GKN PLC, has reported another period of growth in line with expectations for the six months ended June 30, 2016. Sales were up 17% and the company continued market outperformance with organic sales up 2% at £92 million (2%). The effect of currency translation on management sales was a £202 million benefit and there was a £371 million benefit from acquisitions.
Overall organic trading profit reduced by £10 million (3%). There was a benefit from currency translation of £22 million and a £32 million increase due to acquisitions (including the absence of £3 million acquisition costs in the first half of 2015).
Group trading margin in the first half was 8.6% (2015: 9.0%). Return on average invested capital (ROIC) was 16.6% (2015: 17.5%), excluding Fokker which has not been owned for a full 12 month period. At 30 June 2016, the Group had net debt of £918 million (31 December 2015: £769 million) and the total deficit on post-employment obligations totalled £2,101 million (31 December 2015: £1,558 million).
“This is a good set of first half results with GKN continuing to make underlying progress in line with our expectations. Each division has continued to deliver against our strategy. GKN is in good shape with excellent technology and strong positions in the aerospace and automotive markets. Capital allocation will continue to be focussed on these divisions, with greater emphasis on internal productivity,” stated Nigel Stein, Chief Executive of GKN.
“We expect 2016 to be another year of growth, helped by currency translation and Fokker. To increase momentum going into 2017, we will reduce our fixed costs by £30 million. With our excellent technologies, global footprint and strong focus on costs we are very well placed to compete and succeed in the future.”
GKN Powder Metallurgy
GKN Powder Metallurgy comprises GKN Sinter Metals and Hoeganaes. Sales in the first half 2016 for GKN Powder Metallurgy reached £499 million (2015: £474 million) and trading profit was reported to be £63 million in the period, up from £56 million in 2015. Organic sales were £3 million lower however, after the £14 million pass through to customers of lower steel prices and other surcharges.
There was a £28 million (6%) benefit from currency translation. Underlying growth (before raw material pass through) was 2%, in line with global light vehicle production. Underlying sales growth was achieved in all regions with the strongest performance being in Asia.
The organic increase in trading profit was £3 million and there was a £4 million gain on currency translation. The divisional trading margin was 12.6% (2015: 11.8%) reflecting the move towards higher value “design for Powder Metallurgy” parts and a small margin benefit from lower raw material prices passed through to customers. Return on average invested capital was 21.3% (2015: 22.0%).
It was stated that during the period, GKN Powder Metallurgy achieved a number of important milestones, which included winning, in just six months, around £120 million of annualised sales in new and replacement business. The company commenced production of high quality automotive grade powders in China for the Asian market and received three prestigious design awards from the Metal Powder Industries Federation (MPIF).