28th Jul 2015 10:48
LONDON (Alliance News) - FTSE 100-listed engineer GKN PLC on Tuesday said it has agreed a EUR706 million deal to acquire Netherlands-based Fokker Technologies Group BV, as GKN reported a fall in pretax profit for the first half of 2015 thanks to weakness in some of its key end markets.
News of the acquisition eclipsed any concerns about GKN's first-half results, with shares in the company up 6.8% to 315.00 pence, one of the best performers in the blue-chip index, as investors welcomed the deal.
GKN said it will pay EUR706 million to acquire Fokker Technologies, a Dutch maker of aerostructures, electrical wiring systems, landing gear and associated services. GKN said the deal will strengthen its position in the aerospace market and will expand its presence in the Chinese, Turkish, Indian and Mexican markets.
GKN will partly fund the deal via a GBP200 million equity issue, which will be run by JPMorgan Cazenove and UBS Ltd. The price per share will be determined at the close of the accelerated bookbuild, GKN said.
"Fokker is an excellent strategic and cultural fit which supports our growth strategy. It strengthens GKN Aerospace's market leadership, manufacturing footprint and technology," said GKN Chief Executive Nigel Stein.
"This transaction will increase our shipset value on key growth programmes in both the commercial and military markets, including Fokker's complementary positions on the A350 and the F-35. Fokker's sizeable China operations also help boost GKN Aerospace's activity in this important region," Stein added.
GKN, which manufactures components for the aerospace, automotive and industrial sectors, also published its interim results on Tuesday. It said its pretax profit for the six months to the end of June was down to GBP212 million from GBP224 million a year earlier, despite an increase in sales for the group to GBP3.62 billion from GBP3.57 billion.
GKN said it will pay an interim dividend of 2.9 pence, slightly up from the 2.8 pence it paid a year earlier.
Stein said trading had been solid in GKN's automotive business and said its aerospace franchise performed in line with its expectations, but it has seen continued weakness in some end-markets, particularly oil and gas, which has hit its GKN Land Systems unit. Stein said the company expects these trends to continue into the second half of the year.
GKN said organic sales in its Land Systems business, which makes power management products, fell by 8%, with total sales falling 13%, resulting in its trading profit being sliced in half. The main driver of the falling revenue and profit for the division was the continued weakening of agricultural equipment markets, though GKN said demand for construction and industrial equipment remained relatively stable in the half.
GKN Aerospace's organic sales rose 1% in the half, with growth in commercial aerospace markets partially offset by a decline in its military end markets. Commercial organic sales were up 2%, driven by stronger business jets orders and the Airbus A350 programme, though this was offset by declining A330 production by the aircraft manufacturer.
Military organic sales in the division were down 4%, however, primarily due to the end of the Boeing C-17 jet programme in the second half of 2014.
GKN Driveline, which supplies automotive driveline systems and services, saw organic sales growth of 4% in the half, outpacing the 1% rise in global vehicle production over the period. The main driver of performance for the division was the European market, where GKN benefited from increased market shares, a stronger position in premium vehicles and a broader product mix. The group also expects to outperform the market in China in the second half thanks to its strong order book and the launch of new programmes.
The company's Powder Metallurgy business, which makes sintered components for the automotive, industrial and consumer markets, saw organic sales rise by 1%, with good growth in its North America, China and Europe businesses but a decline in sales in Brazil due to weaker automotive and industrial markets.
By Sam Unsted; [email protected]; @SamUAtAlliance
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