Recovering consumer demand for bigger vehicles, a robust aerospace sector and the surprising resilience of farming were the diverse reasons for GKN's decent operating profits growth, up 14 per cent to £468m. The improved performance has allowed GKN to extend its balance sheet to fund acquisitions, which should help it handle mixed trading conditions this year.
The driveline division, which makes driveshafts and gears, was the main engine of growth, with a 10 per cent increase in underlying sales lifting its trading profits by 12 cent per cent to £195m. Exports were a big factor in the recovery as, even though eurozone demand was muted by the debt crisis, the resultant currency weakness helped boost overseas sales.
Aerospace sales were up by a more sedate 4 per cent to £1.48bn, with profits up by the same amount to £166m as lower defence spending partially offset the rapid recovery in civil aerospace. That won't matter much this year as GKN has already bagged aerospace contract extensions and orders worth $3.5bn (£2.2bn). Land systems saw sales climb by a fifth to £885m on strong demand for agricultural equipment, with acquisitions expected to add significantly to earnings this year.
Broker Investec expects pre-tax profit of £527m and EPS of 26.3p this year (from £434m and 21.7p in 2011).
GKN (GKN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 226p | MARKET VALUE: | £3.51bn | |
| TOUCH: | 226-227p | 12-MONTH HIGH: | 249p | LOW: 153p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 81p* | NET DEBT: | 33% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 3.87 | 199 | 18.7 | 9.10 |
| 2008 | 4.38 | -130 | -11.6 | 3.00 |
| 2009 | 4.22 | -54 | -3.2 | nil |
| 2010 | 5.08 | 345 | 19.6 | 5.00 |
| 2011 | 5.75 | 351 | 18.0 | 6.00 |
| % change | +13 | +2 | -8 | +20 |
Ex-div: 25 Apr Payment: 21 May *Includes intangible assets of £958m, or 62p a share | ||||
