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*GKN continued to make progress in 2000. Sales were up by 10% and
earnings per share before goodwill amortisation and exceptional items were up
by 4% to 54.5p. The Board has recommended an increase in the full year
dividend of 10% to 19.8p per share.
*The Group's Automotive businesses around the world grew 12% despite a
significant downturn in the North American market in the last weeks of the
year. Industrial Services including CHEP, CLEANAWAY and Interlake Material
Handling continued to perform strongly.
*GKN Westland Helicopters performed well and the AgustaWestland Joint
Venture was completed in February 2001. Profit from GKN Aerospace Services
was lower than last year though the business is being both restructured and
refocused following the acquisition of Boeing's fabrication facility in St. Louis.
*The outlook for the first half of 2001 will be heavily influenced by the North
American Automotive market. If vehicle production continues at its present
level, which is some 20% lower than the same period last year, the impact on
our Automotive business in North America will be significant. Additionally the
worsening conditions in the Agricultural sector in Europe are adversely affecting
the performance of our OffHighway business.
*In the second half North America automotive production is predicted to
stabilise and we should benefit from cost reduction measures already taken.
The European automotive markets are forecast to remain firm and our
businesses in the Emerging Economies should advance further. Aerospace
Services should yield benefits from restructuring and Industrial Services should
continue to grow. These factors lead to a more optimistic view for the second
half year."
Discussions concerning a nil premium merger of Brambles Industries Limited
with GKN's Industrial Services activities, utilising a dual listed companies
structure, are continuing. These discussions were first announced on 15
January 2001 and were expanded upon in a further announcement on 22
February. There are a number of complex legal, taxation and regulatory issues
still to be resolved on which progress is being made.
Earnings per share before goodwill amortisation and exceptional items at 54.5p
was 4.0% up on 1999. Profit before tax on the same basis at £528 million was
2.9% ahead of last year. The Board is recommending a final dividend of 12.9p
per share compared with a return of capital of 11.7p per share in the previous
year.
- In our Automotive Driveline business we secured two additional
outsourcing contracts, the first for Opel at Kaiserslautern in Germany
and the second for Nissan at Tochigi in Japan. These, together with
the business swap with Dana, bring our world market share in
constant velocity joints and driveshafts to 41%.
- In CHEP Americas the Wal*Mart contract continues to be
implemented at speed. More than 500 additional customers joined
the CHEP pool in 2000. The contract with The Home Depot is also
being rolled out.
- CLEANAWAY made two significant acquisitions, Waste Management
Deutschland in Germany in May 2000 and ServiceTeam in the UK in
January 2001.
- The Joint Venture between GKN Westland Helicopters and Agusta
became operational in February 2001 to create the world's second
largest helicopter company.
- GKN Aerospace Services is being restructured and refocused
following the acquisition of a major facility from Boeing at St. Louis in
the US.
The profit and loss account of the Group for the year ended 31 December 2000
and a half year analysis are attached as Appendix 1.
Sales for the year rose by £453 million (9.8%) to £5,096 million. Excluding the
impact of currency, 1999 and 2000 acquisitions and disposals, the
improvement was £323 million, up by 7.1%, with most of the increase arising
in Automotive and the CHEP businesses worldwide.
Operating profit before goodwill amortisation and exceptional items rose from
£558 million to £593 million, an increase of £35 million (6.3%). The adverse
impact of currency was £9 million though this was largely offset by gains from a
reduction in foreign exchange cover. Excluding this, and the impact of
acquisitions and disposals, operating profit was up by £31 million (5.8%).
Interest payable by subsidiaries was £31 million compared with £21 million in
1999. This increase was largely a consequence of the acquisition programme,
combined with higher working capital levels in support of new business and
increased production levels in Aerospace and Helicopters.
The Group's share of joint venture interest payable rose to £34 million from £24
million in 1999. This was due to the acquisition by CLEANAWAY of Waste
Management Deutschland and further expenditure in support of the continued
growth of CHEP, notably in the US.
Profit before tax, goodwill amortisation and exceptional items was £528 million
compared with £513 million in 1999, an increase of 2.9%.
After goodwill amortisation and exceptional items, profit before tax was £481
million compared with £501 million in 1999.
The business swap with Dana gave rise to an exceptional gain of £57 million
and the Group's share of Alvis' exceptional gain on the sale of shares in Avimo
was £6 million. Offsetting the gains was a charge of £70 million arising from the
Aerospace restructuring that was announced in October.
The rate of tax as a percentage of profit before goodwill amortisation and
exceptional items fell to 25.2% from 26.7% principally due to the further
recovery of surplus ACT through the issue of a reedemable 'B' share.
Earnings per share before goodwill amortisation and exceptional items rose by
4.0% to 54.5p.
Cash flow from operations totalled £365 million compared with £391 million in
1999. There were significant increases in stocks and debtors as Aerospace and
Helicopter contracts developed. Capital expenditure was £261 million (1999 -
£236 million), continuing to reflect very high levels of investment in the
Helicopter and Driveline businesses together with the completion of a significant
expansion programme in Hoeganaes.
Capital expenditure represented 158% of depreciation.
The net impact of acquisitions and divestments was £113m.
Working capital increased during the year principally in GKN Aerospace Services
in support of new programs and restructuring. There was also additional
working capital in the US Automotive businesses due to market conditions.
At the end of the year the Group had net borrowings of £601 million compared
with £281 million at the end of 1999.
A final dividend of 12.9p per share is proposed giving a total dividend for the
year of 19.8p, an increase of 10.0% over the amount distributed to
shareholders in 1999 via the interim dividend and the return of capital under
the 'B' share scheme. The final dividend will be paid on 18 May 2001 to
shareholders on the register on 16 March 2001. Shareholders may choose to
reinvest the final dividend under the GKN Dividend Reinvestment Plan ('DRIP').
There was an increase in shareholders' equity in the year of £113 million to
£1,457 million, largely reflecting the retained profit of £176 million less the £84
million paid to redeem the 'B' shares.
Operating Review: Automotive
Operating Profit £308 million (1999 £273 million)
Our Automotive businesses performed well with sales 12.1% higher and profits
up by 12.8% compared with 1999.
Excluding the impact of acquisitions and currency, sales were 5.8% ahead and
profits up by 10.1%.
The performance of our Automotive Driveline business (ADD) in North America
in 2000 was strong. Sales grew 10.6% against a market in which car and light
vehicle production was 0.8% ahead of 1999. Notwithstanding the significant
market downturn in December the business performed well through to the end
of the year due to market share gains. Also in the Americas, ADD's operations
in Brazil (ATH) benefited from the market recovery in its first year as a
subsidiary of GKN following the asset exchange transaction with Dana earlier in
the year.
ADD achieved record results in most countries in Europe in a market in which
automotive production was up slightly by 1.3% compared with 1999. The
exception was the UK where difficulties in the automotive market continued. In
Germany, although the domestic market was slow, ADD's operations benefited
from their focus on export vehicle models, and grew in terms of both sales and
profit.
In pursuit of its growth strategy, ADD had a number of major successes in
2000, which will benefit the business in the years ahead.
Following agreement with Opel to acquire their constant velocity joint and
driveshaft facility in Germany, a similar agreement was reached in August to
acquire Nissan's driveline facility at Tochigi in Japan. This is GKN's first significant
production facility in Japan. Both of these acquisitions are opportunities created
by GKN's close partnership with customers, and ADD's technical strength.
Together, they represent additional revenue opportunities of £160 million per
annum.
We also increased our shareholding in Unidrive in Australia by 30% to 60% and
acquired a further 10% shareholding in Velcon in Mexico bringing our
shareholding to 49%. We acquired from Dana, the Constant Velocity Joint plant
in Columbia, South Carolina in the USA.
ADD's global market share in CVJ driveshafts has now reached 41%.
In Powder Metallurgy the European Sinter Metals business had a strong year
with sales and profits both significantly ahead of 1999. In North America
however, although sales increased due to the continuing acquisition
programme, profits were lower than the previous year due to lower volumes
from its most important automotive customers in the last quarter of the year,
leading to production inefficiencies in the Sinter Metal plants. The full effect of
this downturn on the results of Sinter Metals will be felt in the first half of 2001
as trading conditions remain difficult. Actions are being taken to reduce the cost
base.
There was a similar impact on Hoeganaes which was also negatively impacted
by a threefold increase in the price of natural gas, which is a key material used
in metal powder production.
In OffHighway Systems the business continued to perform well in difficult
market conditions. It has gained market share in North America. However, the
current worsening conditions in the agricultural market in Europe are having an
adverse effect on farm equipment sales.
Elsewhere in Automotive, Emitec had an excellent year with sales and profits
both well up on last year. The demand for its high performance emission
control products continues to increase rapidly as more stringent environmental
regulations are being implemented.
Operating Profit £169 million (1999 £147 million)
Sales and profits in Industrial Services were up 18.8% and 15.4% respectively
and on a like for like basis, excluding the currency impact, the increases were
16.2% and 13.7%.
In the combined CHEP and CLEANAWAY Joint Ventures sales and profits were
up by 15.8% and 15.9% on a like for like basis.
The momentum of CHEP US continued to be strong with like for like revenue
growth of 29.4% in pallets and RTPs. More than 500 new Wal*Mart suppliers
joined the pool in 2000. The implementation of the The Home Depot contract
has also begun well. In 2000 there was considerable focus on the depot
consolidation programme where a large number of small depots are being
consolidated into a lesser number of premium service depots which offer a
higher level of services.
Further good progress was made in CHEP Canada, Mexico and Brazil.
The current year in the Americas is starting well with a continuation of sales
growth.
CHEP Europe had a reasonable year in sales terms, though with lower growth
than in the second half of 1999 which included the effects of Y2K stocking.
Progress in Italy and Germany was slower than expected although in the case
of the latter, recent agreements with Kraft, Nestle and Reckitt Benkiser point to
a rather faster development than has been the case so far. Sales and profit
growth in Europe were also impacted by transport disruptions in a number of
European countries.
CHEP's investment in a new global IT system has progressed well, with the first
roll-outs achieved in Portugal and France and a phased implementation across
the rest of Europe over the next 9 months. The cost of running the new and
legacy systems in parallel has adversely impacted results in 2000, and will
continue to be a factor, until European implementation completes in the fourth
quarter of 2001, and US implementation in 2002.
CHEP Portfolio, the internet based on-line ordering and reporting service, has
been introduced commercially and is now available to customers across Europe
and North America. Approximately 1500 companies have already been signed
up.
CHEP's RTP pool had another year of strong growth both in North America and
in Europe.
CLEANAWAY in Germany had a good year with strong prices for recycled paper
benefiting results. The integration of Waste Management Deutschland is
proceeding well. In the UK, the acquisition of ServiceTeam in January this year
has strengthened CLEANAWAY's position in the Municipal market at a time
when local authorities are being encouraged to meet increased waste reduction
and recycling targets.
Interlake Material Handling had another good year in 2000. The slow down in
e-commerce and some retail sectors in the US will have an impact on the
demand for Interlake's products in the first half of 2001.
Operating Profit £116 million (1999 £138 million)
The Joint Venture of GKN Westland Helicopters and Agusta of Italy was
completed in February this year. It is the second largest helicopter company in
the world, starting with a strong order book of US$8 billion.
GKN Westland Helicopters had a successful year in 2000 with sales slightly
exceeding £1 billion and profits up by 10.3% on 1999. During the year 47 new
helicopters and kits were delivered, including 9 Apaches to the British Army, 6
EH101s to the Royal Air Force and 5 EH101s to the Royal Navy.
A total of 10 new and 3 upgraded Lynx aircraft were delivered to a number of
customers.
GKN Aerospace Services had a difficult year. Performance in the first half was
affected by customer programme delays and start up problems. Additionally,
there were a number of new product introductions which attracted high costs in
the early stages of implementation. Performance improved in the second half
although, as predicted, profit for the year as a whole was lower than that of
1999.
A major restructuring of GKN Aerospace Services was announced in October
2000 and is well underway. The total cost of £70 million is similar to that
included in our announcement of October last year. The objective is to focus the
business on seven centres of excellence in the US, UK and Germany. The
restructuring process is expected to be largely completed by early 2002 and
should bring significant improvements in efficiency and financial performance in
future years.
Also in October, we announced the agreement with Boeing to acquire its
aerospace fabrication operations in St. Louis, USA, and to become a core
strategic supplier to Boeing. This acquisition was completed on 8 January 2001,
ahead of plan.
This strategic acquisition together with the reorganisation of the business should
position GKN Aerospace Services as a global first tier supplier to all aerospace
prime contractors.
The outlook for the first half of 2001 will be heavily influenced by the North
American Automotive market. If vehicle production continues at its present
level, which is some 20% lower than the same period last year, the impact on
our Automotive business in North America will be significant. Additionally the
worsening conditions in the Agricultural sector in Europe are adversely affecting
the performance of our OffHighway business.
In the second half North America automotive production is predicted to stabilise
and we should benefit from cost reduction measures already taken. The
European automotive markets are forecast to remain firm and our businesses
in the Emerging Economies should advance further. Aerospace Services should
yield benefits from restructuring and Industrial Services should continue to
grow. These factors lead to a more optimistic view for the second half year.
Results 2000 Presentation
Click here to view the PowerPoint presentation of the 2000 results.
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