Last checked at 27 Feb 2018 12:10
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NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM THE UNITED STATES OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION
FOR IMMEDIATE RELEASE
27 February 2018
Response to GKN's full year 2017 results
Today's announcement from GKN adds little to the debate about which management team is best equipped to transform the business.
· Margins at all three divisions continue to fall and US Standard Aerostructures is loss-making
· Despite an increase in sales of £1 billion, profits are up just £1 million, without taking into account a £112 million writedown
· Continued poor cash management is the order of the day, with debt some £80 million higher than consensus
Melrose Chairman, Christopher Miller, said:
"Today's statements are full of long-term promises and more short-term actual misses. They include a rushed plan to demerge Aerospace and Automotive, which begs the question whether the priority of Project Boost has been superseded by the dismemberment of GKN in the next 15 months. At the heart of this is a plea for the incumbent team to embark on an unproven and risky plan which we believe is wrong for all GKN stakeholders and UK plc as a whole. GKN deserves better than this: we believe Melrose is the only team with the ability to unlock its true potential."
Enquiries:
Montfort Communications: Nick Miles, Charlotte McMullen | +44 (0) 20 3514 0897 +44 (0) 7973 130 669 / +44 (0) 7921 881 800 |
Rothschild (Financial Adviser to Melrose): Ravi Gupta, Yuri Shakhmin |
+44 (0) 20 7280 5000 |
RBC Europe Limited (Financial Adviser to Melrose): Mark Preston, Chris Squire |
+44 (0) 20 7653 4000 |
Investec (Corporate Broker to Melrose): Keith Anderson, Carlton Nelson |
+44 (0) 20 7597 5970 |
Melrose Geoffrey Martin (Finance Director) |
+44 (0) 20 7647 4500 |
SOURCES OF INFORMATION AND BASES OF CALCULATION
1. Aerospace reported management trading profit margin 2017 of 7.8% vs. consensus of 8.5%, Driveline reported management trading profit margin 2017 of 7.1% vs. consensus of 7.3%, Powder Metallurgy reported management trading profit margin 2017 of 10.6% vs. consensus of 11.0%, GKN Group reported management trading profit margin 2017 of 7.4% vs. consensus of 7.7%.
GKN consensus used in this announcement comprises all analyst notes available to Melrose since 13 October 2017 (date of GKN's trading statement) as at 12 January 2018 (date that Melrose's approach was made public) and includes divisional and group level estimates from the following analysts: Barclays (16 October 2017), Berenberg (16 October 2017), Deutsche Bank (16 October 2017), J P Morgan Cazenove (group level only, 16 October 2017), UBS (16 October 2017), Peel Hunt (17 October 2017), Citi (18 October 2017), Liberum (23 October 2017), Jefferies (9 November 2017) and Bank of America Merrill Lynch (16 November 2017). Estimates from the following analysts have been excluded from the consensus as they adjust estimated trading profit for the impairment charge in the Aerospace business: Bank of America Merrill Lynch (17 November 2017), Deutsche Bank (17 November 2017), J P Morgan Cazenove (6 December 2017), Investec (18 December 2017) and UBS (10 January 2018). Estimates from Investec (6 November 2017) have been excluded from the consensus as it is a connected adviser to Melrose.
The minimum Aerospace trading profit margin full-year 2017 estimate per the consensus is 8.2%, the maximum Aerospace trading profit margin full-year 2017 estimate is 9.0% and the arithmetic average is 8.5%.
The minimum Driveline trading profit margin full-year 2017 estimate per the consensus is 7.2%, the maximum Driveline trading profit margin full-year 2017 estimate is 7.5% and the arithmetic average is 7.3%.
The minimum Powder Metallurgy trading profit margin full-year 2017 estimate per the consensus is 10.6%, the maximum Powder Metallurgy trading profit margin full-year 2017 estimate is 11.6% and the arithmetic average is 10.6%.
In accordance with Rule 28.8(c) of the Code, the consensus estimates are not shown with the agreement or the approval of GKN.
2. GKN management revenue full-year 2016 of £9,414 million and full-year 2017 of £10,409 million, GKN management trading profit full-year 2016 of £773 million and full-year 2017 of £774 million. 2016 figures as set out in GKN's Annual Report 2016 and 2017 figures as set out in GKN's results presentation dated 27 February 2018.
3. GKN reported net debt for 2017 of £889 million as set out in GKN's presentation dated 27 February 2018.
The minimum net debt full-year 2017 estimate per the consensus is £642 million, the maximum net debt full-year 2017 estimate is £929 million and the arithmetic average is £812 million.
Important notice
N M Rothschild & Sons Limited ("Rothschild"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Melrose and for no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Melrose for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement.
RBC Europe Limited, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Melrose and for no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Melrose for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement.
Investec Bank plc ("Investec"), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Melrose and no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Melrose for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement.
Rule 26.1 disclosure
In accordance with Rule 26.1 of the Code, a copy of this announcement will be available at www.melroseplc.net by no later than 12 noon (London time) on the business day following this announcement.
The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.
Important notice for US shareholders
This Announcement does not constitute an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Melrose does not intend to make a public offering of securities in the United States, but if undertaken any such public offering would need to be made by means of a prospectus that would contain detailed information about the company and management, as well as financial statements.