Stripping out currency headwinds and the brutal bottom-line impact of a non-cash revaluation of currency hedges, full-year results from car parts giant GKN (GKN) look respectable. Both organic sales and underlying pre-tax profit rose 4 per cent as demand for the group's premium components once again outperformed global car production.
Chief executive Nigel Stein credited 8 per cent organic sales growth at Driveline - GKN's core automotive unit - to strong market share, global presence and the fact that popular cars like SUVs require many more of GKN's products. Similar progress was evident in the powder-metallurgy division, which uses compression technology to make high-spec car parts.
But the outlook for its other operations is murky. In aerospace buoyant demand for commercial aircraft parts was again offset by tepid defence spending. That trend seems likely to continue, as several large US military programmes are scheduled to end this year. Management expect the unit's organic sales to be flat in 2015.
The outlook is even more grim for GKN's small Land Systems division, where soft agriculture markets drove a 41 per cent slump in operating profit to £44m. GKN now plans to stomach an £8m restructuring charge to further reduce the fixed-cost base.
Broker Canaccord Genuity expects adjusted pre-tax profit to hit £615m this year (from £601m), giving adjusted EPS of 28.3p.
| GKN (GKN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 375p | MARKET VALUE: | £6.2bn | |
| TOUCH: | 375-376p | 12-MONTH HIGH: | 418p | LOW: 281p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 36 | |
| NET ASSET VALUE: | 90p* | NET DEBT: | 42% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 5.08 | 345 | 19.6 | 5.0 |
| 2011 | 5.75 | 351 | 18.0 | 6.0 |
| 2012 | 6.51 | 568 | 29.3 | 7.2 |
| 2013 | 7.14 | 484 | 24.2 | 7.9 |
| 2014 | 6.98 | 221 | 10.3 | 8.4 |
| % change | -2 | -54 | -57 | +6 |
Ex-div:09 Apr Payment:18 May *Includes intangible assets of £1.4bn, or 88p per share | ||||
