GKN plc
Trading Update
16 December 2009
GKN plc, the global engineering business that serves the automotive, aerospace
and off-highway markets, today issues a trading update prior to its year end on
31 December 2009.
GKN Markets and Performance
Overall demand in GKN's major markets has been better than anticipated at the
time of the Interim Management Statement on 15 October 2009.
In Automotive (including Powder Metallurgy), Government incentive programmes
continue to provide some support for sales of smaller light vehicles and
improved production demand. Production of mid-sized vehicles, where GKN has
greater exposure, has also increased in a number of markets as sales have shown
some signs of recovery and inventory levels stabilised. As a consequence,
demand has continued at similar levels to September and GKN's fourth quarter
sales are now expected to show a good improvement compared with the third
quarter.
GKN Aerospace continues to perform well, with military aircraft production
remaining solid and no further material reduction in civil aircraft schedules.
Sales for the fourth quarter are expected to be similar to the third quarter.
GKN OffHighway production in the fourth quarter remains significantly down at
around 50% lower than the comparable period in 2008. Some signs of
stabilisation in sales have been evident at levels slightly ahead of those seen
in the prior three months.
Restructuring
Good progress continues to be made with the planned restructuring programme.
The possibility of further restructuring was outlined in the Half Year Results
announcement in August and, consequently, additional restructuring actions have
been launched to balance the business better with expected demand, particularly
in OffHighway.
The cash cost of the restructuring plan in 2009/10 is expected to increase from
£103 million to between £125 million and £130 million, excluding short-time
working, with a commensurate increase in annualised benefits.
Group Financingand Profitability
On 30 November 2009, GKN announced an offer to purchase up to £150 million of
its outstanding £325 million 7% 2012 Bonds. Following an auction process, the
Group has purchased £123 million of the outstanding bonds at a purchase price
of £1,054 per £1,000 in principal amount. The additional cost of £7 million
will be treated as a finance charge in the 12 months ending 31 December 2009.
This purchase reduces the gross indebtedness and future interest expense of the
Group. The ongoing saving in interest is expected to be £9 million per annum
from 2010.
Cash flow management has remained strong with significant inflows in the
quarter, most notably the first drawdown of £28 million of repayable launch
investment for the A350 programme. Net debt at 31 December 2009 is now expected
to be lower than the position at 30 September 2009 of £374 million.
Management profit before tax(*) for the year ending 31 December 2009 is
expected to be in the range £70 million to £80 million, including the
additional £7 million finance charge from the bond repurchase. The Group
expects to make further significant progress in 2010.
Final Results Announcement
The Group intends to announce its results for the year ending 31 December 2009
on 25 February 2010.
(*)Note: Financial information set out in this announcement, unless otherwise
stated, is presented on a management basis which aggregates the sales and
trading profit, as applicable, of subsidiaries and the Group's proportionate
share of joint ventures. Management profit or loss before tax is Group profit
or loss before tax adjusted to exclude restructuring and impairment charges,
profits and losses on sale or closures of businesses, amortisation of
non-operating intangible assets arising on business combinations, change in
value of derivative and other financial instruments and other net financing
charges. These figures better reflect performance of continuing businesses.
For further information:
Guy Stainer
Director, Investor Relations and External Communications
GKN plc
T: +44 (0)207 463 2382
M: +44 (0)7739 778 187
E: guy.stainer@gkn.com
Andrew Lorenz
Financial Dynamics
T: +44 (0)20 7269 7113
M: +44 (0)7775 641 807
Cautionary Statement
This press release contains forward looking statements which are made in good
faith based on the information available to the time of its approval. It is
believed that the expectations reflected in these statements are reasonable but
they may be affected by a number of risks and uncertainties that are inherent
in any forward looking statement which could cause actual results to differ
materially from those currently anticipated.
Notes to Editors
GKN plc is a global engineering business serving the automotive, aerospace and
off-highway markets. It has operations in more than 30 countries, around 39,000
employees in subsidiaries and joint ventures and had sales of £4.4 billion in
the year ended 31 December 2008. GKN plc is listed on the London Stock Exchange
(LSE: GKN).