GKN buoyed by Volvo Aero acquisition in first quarter

GKN, the engineering giant involved in the automotive, aerospace and land systems markets, said that first-quarter trading met the board's expectations with last year's acquisition of Volvo Aero showing good results.

Group sales in the first three months of the year increased by 9.0% from £1,742m to £1,891m, with the £633m acquisition of Volvo Aero in October (now renamed as GKN Aerospace Engine Systems) boosting the top line by £161m. Organic growth over the year however was flat.

GKN said that global light vehicle production fell 1.0% year-on-year to 20.8m with deep declines in Europe (-9.0%) and Japan (-16%) partly offset by strong growth in China (+10%) and Brazil (+11%). Its automotive divisions of Driveline and Powder Metallurgy, which together account for over half of the group's revenues, registered flat sales on the year before.

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The Aerospace division reported sales growth of 47%, helped by the Volvo Aero purchase which now accounts for nearly a third of the division's sales. Organic revenue growth was a more subdued 3.0%.

However, the weakness in construction and European industrial markets, seen last year, continued with Land Systems sales down 8.0%.

Trading profit in the first quarter amounted to £139m, down slightly from the £141m reported in the same period of 2012, as the company had to take a £23m restructuring charge, partly offset by a £19m positive contribution from acquisitions. Pre-tax profit fell 4.0% from £124m to £119m, while the trading margin fell from 8.1% to 7.3%.

Net debt increased from £871m to £940m reflecting the initial deferred consideration payment from the acquisition of Volvo Aero, as well as a seasonal change in working capital levels.

"We have met our expectations for the first quarter against the backdrop of challenging end markets," said Chief Executive Nigel Stein.

He said that GKN Aerospace Engine Systems is performing well against the restructuring and integration plan and made a "strong financial contribution".

"With restructuring charges now largely behind us, we expect the remainder of the year to show improvement, supported by our market leadership positions, advanced technology and extensive global footprint."