GKN plc. Results for the year ended 31 December Nigel Stein Chief Executive 28 February 2017

Transcription

1 GKN plc Results for the year ended 31 December 2016 Nigel Stein Chief Executive 28 February 2017

2 Disclaimer Cautionary statement This presentation contains forward looking statements which are made in good faith based on the information available at 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. 2

3 Results for year ended 31 December 2016 Sales Management PBT Earnings per share Dividend per share 9.4bn 678m 31.0p 8.85p +22% (+2% organic) +12% +12% +2% 3

4 A year of achievement Making GKN even better Moving decisively on strategy Sharpening focus Smoothly integrating Fokker completed Investing in technology Reducing the Group s cost base Driving performance and productivity 4

5 Sharpening our focus Focusing on aero and auto markets GKN Land Systems Reorganisation successfully completed Sold Stromag to Altra Industrial Motion Shafts & Services now in GKN Driveline Wheels & Structures now in Other Businesses 5

6 Sharpening our focus Fixed cost headcount reduction Target 30 million annualised savings Restructuring charge of 39 million Headcount reduced by 650 people 6% of management grade jobs cut Entering 2017 with reduced fixed costs 6

7 Sharpening our focus Driving productivity Increasing automation and digitisation PICTURE of COBOT Good progress with shop-floor automation 34 cobot projects launched Digitally connecting plant and equipment 1,500 machines connected Investing to support growth 7

8 GKN Aerospace Fokker successfully integrated Excellent technology and people Great fit with GKN Restructuring completed well within forecast costs Brought teams together Harmonising processes Fokker improvement faster than we expected 8

9 GKN Aerospace Delivering on expectations Challenging year Profitable military programmes decline; newer commercial programmes ramp up Commercial sales up 3%; Military declines 2% Military to grow in 2017 with F-35 JSF ramp up Delivered world s largest lipskin for Boeing 777X Boeing 737 MAX production starts August

10 GKN Driveline Moving forward Excellent sales growth Organic growth ahead of global markets Won 1bn new and replacement business 25m excess launch costs on US AWD programmes New structure focused on product streams edrive technology nominated for award 10

11 GKN Powder Metallurgy Solid year Good returns Underweight in China GKN 2016 sales up 28% Accelerating Asian growth with Bazhou powder JV Won 200m annualised new and replacement business Driving digitisation and developing key technologies 11

12 Progress in delivering strategy: Making GKN even better Three strong divisions Five strategic objectives Lead in chosen markets Leverage global footprint Technology driving margin Operational excellence Sustain above market growth 12

13 Adam Walker Group Finance Director 28 February

14 Results summary 2016 m 2015 m Change % Sales 9,414 7, % organic growth Trading profit m 2016 restructuring programme Trading margin (%) (60) bps Margin excluding restructuring of 8.6% Profit before tax Earnings per share (p) Tax rate 24% Dividend per share (p) Final dividend 5.9p 14

15 Currency Translational impact in 2016 Sales 862m Profit 89m Pension (112)m overseas schemes Net Debt (145)m 75%/25% ($: ) Ongoing benefit for Income Statement in 2017 at current rates 15

16 Group sales 209m m 9, (65) (6) 9,414 9,000 US$ + 461m Euro + 222m 8, % 6% 1%* (8)% 8,000 7,500 7,689 Organic growth 2% 7, FX Acq/Div Aerospace Driveline Powder Metallurgy Land Systems Other 2016 * Excluding surcharges 16

17 Group trading profit m US$ Euro + 62m + 16m 89 (39) 5 3 (19) (1) (6) % 7.9% 11.7% 4.5% Trading Margins* FX Acq/ Div 2016 Restructuring Programme Aerospace Driveline Powder Metallurgy Land Systems Other 2016 * Excluding 2016 restructuring programme 17

18 GKN Aerospace FY 2016 FY 2015 Organic Growth* Sales ( m) 3,423 2,500 1% Trading profit ( m) (6)% Trading margin 10.2%* / 9.9% 10.9% Delivering on expectations Strong contribution from Fokker Commercial growth of 3% (A350; A320) headwinds A380; A330; GEnx (Boeing 747) Military decline of 2% (F/A-18: Black Hawk) offset by F-35 Ramp up costs GTF and Trent XWB Restructuring charge 10m * Excluding 2016 restructuring programme 18

19 GKN Driveline FY 2016 FY 2015 Organic Growth* Sales ( m) 4,216 3,548 6% Trading profit ( m) % Trading margin 7.9%* / 7.7% 8.2% Moving forward Market outperformance in North America and Europe China slightly down against market but 18% growth in H2 CVJ running at full capacity strong financial performance AWD North America launch costs on substantial programme Increased investment in edrive leading to early wins Restructuring charge 10m * Excluding 2016 restructuring programme 19

20 GKN Powder Metallurgy FY 2016 FY 2015 Organic Growth* Sales ( m) 1, % Trading profit ( m) (1)% Trading margin 11.7%* / 11.4% 12.0% Solid Year Good growth in Europe and Asia; tougher in North America Scrap steel surcharge Investment in Asian powder capability Restructuring charge 3m * Excluding 2016 restructuring programme 20

21 GKN Land Systems FY 2016 FY 2015 Organic Growth* Sales ( m) (8)% Trading profit ( m) % Trading margin 4.5%* / 2.6% 3.5% A year of change Continued decline in agricultural equipment market (20% decline in North America) Sale of Stromag (Industrial business) Elimination of divisional structure Restructuring charge 14m * Excluding 2016 restructuring programme 21

22 Adjusting items 2016 m 2015 m Trading profit Change in derivative & other financial instruments (154) (122) Amortisation of non-operating intangible assets (103) (80) Changes in Group structure (9) (1) Acquisition related restructuring charges - Fokker (31) - Impairment charges Inventory unwind (52) (71) - (12) Operating profit

23 Cash flow and net debt 2016 m 2015 m Operating cash flow Free cash flow Net debt (704) (769) 2015 substantial customer advance Continued investment to support growth programmes capex/depreciation 1.5 times (2015: 1.6 times) Interest and tax outflows level year on year - 169m (2015: 165m) Additional pension payment of 15m legacy buy-out Translational currency impact on net debt ( 145m) offsets Stromag proceeds ( 151m) 23

24 Group post-employment accounting deficit Pensions Accounting IAS 19 Deficit 2.0bn UK 1.2bn Europe 0.65bn US 0.15bn Increase of 475m driven by change in discount rates UK Triennial Valuation Drives future cash flow obligations Current annual funding requirement 42m Valuation of liabilities materially lower than IAS 19 basis Ongoing negotiations with Trustees Currency impact 112m US Unfunded and funded schemes Core scheme closed no service charge Europe Unfunded schemes Pay as you go limited volatility on cash flows 24

25 Looking ahead Operating margin Continuous improvement Standardisation / shared services Close to costs Operating Cash Flow Productivity Capital allocation Pensions Tax IFRS 15 25

26 Summary Currency Growing above our markets Restructuring to drive a sharper focus Investment for the future Cash generation 26

27 Nigel Stein Chief Executive 28 February

28 GKN s market leading positions Aerostructures Global # Engine systems Global # Electrical wiring Global # Additive Driveshafts AWD edrive Manufacture Emerging Global # Global # Global # PM components Global # 1 2 Powders Global # Additive manufacture (with GKN Aerospace) EMERGING 28

29 edrive: Clear opportunity for GKN Incremental to our current business Hybrid and full electric vehicles will continue to have driveshafts Leading AWD position Electrification will add content per vehicle Electrification is good for GKN Driveline Official Porsche Technology Partner GKN eaxle, 918 espyder 29

30 Key technologies: Landscape of vehicle electrification GKN focus Micro hybrid (stop-start) Mild hybrid (incl. 48 volt) Full hybrid Plug-in hybrid Battery electric vehicle 30

31 Unmatched real-world experience in edrive History of delivering hybrid electric systems 300,000 vehicles on the road today, using GKN edrive technology many more to come Peugeot 3008 HY4 FIAT 500e Mitsubishi Outlander Volvo XC90 Nissan Cube Porsche 918 espyder BMW i8 BMW 2 Series Active Tourer BMW X

32 eaxle technology positions us for the future etwinster torque vectoring eaxle Competitively well positioned GKN expertise, knowledge and track record Noise, vibration, harshness Packaging Gears, electrics and software Well placed to capture share of large market Increasing content per vehicle 32

33 Additive manufacturing (AM) Great opportunity for GKN Evolution of an aerospace bracket using AM Aerospace and Powder Metallurgy divisions Building technology experience Working with customers to deliver AM components Using AM tools in our plants Reengineering and optimising components Baseline Stage 1 Optimisation Full Optimisation 42% Weight saving 33

34 Bringing the Group s expertise together GKN Powder Metallurgy Building a portfolio of powders Titanium powder JV Manufacturing in-house tools and prototypes for customers AM POWDERS IN DEDICATED MATERIALS GKN Aerospace Range of technologies in a global network of centres LARGE SCALE DEPOSITION SMALL SCALE DEPOSITION (WIRE) SMALL SCALE DEPOSITION (POWDER) POWDER BED (LASER) POWDER BED (ELECTRON BEAM) Different techniques suit different products Working together in GKN s Additive Manufacturing virtual division 34

35 GKN is well placed Strong technology; customer relationships; global capability Competitive and ambitious Confident and focused on winning 35

36 Outlook for 2017 Aerospace Teal 2017 forecast +2%, Commercial -1%; Military +14% GKN Aerospace s 2017 organic sales are expected to grow slightly above the market Automotive External global production forecast +2% Increases in China and Europe; North America down GKN Driveline and GKN Powder Metallurgy are expected to grow organically above the market We expect 2017 to be another year of further growth, helped by the benefits of the actions taken in 2016 and GKN s constant focus on continuous improvement 36

37 Appendix Results for the year ended 31 December

38 Statutory income statement 2016 m 2015 m Sales (subsidiaries) 8,822 7,231 Trading profit Change in value of derivative and other financial instruments (154) (122) Amortisation of non-operating intangible assets arising on business combinations (103) (80) Changes in Group Structure (9) (1) Acquisition related restructuring charges (31) - Impairment charges (52) (71) Inventory unwind - (12) Operating profit Share of post-tax earnings of equity accounted investments Interest (net) (79) (65) Other net financing charges (37) (72) Net financing costs (116) (137) Profit before tax Management profit before tax

39 Margin Adjusted * 2016 % Margin 2016 % 2015 % Aerospace Driveline Powder Metallurgy Land Systems Group * Excluding 2016 restructuring programme 39

40 Return on invested capital ROIC% before tax 20% Group Target - 20% Trading Profit ( m) * 15% Group ROIC Excl. Fokker Av. Invested Capital ( m) 4,823 3,924 ROIC % % Group WACC - 12% Aerospace 14.6% 18.1% * Driveline 19.2% 19.5% 1 5% * Powder Metallurgy 21.0% 22.3% Land Systems 7.0% 7.1% * 2015 Group and Aerospace exclude the impact of Fokker 40

41 Impact of currency Translational impact on 2015: Effect on 2015: Average Rate Change Sales Trading Profit % m m US $ (11.8) Euro (11.6) Real (7.4) 9 - Yen (20.2) 70 1 Renminbi (6.4) 33 5 Indian Rupee (7.2) 10 1 Swedish Krona (10.1) 26 2 Other 31 2 Impact (subs & JVs) Translational impact on 2016 trading profit (including JVs): Euro moves 1 point e.g = (1.7)m US$ moves 1 point e.g = (3.1)m 41

42 Operating cash flow 2016 m 2015 m Trading profit (subs) Deprec n & amort n EBITDA 1, Working capital (145) 70 Capital expenditure (494) (411) Other flows 13 (4) Operating cash flow

43 Free cash flow and net debt 2016 m 2015 m Operating cash flow Dividends received (JVs) Interest & tax (169) (165) Pension funding (57) (42) Fokker restructuring (16) - Dividend paid (NCI) (2) (3) Free cash flow Dividends (150) (142) Acquisitions & disposals 130 (294) Net investment hedges and other (116) (79) Movement in net debt 65 (145) Net debt (704) (769) 43

44 Post-employment obligations: accounting deficit 2016 Full Year UK m Americas m Europe m ROW m Assets 2, ,580 Funded Liabilities (3,497) (332) (40) (33) (3,902) Funded Deficit (1,204) (105) (3) (10) (1,322) Unfunded Liabilities (17) (43) (648) (3) (711) Net Deficit (1,221) (148) (651) (13) (2,033) 2015 Full Year Assets 2, ,560 Funded Liabilities (3,219) (280) (36) (32) (3,567) Funded Deficit (897) (94) (3) (13) (1,007) Unfunded Liabilities (15) (39) (495) (2) (551) Net Deficit (912) (133) (498) (15) (1,558) Total m 44

45 % change Global automotive market in GKN Driveline sales growth v global market* Global automotive market in 2016* % Market (production growth) GKN Driveline sales growth 4 6% 5% Market GKN GKN Driveline 2016 sales by region (5) 11% 10% 9% 5% 3% 2% Japan Brazil 2% 0% N. America Europe China (1)% India (10) (9)% (10)% Americas 36% 27% Asia (15) (20) 37% Europe *Source: IHS Automotive 45

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