Bottom Line: Europe puts brake on GKN

SIR DAVID LEES, chairman of GKN, says it would be content to remain a minority shareholder in Westland for the next five years, as it has been for the past five, if its bid fails to win the day.

Whether shareholders will continue to take such a sanguine view of recovery prospects at GKN as a group is more arguable. At 536p, its shares are discounting a significant bounce-back in profits over the next couple of years.

The main prop against disappointment is a 4.8 per cent dividend yield, although earnings have not covered the payout for the past two years and may only just do so this year.

The severity of the downturn in mainland Europe, its largest single market, where car and truck production fell by 20 and 25 per cent respectively, is reflected in GKN's 1993 figures, with a 20 per cent fall in pre-tax profits to pounds 97.5m.

Despite a strong performance in the UK and progress in the US, a double-digit fall in GKN's mainland European volumes slashed second-half operating profits in automotive and engineered products from pounds 42m to pounds 28m as margins fell from 5.6 to 3.9 per cent.

A jump in restructuring costs from pounds 12.9m to pounds 20m will probably be reversed this year and enable automotive profits to show some improvement.

GKN, perhaps caught on the hop by the European slump last year, is nonetheless forecasting an optimistic-looking 4 per cent rise in European car production this year. But it is likely to continue to gain market share, as its Fiat outsourcing venture underlines, while the build-up of sales from its dollars 50m ( pounds 34.5m) Roxboro project will also be chipping in.

Its share of losses at UES, a chunky pounds 19m in 1993, ought to come down in 1994 unless another round of severe cost-cutting is needed. But GKN seems to be stuck with this headache.

Westland will enhance GKN's earnings, but even so pre-tax profits of pounds 135m this year imply a p/e ratio of 24, which may be hard to sustain if recovery disappoints.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
News
people
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn