GKN hikes divi as sales grow 13 percent

Automotive and aerospace engineer GKN hiked its total dividend by a fifth after seeing double-digit growth in both sales and profits in 2011.

Sales (on a management basis) rose by 13% from £5,429m to £6,112m, an underlying increase of 10%, as a more subdued performance in GKN Aerospace was offset by strong growth in its Driveline, Powder Metallurgy and Land Systems divisions.

Tough trading in Aerospace has already been widely reported, as defence firms have struggled with governments' defence spending remaining under pressure. Nevertheless, GKN says that civil aircraft production is expected to continue to grow in 2012, with both Airbus and Boeing increasing production, and this should more than offset the anticipated reduction in US military aircraft demand.

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Revenues on a management basis, which aggregates the sales and trading profit of subsidiaries (excluding certain subsidiary businesses sold and closed) with the group's share of the sales and trading profit of joint ventures, are said to better reflect the performance of continuing businesses.

Pre-tax profit jumped from £363m to £417m, a 15% increase despite a £19m net cost relating to a temporary plant closure in the US. The trading margin, excluding this charge, improved to 8.0%, from 7.6% the year before, and while this was at the bottom end of the medium-term target range of 8-10%, GKN has raised its margin targets for three of the its four divisions.

"GKN achieved a strong financial performance with all four divisions at or near record profits. Each division has leading technology and market positions and out-performed their respective markets, with a strong pipeline of new business. GKN Driveline and GKN Land Systems were further strengthened with the two highly complementary acquisitions of Getrag Driveline Products and Stromag," said Chief Executive Nigel Stein.

A final dividend of 4p per share was recommended, taking the total payout to 6p per share, up 20% on last year's 5p-per-share dividend.

While the group acknowledges that the macro-economic environment remains uncertain, it expects 2012 to be another year of good progress. "Overall, the group's broad exposure to global markets, strong customer positions and healthy order books mean that GKN should make further progress in 2012, with the added benefit of a full year contribution from the recent acquisitions."

BC