GKN (GKN) usually beats the market, and 2013 was no exception. Its automotive business easily outperformed global car production, accelerating group profit beyond consensus forecasts. While military revenue will probably fall again this year, car sales and aerospace work will not, and signs of life in the European industrial and US heavy-construction markets may even provide a surprise at the land division.
Sales increased 3 per cent on an organic basis, and underlying pre-tax profit, which strips out a big paper gain on currency hedges in 2012, jumped 17 per cent to £578m. Cash generation was up by almost a half and net debt fell sharply to £732m. Sales at driveline, the core automotive business, grew 7 per cent to £3.4bn, steering underlying operating profit up 5 per cent to £246m. Profit was up by even more in the powder-metallurgy division, which uses compression technology to make high-spec car parts. The weak spot was the aerospace division, where weak demand for higher-margin spares caused a slight dip in turnover.
Yet new commercial programmes with Airbus and Boeing will generate “slightly higher” sales in 2014, offsetting a likely drop in defence business. According to Numis Securities, adjusted pre-tax profit should hit £605m this year, giving adjusted EPS of 28.5p (from 26p in 2013).
GKN (GKN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 409p | MARKET VALUE: | £6.7bn | |
| TOUCH: | 408-409p | 12-MONTH HIGH: | 418p | LOW: 237p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 17 | |
| NET ASSET VALUE | 108p* | NET DEBT: | 41% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 4.22 | -54 | -3.2 | nil |
| 2010 | 5.08 | 345 | 19.6 | 5 |
| 2011 | 5.75 | 351 | 18.0 | 6 |
| 2012 | 6.51 | 568 | 29.3 | 7.2 |
| 2013 | 7.14 | 484 | 24.2 | 7.9 |
| % change | +10 | -15 | -17 | +10 |
Ex-div: 09 Apr Payment: 21 May *Includes intangible assets of £1.48bn, or 90p per share | ||||
