GKN 's (GKN) prediction of flat organic aerospace sales in 2016 was mainly to blame for a 7 per cent drop in the engineer's share price on results day. Wide-body aircraft production is expected to slow as Airbus and Boeing prepare their next-generation models. That could be a problem, given that new programmes often take a while to generate a profit.
Nigel Stein, GKN's boss, reckons the reaction was over the top, particularly as the division looks poised to return to growth in 2017. Aside from expecting better military revenues as governments increase defence budgets and the F-35 joint strike fighter enters production, management is also optimistic about the £480m acquisition of Fokker in October.
Strip out the costs associated with this deal and operating profit was essentially flat as continued success in the car parts business was undermined by another dire performance from the land systems unit. Plummeting demand for agricultural and construction products was mainly to blame, together with £11m of restructuring costs, most of which were implemented to better handle the downturn in these markets.
Meanwhile, GKN's driveline division continued to outperform the wider automotive sector, success that management attributed to having the best technology, global footprint and competitive costs. Broker JPMorgan Cazenove expects adjusted EPS of 26.4p in 2016, up from 25.2p in 2015.
| GKN (GKN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 277.2p | MARKET VALUE: | £4.7bn | |
| TOUCH: | 277-277.2p | 12-MONTH HIGH: | 389p | LOW: 246p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 109p* | NET DEBT: | 41% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 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 |
| 2015 | 7.23 | 245 | 11.8 | 8.7 |
| % change | +4 | +11 | +15 | +4 |
Ex-div: 7 Apr Payment: 16 May *Includes intangible assets of £1.86bn, or 108p per share | ||||
