23rd Feb 2016 10:18
LONDON (Alliance News) - Shares in engineer GKN PLC dipped on Tuesday after the group guided to a tougher year for its aerospace business and continued difficulties in its land systems arm, though profit and revenue for 2015 both increased.
The caution in the outlook sent GKN shares lower on Tuesday morning, trading down 1.8% to 283.60 pence at mid-morning, one of the worst performers in the FTSE 100.
GKN said it remains confident on its prospects for growth in 2016, helped by good conditions for its Automotive division and the integration of Fokker Technologies, the Dutch aerostructures business it bought last year.
However, the company said aerospace markets have entered a transition phase over to new programmes by the big manufacturers and the overall market in 2016 is set to be slightly weaker than in 2015. Aerospace sales are set to be broadly flat for GKN in the coming year, though it will benefit from the contribution from Fokker.
Beyond that, GKN said its Driveline and Powder Metallurgy businesses should outperform the market, but its Land Systems arm will see sales fall further due to softer agricultural and construction equipment markets.
GKN said pretax profit for the year to the end of December rose to GBP245.0 million from GBP221.0 million a year earlier. On a management basis, which strips out the effect of a change in value of foreign exchange derivatives, pretax profit for the group hit GBP603.0 million, up from GBP601.0 million and exactly in-line with a company-supplied consensus forecast.
Revenue was up to GBP7.23 billion in 2015 from GBP6.99 billion, helped by the acquisition of Fokker, which was completed in October, but also good performances in GKN's Automotive and Aerospace units. Aerospace sales were strong in commercial aerospace, though this was somewhat offset by a decline in military revenue, while Driveline sales were pushed on by new contract wins.
The company's Power Metallurgy business also performed well, with robust organic sales and improving margins, plus planned expansions of the unit in China and North America on track.
Those divisions helped to offset a weaker performance for its Land Systems business, which is trading in a tough agricultural market environment and declining margins.
The trading margin in Aerospace narrowed marginally to 12.2% in 2015 from 12.4% in 2014, while the margin in Driveline edged up to 8.2% from 8.1%. Power Metallurgy performed the best in this regard, with its trading margin increasing to 12.0% in 2015 from 11.0%. The margin in Land Systems shrunk to 3.5% from 5.7%.
GKN said it will pay a final dividend of 5.8 pence per share, up from 5.6p a year earlier, meaning its total dividend will rise 4.0% to 8.7p from 8.4p.
"GKN continued to make progress in 2015 and delivered on our expectations. We performed well against our key markets, overcoming some demand weakness and demonstrating once again the strength of our businesses, strong market positions and leading technology," said Nigel Stein, GKN's chief executive.
By Sam Unsted; [email protected]; @SamUAtAlliance
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