A cautious outlook statement tempered the euphoria in GKN’s half-year results. The engineering group has rebounded dramatically from the horrors of last year and its operating profit for the period was ahead of the 2008 peak, thanks mainly to a sharp recovery in global car production. But management is expecting a slightly softer second half as the recovery in auto sales shifts down a gear.
GKN’s core auto-parts business, Driveline, swung back into profit as sales bounced 47 per cent and cost reductions took root. Encouragingly, second-quarter performance was even stronger than that in the first three months of the year, when European scrappage schemes expired. That reflects GKN’s bias towards the premium sector, which was largely unaffected by government incentives and continues to motor forward.
The group's smaller but equally cyclical businesses - Powder Metallurgy (metal powder and sintered products) and Land Systems (manufacturer of vehicle products) - showed a similar return to form. Only the more resilient aerospace division remained flat, reflecting lower component sales for the F22 fighter jet.
Evolution Securities expects full-year pre-tax profits of £254m and EPS of 12.1p (2009: £33m/1.7p).
GKN (GKN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 143p | MARKET VALUE: | £ 2.21bn | |
| TOUCH: | 142-143p | 12-MONTH HIGH: | 155p | LOW: 100p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 21 | |
| NET ASSET VALUE*: | 66p | NET DEBT: | 15% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2009 | 2.06 | -16 | nil | nil |
| 2010 | 2.54 | 180 | 10.0 | 1.50 |
| % change | +23 | - | - | - |
Ex-div: 11 Aug Payment: 29 Sep *Including intangibles of £551m or 35p per share | ||||
