Engineering giant GKN sees its profits more than double
PROFITS AT takeover target GKN have more than doubled as the engineering group updated on plans to fend off a hostile bid from Melrose Industries.
The aerospace-to-automotive group saw pre-tax profits soar to £658m in 2017, up from £292m for the same period the year before.
GKN firmed up the timings on ‘Project Boost’ – its plan to persuade investors not to back Melrose’s £7.4bn bid – saying a proposal to separate GKN Aerospace and GKN Driveline into two listed companies would be set for mid2019.
The move aims to help shift £2.5bn back to shareholders over three years, while generating £340m of cash per year until 2020.
Updating on its annual performance, sales broke through the £10bn mark for the first time in the company’s history, rising six per cent organically to £10.4bn.
However, underlying pre-tax profits made for grimmer reading, tumbling 16 per cent to £572m.
Chief executive Anne Stevens said: “GKN has fantastic businesses which have grown organically above our key markets, demonstrating once again our strong positions and leading technology.
“However, as I set out two weeks ago, we now need to change our emphasis and ensure that those orders deliver worldclass financial performance with a renewed focus on strong margins and cash generation.
“With Project Boost, I have laid out how we plan to achieve this, through detailed product segment strategies and an emphasis on manufacturing and functional excellence.”
GKN, which employs around 58,200 staff, saw annual sales at GKN Aerospace rise 2 per cent on an organic basis to £3.6bn, but its trading margin eased by 2.1 per cent to 7.8 per cent.
Margins marginally slipped at GKN driveline, but the unit secured a 9 per cent organic rise in sales to £5.3bn.
The outlook for group revenues were unchanged.
Shares edged lower in morning trading on the London Stock Exchange despite the firm boosting the final dividend by 5p to 9.3p.
Nicholas Hyett, Hargreaves Lansdown equity analyst, questioned whether Ms Stevens’ plan will be enough to win over investors. He said: “Significant write-downs in the US aerospace business have hit profits and margins.”
Write-downs in the US aerospace business have hit profits. Nicholas Hyett, equity analyst at Hargreaves Lansdown