The acquisition of Volvo's aerospace arm grabbed most of the thunder three weeks prior to these results, as the £633m mainly debt funded purchase bolsters GKN's civil aerospace offering at a time when the defence market is suffering and automotive suppliers face uncertainty in Europe. However, with the North American car market recovering strongly, and debt under control, GKN remains a strong core holding for the engineering sector and one that is reasonably priced.
In North America, car production climbed 22 per cent in the first half with demand for luxury vehicles picking up, too. That had an impact on sales at GKN Driveline, the driveshaft business, which rose 9 per cent to £1.66bn and drove underlying trading profit up 11 per cent to £121m. This also gave profits at GKN's Powder Metallurgy division a boost, up a quarter to £47m, as the world's largest maker of sintered components has been benefiting from the growing trends in industrial and auto markets to improve fuel efficiency and reduce emissions.
Finance director William Seeger said he could see some softness this year in some of the industrial and mining markets served by GKN Land Systems business and added that demand in Europe was under pressure in smaller economies, but that export-led luxury brands have been unaffected.
Broker Investec forecasts full-year pre-tax profits of £525m and EPS of 26.1p (up from £417m and 22.5p in 2011).
GKN (GKN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 213p | MARKET VALUE: | £3.46bn | |
| TOUCH: | 212-213p | 12-MONTH HIGH: | 237p | LOW: 153p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 75p* | NET DEBT: | 37% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 2.80 | 202 | 10.4 | 2.0 |
| 2012 | 3.25 | 289 | 14.4 | 2.4 |
| % change | +16 | +43 | +38 | +20 |
Ex-div: 8 Aug Payment: 24 Sep *Includes intangible assets of £942m, or 58p a share | ||||
