Annual Report 2008 in PDF - GKN

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106 Notes to the Financial Statements continued 19 Financial risk management continued (d) Capital risk management The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain a capital structure which optimises the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce borrowings. The Group monitors capital on the basis of the ratio of Gross borrowings to EBITDA. The Group seeks to operate at an EBITDA of subsidiaries to Gross debt ratio of 2.5 times or less and the ratios at 31 December 2008 and 2007 were as follows: 2008 2007 £m £m Gross borrowings 822 788 EBITDA 377 428 Gross borrowings to EBITDA ratio 2.2 times 1.8 times The Group’s only external banking covenant requires an EBITDA of subsidiaries to net interest payable and receivable ratio of 3.5 times or more. The ratios at 31 December 2008 were as follows: 2008 2007 £m £m EBITDA 377 428 Net interest payable and receivable (47) (43) EBITDA to net interest payable and receivable ratio 8.0 times 10.0 times (e) Liquidity risk The Group is exposed to liquidity risk as part of its normal financing and trading cycle at times when peak borrowings are required. Borrowings normally peak in May and September following dividend and bond coupon payments. The Group’s policies are to ensure that sufficient liquidity is available to meet obligations when they fall due and to maintain sufficient flexibility in order to fund investment and acquisition objectives. Liquidity needs are assessed through short and long term forecasts. Committed bank facilities of £350 million expire in July 2010 and on which there were drawings at the year end of £34 million (2007 – £350 million expiring in July 2010 and undrawn at the year end). A further £9 million of the facility had been utilised for Letters of Credit on Group borrowings in China. Additional committed facilities were agreed in the year amounting to £55 million, maturing in 2013 and €50 million maturing in 2011. Committed facilities are provided through 12 banks. Maturity analysis of borrowings and derivative financial instrument liabilities Within One to two Two to five More than one year years years five years Total £m £m £m £m £m 2008 Borrowings (note 18) (97) (39) (334) (352) (822) Contractual interest payments and finance lease charges (50) (49) (107) (144) (350) Derivative financial instruments liabilities — receipts 319 111 220 211 861 Derivative financial instruments liabilities — payments (373) (133) (269) (260) (1,035) 2007 (201) (110) (490) (545) (1,346) Borrowings (note 18) (92) (6) (335) (355) (788) Contractual interest payments and finance lease charges (50) (47) (128) (169) (394) Derivative financial instruments liabilities — receipts 883 16 23 18 940 Derivative financial instruments liabilities — payments (894) (17) (23) (18) (952) (153) (54) (463) (524) (1,194) There is no significant difference in the contractual undiscounted value of other financial liabilities from the amounts stated in the balance sheet and balance sheet notes. GKN plc Annual Report 2008
Financial Statements 19 Financial risk management continued (f) Commodity price risk The Group is exposed to changes in commodity prices, particularly of metals, which has a significant impact on input costs and the overall financial results. The Group seeks to mitigate this exposure in a variety of ways including medium term price agreements, surcharges and advance purchasing. In rare circumstances and only in respect of certain specified risks, the Group uses derivative commodity hedging instruments. The impact of such financial instruments in respect of the overall commodity price risk is not material. (g) Categories of financial assets and financial liabilities Notes to the Financial Statements Held for trading Derivatives Loans and Amortised Financial Financial used for receivables cost assets liabilities hedging Total £m £m £m £m £m £m 2008 Other receivables and investments 4 — — — — 4 Trade and other receivables 600 — — — — 600 Derivative financial instruments — — 62 (184) (8) (130) Cash and cash equivalents 114 — — — — 114 Borrowings — (822) — — — (822) Trade and other payables — (717) — — — (717) Provisions — (5) — — — (5) 2007 718 (1,544) 62 (184) (8) (956) Other receivables and investments 9 — — — — 9 Trade and other receivables 538 — — — — 538 Derivative financial instruments — — 24 (13) (16) (5) Cash and cash equivalents 282 — — — — 282 Borrowings — (788) — — — (788) Trade and other payables — (631) — — — (631) Provisions — (1) — — — (1) 829 (1,420) 24 (13) (16) (596) www.gkn.com 107
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GKN plc Annual Report and Accounts
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Our Objective GKN is committed to p
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2008 Performance* Group results sig
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Although we expect 2009 to be a ver
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Constant velocity joints (CVJs) rev
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Off-highway driveshaft Blended wing
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Strategy and business objectives Th
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Operating cash flow performance of
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Restructuring and impairment costs
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2008 2007 Tax charge analysis % % W
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Overseas pensions The principal cou
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GKN received the prestigious Nissan
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GKN Driveline manufactures across a
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2008 2007 GKN Driveline £m £m Sal
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Continuing evolution of powder meta
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Despite a £6 million positive impa
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GKN OffHighway is a first tier supp
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Trading profit of subsidiaries of
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In January 2009 GKN completed the a
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Divisional strategy GKN Aerospace
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Financing The following section des
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Competitive markets and competition
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Living the Values GKN is a group of
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Delivering advanced technology Deli
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Engaging more fully with our employ
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Accident frequency rate (AFR) Numbe
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Contributing to our communities We
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Andrew Reynolds Smith (42) Chief Ex
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Dividend An interim dividend of 4.5
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Page 105 and 106: 14 Other receivables and investment
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Page 115 and 116: 24 Acquisitions There were no acqui
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Page 127 and 128: Group Financial Record For the year
Page 129 and 130: OffHighway GKN OffHighway Ltd GKN W
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Page 133 and 134: Contact Details GKN plc PO Box 55 I
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