GKN returned to profitability in the third quarter after car scrappage schemes and the end of the de-stocking process helped to draw a line under a forgettable first-half performance.
Sales were down by an underlying 19 per cent if the benefit from the Filton acquisition and currency gains are excluded. However, the company posted a pre-tax profit in the third quarter of £36m, its second quarter of profitability and a similar level to 2008's return. After the proceeds from a rights issue are subtracted, along with free cash flow, then net debt at the end of the quarter was £374m, down from £800m at the half-year, with a more manageable balance sheet gearing of 74 per cent.
However, management remains cautious on the immediate conditions in the market, as the full effect of the ending of the car scrappage schemes has still to be assessed - certainly in the US, the end of the scheme in August saw vehicle and parts sales plunge more 10.4 per cent, after an 8.4 per cent rise the month before. The UK scheme has been extended until February 2010.
