Engineering that moves the world Results for the six months to 30 June 2014

Transcription

1 Engineering that moves the world Results for the six months to 30 June 2014 Nigel Stein, Chief Executive 29 July 2014

2 Disclaimer Cautionary statement This presentation 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. Nothing in this document should be regarded as a profits forecast. 1

3 Results for the six months to 30 June 2014 Good first half performance Sales Management PBT Earnings per share Interim dividend per share 1% 6% 4% 8% Organic sales 6% GKN Aerospace GKN Driveline GKN Powder Metallurgy GKN Land Systems Good performance Strong organic growth Margin progression Tough markets 2

4 Progress against our financial goals Growth above market Automotive Aerospace Land Systems 6% Organic Target margin 8% to 10% Moving up the range 8.9% (8.3%) Business Performance ROIC >20% Making progress 16.9% (16.6%) Increasing cash flow, EPS and dividends 3

5 Consistent strategy Lead in chosen markets Leverage global footprint Technology driving margin All divisions successfully winning new business Expanding our footprint particularly in US, Mexico and China Investment in advanced technology is increasing Operational excellence Operational excellence is focus and key differentiator Sustain above market growth Group has sustained above market growth 4

6 GKN Aerospace: Good performance H Organic growth Sales () 1,100 3% Trading profit () 121 6% Trading margin 11.0% 50bps Commercial growth driven by B787 ramp up; A350 rate increasing to plan Integrating N. America engine components businesses into GKN Aerospace Engine Systems Further developing Mexico cost competitive facilities; Seeking Asian opportunities Filton site is Airbus supplier of the year Farnborough Airshow: Airbus and Boeing sales totalled 700 aircraft valued at $115 billion; A330neo launched OEMs requiring fewer, more capable global suppliers GKN Aerospace sales by market segment, H Military 26% H organic sales -2% Commercial 74% H organic sales +5% GKN won the contract for Bombardier Global 7000 and Global 8000 rudders and elevators 5

7 GKN Driveline: Strong organic growth Strong growth ahead of market; Margin improvement into target range c 300m p.a. new business won in H1 Includes AWD system wins with Ford, GM, VW, Fiat, JLR, Renault Nissan, BMW, Toyota AWD in China growing H PTU wins and localisation of AWD products from Europe and North America Expanding capacity in Mexico and North Carolina Organic growth Sales () 1,765 11% Trading profit () % Trading margin 8.0% 120bps New platforms and rising content per vehicle driving strong growth % (5) (10) (15) (20) 4 11 North America GKN and market growth rates: H Market (production growth) GKN Driveline sales growth 8 11 (15) (18) Europe China Japan Brazil India Global (6) Source: IHS Automotive The TMG EV P002 electric race car (with two GKN EVO edrive axial flux motors) at this year s Goodwood Festival of Speed 6

8 GKN Powder Metallurgy: Margin progression Sales ahead of market H Organic growth Sales () 471 6% Trading profit () 53 20% Trading margin 11.3% 130bps Second China plant helped Asian parts sales increase by 10% N. America 8% growth driven by engine and transmission programmes with GM and Ford GKN Powder Metallurgy sales by origin, H Asia Pacific 9% Europe 38% Americas 53% Design for PM paying off; N. America capability upgrade project underway Moving towards higher value powders Technology developments in additive manufacture Focus on advanced process capability and high-tech powders GKN is now supplying gears to Audi for its crank shaft oil pumps 7

9 GKN Land Systems: Tough markets H EU Agriculture market softened; Some recovery in EU industrial market Like-for-like 6% revenue decline Strong focus on cost control Organic growth Sales () 426 (9)% Trading profit () 31 (26)% Trading margin 7.3% (190)bps Strengthening position in Huading wheels business in China OTHER BUSINESSES: Creation of GKN Hybrid Power; Audi Le Mans win powered by GKN electric flywheel Investing to support US industrial sales and Chinese capacity GKN Land Systems sales by market segment, H Agriculture 46% Industrial 24% Construction & Mining 12% Automotive 11% Structures 7% GKN has won the contract for Komatsu WL for WA380 wheels 8

10 Adam Walker Group Finance Director 29 July

11 Financial highlights Organic sales growth of 6% Organic trading profit growth of 14% Trading margin increased to 8.9% EPS growth of 4% to 14.4p FX Translational impact: Sales 247m Trading profit 24m Potential full year profit impact of 50m Interim dividend increased by 8% to 2.8p Net debt of 813m, 0.9 times net debt / EBITDA 10

12 Group sales 210m 4,000 3,750 3,500 3,869 (247) (4) 32 3% % 11% (43) (9)% 16 3,828 3,250 US$ Euro (116)m (30)m Organic growth 6% 3,000 H FX Acq/Div Aerospace Driveline Powder Metallurgy Land Systems Other H

13 Group trading profit m (11) 300 (24) US$ Euro (13)m (2)m 200 H FX Acq/ Div Aerospace Driveline Powder Metallurgy Land Systems Other H

14 Margin H % Margin H Reported % H Adjusted Margin % 1 Target Range % Aerospace Driveline Powder Metallurgy Land Systems Group Margin pre-restructuring charges 13

15 Return on invested capital ROIC% before tax 1 20% Group Target > 20% 15% Pre-Aerospace Engine Systems Group ROIC H H Aerospace % 20.1% Driveline 17.9% 15.0% Group WACC - 12% Powder Metallurgy 21.0% 19.2% 10% Land Systems 14.6% 18.7% Group % 16.6% 1 5% FY 2011 FY 2012 H FY 2013 H H excludes Aerospace Engine Systems impact 14

16 Tax update H H Book tax 22% 20% Unrecognised deferred tax assets 88m: down 49m in H Balance focused in US and UK Book tax rate increasing as level of deferred tax asset recognition decreasing Cash tax rate historically lower than book rate but gap substantially narrows in 2015 % m m m m m H Unrecognised deferred tax assets Book tax rate 15

17 Operating cash flow H H Trading profit (subs) Deprec n & amort n EBITDA Working capital (150) (135) Capital expenditure (161) (158) Investment (311) (293) Repayment of Government refundable advance (38) - Other flows 1 (3) Operating cash flow

18 Free cash flow and net debt H H Operating cash flow Dividends received (JVs) Interest (net) (38) (21) Tax (21) (24) Pension funding (42) (30) Dividend paid (NCI) (1) - Free cash flow Dividends (87) (78) Acquisitions and disposals (8) (60) Currency and other (5) 4 Movement in net debt in H1 (81) (57) Net debt (813) (928) 17

19 Group post-employment accounting deficit - (200) (400) (600) (800) Assets Liabilities Deficit June ,578 (3,941) (1,363) Dec ,532 (3,803) (1,271) (763) (825) Pension update UK triennial valuation complete and recovery plan agreed Accounting deficit change caused by market driven changes in discount rates (1,000) (1,200) (1,400) (1,600) (508) (1,271) Net Deficit Dec 2013 (149) (23) Assumption changes Service Cost 71 9 Contributions Currency and other (538) (1,363) Net Deficit June 2014 Funded Unfunded 18

20 Summary Strong set of underlying results Above market growth Margin progression Continued focus on profit and cash conversion Interim dividend increased Other areas of focus 19

21 Nigel Stein Chief Executive 29 July

22 Moving forward Lead in chosen markets Leverage global footprint Technology driving margin Sold interest in Emitec Organic and add-on opportunities in all divisions Aerospace primary focus for acquisitions Further increase our presence in Asia Steady increase in technology Investing in the long-term future Operational excellence Focus on operational excellence and customer service as key differentiators Sustain above market growth Demonstrate GKN is a winner in what we do 21

23 Investing in the long-term future Advanced technology opportunities Additive manufacture GKN leading 13 million UK Aerospace Technology Institute 3D printing project First sale of specialist water atomised powder for additive manufacture use Pilot gas atomiser to be installed by year end Hybrid power systems Secured order to supply 500 systems for Go Ahead buses GKN Hybrid Power electric flywheel Advanced EVO electric motor GKN designed and manufactured gearbox Full integration GKN has additive manufacture centres in the UK, Sweden and US Other Technology partnership established with McPhy Energy to develop solid state hydrogen storage systems 22

24 Market commentary Principal markets expected to grow Aerospace Positive progress in 2014 driven by commercial growth Military spend under pressure Cuts in Western budgets Delays to new programmes Reduced overseas military operations Source: Internal analysis Automotive 2014 H2 global production to increase by 3% N. Am 6% Europe = China 8% Japan (7)% India 9% Brazil (2)% Source: IHS Automotive A350 maiden flight Selected Land to manufacture Systems Advanced Technology June 2013 Winglet for the new Boeing 737 MAX Agricultural market in EU and North America softer than last year Construction flat Some improvement in European industrial and constructions markets Source: Internal analysis 23

25 Outlook for FY 2014 Another year of continued progress GKN Aerospace sales are expected to show modest growth GKN Driveline and GKN Powder Metallurgy are expected to continue to grow above the market GKN Land Systems sales expected to be below 2013 The strength in sterling will adversely affect reported results. However the Group s underlying progress is expected to continue due to the benefits of its diverse exposure to global markets, strong customer positions and healthy order books. 24

26 Appendix Results for the six months to 30 June

27 Statutory income statement H H Sales (subsidiaries) 3,565 3,647 Trading profit Change in value of derivative and other financial instruments (7) (91) Amortisation of non-operating intangible assets arising on business combinations (35) (35) Operating profit Post-tax joint venture trading Joint venture exceptional and non-trading items (1) (1) Share of post-tax earnings of joint ventures Interest (net) (37) (36) Other net financing charges (29) (24) Net financing costs (66) (60) Profit before tax Management profit before tax results have been restated for a hindsight fair value adjustment 1 26

28 Trading profile Management Basis Sales 3,828 3,869 3,725 7,594 Aerospace 1,100 1,123 1,120 2,243 Driveline 1,765 1,728 1,688 3,416 Powder Metallurgy Land Systems Trading profit Aerospace Driveline Powder Metallurgy Land Systems Margin 8.9% 8.3% 9.2% 8.7% Profit before tax H1 H1 H2 FY 27

29 Impact of currency Translational impact on H1 2013: Average Rate Translational impact on H trading profit (including JVs): Euro moves 1 point e.g = (0.7)m US$ moves 1 point e.g = (1.2)m Change Effect on H1 2013: Sales Trading Profit H H % US $ (116) (13) Euro (30) (2) Real (22) (2) Yen (24) (1) Renminbi (14) (2) Indian Rupee (11) (1) Swedish Krona (9) - Other (21) (3) Impact (subs & JVs) (247) (24) 28

30 Post-employment obligations: accounting deficit 2014 Half Year UK Americas Europe ROW Total Assets 2, ,578 Funded Liabilities (3,076) (260) (38) (29) (3,403) Funded Deficit (753) (57) (3) (12) (825) Unfunded Liabilities (16) (37) (483) (2) (538) Net Deficit (769) (94) (486) (14) (1,363) 2013 Full Year Assets 2, ,532 Funded Liabilities (2,973) (253) (38) (31) (3,295) Funded Deficit (698) (50) (2) (13) (763) Unfunded Liabilities (16) (37) (453) (2) (508) Net Deficit (714) (87) (455) (15) (1,271) 29

31 Contacts Adam Walker Finance Director Guy Stainer Investor Relations Tel +44 (0) Chris Fox External Communications Tel +44 (0)