Annual Report 2009 in PDF - GKN

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GKN plc Annual Report 2009
Review of Performance
Pictured above and right:
Powder Metallurgy’s Technology Centre in
Radevormwald, Germany, houses the division’s
European research and development centre and a
state-of-the-art technical area.
After reporting a £14 million trading loss
in the first half of 2009, Powder Metallurgy
benefited in the second half from the gradual
recovery in sales volumes and the impact of
the significant restructuring programme. Both
GKN Sinter Metals and Hoeganaes reported
trading profits across all regions in the
second half of the year. In the year ended
31 December 2009, Powder Metallurgy
reported a trading loss of £7 million (2008 –
£2 million loss).
Restructuring actions implemented to
reposition the business in light of the
economic slowdown included the closure and
cessation of production at three facilities,
headcount reductions and extensive use of
government supported short-time working,
which has steadily diminished as the year has
progressed. A further 500 jobs were lost in
2009, bringing the total headcount reduction
since the commencement of the programme
in mid 2008 to 1,100.
Net restructuring costs in 2009 totalled £20
million in relation to redundancies, shorttime
working and facility closure costs.
No impairment charges were incurred in 2009
(2008 – £100 million).
The management actions in 2009 to
protect cash flow included reducing working
capital and capital expenditure. As a result,
inventories were reduced by 23% at constant
currency rates and capital expenditure on
tangible fixed assets reduced to £10 million
(2008 – £35 million). The ratio of capital
expenditure to depreciation consequently
reduced to 0.3 times (2008 – 1.1 times).
Increasing trends to improve fuel efficiency
and reduce emissions, such as variable valve
timing in engines, high performance gear sets
in automatic transmissions and differential
gears, are driving the demand for products
made by powder metallurgy. Approximately
£75 million of new programme business was
awarded in the period. In addition, a further
£25 million of annualised sales of existing
programmes were won from competitors.
New product launches included the first
application of GKN’s innovative planetary
pump as an integral part of the double clutch
transmission on the Ferrari California and a
number of powder metallurgy parts for the
Tata Nano, a low cost vehicle for the Indian
market.
The full year divisional trading margin in 2009
was (1.4)% (2008 – (0.3)%), although in the
fourth quarter the trading margin was 3.4%,
reflecting improved business performance
and market conditions. Return on invested
capital was (1.6)% (2008 – (0.4)%).