Sustainable Growth
GKN Full Year Results - Year ended 31 December 2010
21
Results Summary
2010
£m
2009
£m
Change
£m
Change
%
5,429
4,454
975
22%
411
156
255
7.6%
3.5%
4.1% pts
363
87
276
Earnings per share
20.7p
5.7p
15.0p
Dividend per share
5.0p
-
5.0p
188
136
52
Dec 2010
£m
Dec 2009
£m
Change
£m
(151)
(300)
149
Sales
Trading profit
Trading margin
Profit before tax
Free cashflow
Net borrowings
GKN Full Year Results - Year ended 31 December 2010
22
Income Statement
2010
£m
2009
£m
5,084)
4,223)
Trading profit
367)
133)
Restructuring and impairment charges
(39)
(144)
12)
76)
(19)
(24)
UK Pension scheme curtailment
68)
-)
Gains and losses on changes in Group structure
(4)
(2)
385)
39)
Post-tax joint venture trading
36)
18)
Joint venture exceptional and non-trading items
(1)
3)
Share of post-tax earnings of joint ventures
35)
21)
Interest (net)
(40)
(64)
Other net financing charges
(35)
(50)
Net financing costs
(75)
(114)
Profit/(loss) before tax
345)
(54)
363
87
Sales (subsidiaries)
Change in value of derivative and other financial instruments
Amortisation of non-operating intangible assets arising on business
combinations
Operating profit
Profit before tax – Management Basis
GKN Full Year Results - Year ended 31 December 2010
23
Group Overview
Sales
£5,429m
(£4,454m)
Trading Profit
£411m
(£156m)
£2,433m
(£1,803m)
Other
£169m
Other
Driveline
45%
Driveline
39%
£37m
Land
£699m
(£593m) Systems
Land
Systems
9%
Powder
Metallurgy
13%
13%
Aerospace
27%
Powder
Metallurgy
14%
£759m
(£512m)
£1,451m
(£1,486m)
Aerospace
38%
£54m
£162m
( ) = 2009
GKN Full Year Results - Year ended 31 December 2010
24
Driveline
Trading Performance
2010
2009
Investment Returns
Sales - £m
2,433
1,803
Return on invested capital
169
10
6.9%
0.6%
Trading profit - £m
Margin
Tangible capex - £m
Capex/Depreciation ratio
Sales up 35% (£630m)
16.0%
0.9%
73
73
0.7x
0.7x
Capital investment increasing to support
growth
Europe – largest region, up 17%
Americas sales up 41%
Sales by Origin
2009
ROIC up sharply as margin expands and
restructuring benefits delivered
Asia 35% of sales, up 56%
£847m
(£544m)
2010
Asia
35%
Americas
27%
Europe
38%
( ) = 2009
GKN Full Year Results - Year ended 31 December 2010
£667m
(£474m)
£919m
(£785m)
25
Powder Metallurgy
Trading Performance
2010
2009
759
512
54
(7)
7.1%
(1.4)%
Sales - £m
Trading profit/(loss) - £m
Margin
Investment Returns
Return on invested capital
Tangible capex - £m
Capex/Depreciation ratio
2010
2009
13.2%
(1.6)%
27
10
0.9x
0.3x
Sales up 48% (£247m)
ROIC improving with profitability
76% sales to automotive
Capital investment “Design for PM”
North America largest
region, sales up 61%
£87m
(£55m)
Europe sales up 34%
Growing Asia and South
America
Sales by Origin
Asia/SA
12%
Europe
40%
North
America
48%
£366m
(£228m)
£306m
(£229m)
( ) = 2009
GKN Full Year Results - Year ended 31 December 2010
26
Land Systems
Trading Profit
Sales - £m
Trading profit/(loss) - £m
Margin
2010
2009
699
593
37
(3)
5.3%
(0.5)%
Investment Returns
Return on invested capital
Tangible capex - £m
Capex/Depreciation ratio
Sales up 18% (£106m)
2010
2009
15.8%
(1.1)%
7
11
0.5x
0.7x
ROIC improved on profit recovery and
favourable asset base
Agriculture 37% of sales, up 5%
Capital investment will increase following
late cycle market recovery
Construction, Mining, Industrial up 34%
Commercial vehicle and passenger
car, up 21%
£136m
(£115m)
£260m
(£248m)
Industrial
20%
Agriculture
37%
Sales by Market
Commercial
vehicle &
passenger
car
32%
£223m
(£184m)
GKN Full Year Results - Year ended 31 December 2010
C&M
11%
£80m
(£46m)
( ) = 2009
27
Aerospace
Trading Performance
2010
2009
Investment Returns
Sales - £m
1,451
1,486
Return on invested capital
162
169
11.2%
11.4%
Trading profit - £m
Margin
Sales down 2% due to military segment
Tangible capex - £m
Capex/Depreciation ratio
2010
2009
23.3%
24.2%
51
43
1.3x
1.0x
Civil 53% - Military 47% sales split
ROIC - highest in Group, including
continued long term investment
Military – balance of fast jets, rotorcraft,
transport aircraft
A350 investment £39m in 2010; 2011 peak
investment year
Fast Jets
21%
Rotorcraft
12%
Transports
10%
Sales by Segment
Civil Airliners
40%
Aftermarket
7%
Regional/
Business Jets
5%
Other
5%
GKN Full Year Results - Year ended 31 December 2010
28
Trading Margins
H1
2010
%
H2
2010
%
FY
2010
%
Target
range
%
Driveline
6.9
7.0
6.9
8-10
Powder Metallurgy
6.9
7.3
7.1
8-10
10.9
11.4
11.2
10-12
Land Systems
5.3
5.3
5.3
7-10
Group
7.5
7.7
7.6
8-10
Aerospace
GKN Full Year Results - Year ended 31 December 2010
29
Joint Ventures
2010
£m
2009
£m
Change
%
355
245
45%
44
23
12.4%
9.4%
Interest and taxation
(8)
(5)
Share of post-tax earnings
36
18
Sales
Trading profit
Trading margin
Includes Driveline’s Chinese JVs, Emitec, Chassis Systems and other smaller JVs
Sales growth from automotive market
recovery
Americas
5%
Driveline China up 50%
Emitec sales up 46%
Europe
22%
Asia
73%
NoNOx acquisition – emissions reduction
GKN Full Year Results - Year ended 31 December 2010
30
Restructuring
Income Statement
2010
£m
2009
£m
-
(9)
Redundancy costs
(12)
(86)
Short-time working
(2)
(24)
Reorganisation costs
(25)
(22)
Total restructuring and impairment
(39)
(141)
Cash spend
(55)
(99)
Impairment – Subs & JVs
2008 Restructuring programme coming to an end
Europe, UK and Japan
Cash spend £55m in 2010, £30m in 2011
Benefits £156m, including £18m in 2011
GKN Full Year Results - Year ended 31 December 2010
31
Net Financing Costs
2010
£m
2009
£m
(39)
(57)
(1)
(7)
(40)
(64)
Other net financing charges
(35)
(50)
Net financing costs
(75)
(114)
13.0x
5.2x
Net interest payable
Bond buy back premium
EBITDA/Net interest ratio (12 months)
Net interest benefit from bond buy back and lower overall
borrowings
Other net financing charges reduced - UK pension actions and
asset returns
GKN Full Year Results - Year ended 31 December 2010
32
Tax Update
Unrecognised deferred tax
asset balance now £469m
Focused in US and UK
Recognition resulted in book
tax rate of 11%
Utilisation resulted in cash
tax rate of 13%
2010
2009
Book Tax Rate
11%
17%
Cash Tax Rate
13%
29%
Guidance for 2011
Book tax rate 15-20%
Cash tax rate 13-15%
GKN Full Year Results - Year ended 31 December 2010
33
Operating Cashflow
2010
£m
2009
£m
Trading profit (subsidiaries)
367
133
Depreciation, amortisation and impairments
203
206
EBITDA
570
339
Change in working capital and provisions
(44)
97
Strategic restructuring
(55)
(99)
Movement in post-employment obligations
(48)
(45)
(3)
(4)
420
288
5
35
(190)
(153)
10
28
245
198
Other
Cash generated from operations
Proceeds from sale of fixed assets
Capital expenditure (tangible and intangible)
Government refundable advances
Operating cashflow
82% profit conversion
(pre-restructuring)
GKN Full Year Results - Year ended 31 December 2010
Capex/depreciation
ratio 0.8x
34
Working Capital
Average Working Capital % of Sales
12
11.5%
11.1%
9.2%
% 9
6.8%
6
FY '07
FY '08
FY '09
FY '10
2007
2009
2010
Working capital – segmental basis
£276m
£256m
£286m
Average working capital % of sales
11.1%
9.2%
6.8%
8.5x
7.9x
9.4x
Average productive inventory - turns
GKN Full Year Results - Year ended 31 December 2010
35
Free Cashflow
2010
£m
2009
£m
245
198
23
15
Interest (net)
(46)
(61)
Tax
(33)
(15)
(1)
(1)
188
136
-
403
Dividends paid to shareholders
(23)
-
Acquisitions, disposals and investments
(18)
(111)
2
(20)
149
408
Dec 2010
£m
Dec 2009
£m
(151)
(300)
Operating cashflow
Dividends received (joint ventures)
Dividends paid to non-controlling interests
Free cashflow
Rights issue
Currency and other
Net movement in borrowings
Net borrowings
GKN Full Year Results - Year ended 31 December 2010
36
Pension Update - UK
Asset backed scheme - £331m recognised
£30m/year cash for 20 years
2011 – first payment £23m
Benefit changes led to £68m liability reduction
Triennial valuation agreed with Trustee
Confirms no deficit funding for at least 3 years
GKN Full Year Results - Year ended 31 December 2010
37
Net Assets
Dec 2010
£m
Dec 2009
£m
2,462
2,363
18
(52)
Post-employment obligations
(600)
(996)
Net borrowings
(151)
(300)
(42)
(43)
1,687
972
411
156
2,411
2,528
17.0%
6.2%
Net operating assets
Current and deferred tax
Derivative financial instruments
Net assets
Trading profit
Average invested capital
Return on average invested capital
GKN Full Year Results - Year ended 31 December 2010
38
Dividends
Dividend per
share
Cash Costs
Interim dividend
1.5p
£23m
Final dividend
3.5p
£54m
Total dividend per share
5.0p
£77m
Cover 2.4x on free cash flow
Dividend cover 4.1x on management EPS
Progressive dividend policy – 2.5x management EPS cover in
medium term
GKN Full Year Results - Year ended 31 December 2010
39
Summary
Performance reflects our market strength
Margin increasing towards target range
Robust free cashflow
Positioned to invest for sustained growth
Dividend restored
Balance sheet provides flexibility
GKN
Delivering Sustainable Growth
GKN Full Year Results - Year ended 31 December 2010
40
GKN
Delivering Sustainable Growth
Outlook
GKN Full Year Results – Year ended 31 December 2010
Outlook
GKN’s Markets
Positive outlook for GKN’s major markets
Global automotive production forecast to increase by 5%
to 78 million vehicles
Small reduction in US military – civil production returning
to growth.
Land Systems to continue to improve – European
agriculture to enjoy good growth
GKN Full Year Results - Year ended 31 December 2010
42
Outlook
GKN’s Performance
Driveline and Powder Metallurgy expected to show further
good improvement
Conclusion of restructuring gives additional benefits to Driveline
Aerospace to be broadly flat – increases in civil to offset
reductions in military
Return to strong growth trend in 2012
Land Systems to continue to improve – benefits from
European agriculture recovery (25% of Land Systems sales)
GKN Full Year Results - Year ended 31 December 2010
43
Outlook
Cashflow
Positive free cash flow (after dividends) – further reduction in net debt
Raw Materials
Base Material supplies already contracted for 2011 for Aerospace and
Driveline
Similar price levels to 2010
Land Systems expect substantial recovery of increases through
pricing
Scrap metal surcharges impact Driveline and Powder Metallurgy
80% recovery over course of year
Impact from material cost increases currently expected to be small
GKN Full Year Results - Year ended 31 December 2010
44
Summary
2011 expected to be a year of good progress for the
Group
GKN well placed for a period of sustained growth,
margin expansion and strong free cash flow
generation
GKN Full Year Results - Year ended 31 December 2010
45
APPENDIX
GKN Full Year Results – Year ended 31 December 2010
Results Summary
2010
2009
H1
£m
H2
£m
FY
£m
H1
£m
H2
£m
FY
£m
2,701
2,728
5,429
2,165
2,289
4,454
202
209
411
25
131
156
7.5%
7.7%
7.6%
1.2%
5.7%
3.5%
Profit/(loss)
before tax
175
188
363
(6)
93
87
Free cashflow
107
81
188
23
113
136
Sales
Trading profit
Trading margin
GKN Full Year Results - Year ended 31 December 2010
47
Trading Profile
2010
2009
H1
£m
H2
£m
FY
£m
H1
£m
H2
£m
FY
£m
2,701
2,728
5,429
2,165
2,289
4,454
1,189
1,244
2,433
811
992
1,803
Powder Metallurgy
378
381
759
229
283
512
Aerospace
734
717
1,451
770
716
1,486
Land Systems
359
340
699
329
264
593
202
209
411
25
131
156
Driveline
82
87
169
(36)
46
10
Powder Metallurgy
26
28
54
(14)
7
(7)
Aerospace
80
82
162
79
90
169
Land Systems
19
18
37
1
(4)
(3)
Profit/(loss) before tax
175
188
363
(6)
93
87
Subs & JVs
Sales
Driveline
Trading profit/(loss)
GKN Full Year Results - Year ended 31 December 2010
48
Trading Summary by Quarter - 2010
Q1
£m
Q2
£m
Q3
£m
Q4
£m
FY
£m
1,306
1,395
1,336
1,392
5,429
Driveline
580
609
609
635
2,433
Powder Metallurgy
180
198
191
190
759
Aerospace
353
381
349
368
1,451
Land Systems
173
186
165
175
699
84
118
100
109
411
Driveline
37
45
40
47
169
Powder Metallurgy
11
15
15
13
54
Aerospace
32
48
39
43
162
6
13
8
10
37
71
104
88
100
363
Subs & JVs
Sales
Trading profit
Land Systems
Profit before tax
GKN Full Year Results - Year ended 31 December 2010
49
Impact of Currency
Translational:
Effect on:
Average Rate
2010
2009
Change
%
Sales
£m
Trading
Profit
£m
US $
1.55
1.56
(0.6)
9
1
Euro
1.16
1.12
3.6
(46)
(1)
Real
2.72
3.11
(12.5)
28
4
Yen
136
146
(6.8)
21
(1)
Other
23
2
Impact (subs & JVs)
35
5
Translational impact on 2010 trading profit (including JVs):
1% move in euro = £1.0m; 1% move in US dollar = £1.6m
Transactional - £2m favourable impact in 2010
GKN Full Year Results - Year ended 31 December 2010
50
Summary of Restructuring Actions and Benefits
Workforce
Actions
Charges
Cash Spend
Benefits
Cost
Reduction
Facilities
Impairment
STW
Cost
Reduction
STW
Cost
Reduction
Impairment
STW
Cost
Reduction
Heads
Plants
£m
£m
£m
£m
£m
£m
£m
£m
2008 Actual
2,800
1
139
2
18
2
2
2
6
1
2009 Actual
3,460
13
9
24
108
24
69
10
76
71
2010 Actual
500
1
-
2
37
2
51
-
6
66
2011 Forecast
200
1
-
-
-
-
30
-
-
18
6,960
16
148
28
163
28
152
12
88
156
Total
GKN Full Year Results - Year ended 31 December 2010
51
Capital Investments
2010
2009
£m
£m
135
115
24
24
Total Tangible Capex
159
139
Depreciation
193
195
Ratio (times)
0.8
0.7
2010
2009
£m
£m
Intangible expenditure
16
6
Driveline: India, China,
Mexico capacity, new
products
A350
15
8
“Design for PM” investment
Total Intangible Capex
31
14
Amortisation
10
11
190
153
Tangible expenditure
A350
Total expenditures
GKN Full Year Results - Year ended 31 December 2010
Capex/depreciation ratio 0.8x
2011 increasing to support
growth
Growth opportunities:
Aerospace: A350, JSF,
B787
52
Tax charge analysed by “Cash Tax”
Tax Analysis
2010
2009
Weighted average of tax rates
32%
31%
Stable within +/-3% range
Impact of tax losses, utilisation
of deferred tax assets
(19)%
(2)%
Driven by profit profile &
available tax losses
13%
29%
Target: 20% or below
(6)%
(21)%
Volatile due to DT asset
recognition and tax
settlements
Tax impact of equity movements
(mainly pensions)
4%
9%
Volatile due to pension and
currency movement
Book Tax rate
11%
17%
Volatile based on deferred tax
asset recognition
“Cash Tax” rate
Net deferred tax and tax
provision movement
GKN Full Year Results - Year ended 31 December 2010
53
Post-employment Accounting Deficit - UK
Assets
£m
Liabilities
£m
Deficit
£m
Discount
Rate
%
Dec 2010
2,364
(2,448)
(84)
5.4
3.35
June 2010
2,268
(2,483)
(215)
5.3
3.05
Dec 2009
1,930
(2,440)
(510)
5.7
3.25
0
Inflation
%
147
68
342
(84)
(200)
(131)
(400)
(510)
(600)
Net Deficit 2009
Asset Backed
Scheme + Deficit
funding
Contributions
Benefit changes
GKN Full Year Results - Year ended 31 December 2010
Assumptions
Experience Gains
Net Deficit 2010
54
Post-employment Obligations – Accounting Deficit
UK Americas
£m
£m
Europe
£m
ROW
£m
Total
£m
2010 Full Year
Assets
Liabilities
Net Deficit
2,364
245
28
23
2,660
(2,448)
(399)
(369)
(44)
(3,260)
(84)
(154)
(341)
(21)
(600)
2,268
221
26
22
2,537
(2,483)
(410)
(362)
(46)
(3,301)
(215)
(189)
(336)
(24)
(764)
1,930
215
27
18
2,190
(2,440)
(355)
(352)
(39)
(3,186)
(510)
(140)
(325)
(21)
(996)
2010 Half Year
Assets
Liabilities
Net Deficit
2009 Full Year
Assets
Liabilities
Net Deficit
GKN Full Year Results - Year ended 31 December 2010
55
Contacts
Bill Seeger
Finance Director
Guy Stainer
Investor Relations
Tel +44 (0) 20 7463 2382
guy.stainer@gkn.com
GKN Full Year Results - Year ended 31 December 2010
56