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 Management basis(1) As reported
2014 2013 Change​ 2014 2013 Change
£m £m % £m £m %
Sales 3,828 3,869 -1 3,565 3,647 -2
Operating profit 340 320 +6 259 163(*) +59
Trading margin (%) 8.9% 8.3% +60bps
Profit before tax 296 278 +6 224 127(*) +76
Earnings per share 14.4p 13.8p +4 11.2p 5.5p(*) +104
Interim dividend per share 2.8p 2.6p +8 2.8p 2.6p +8

(*) restated for a hindsight fair value adjustment, see note 2 of the financial statements.

Financial Highlights(1)

  • Sales increased 6% organically, but 1% lower after £247 million currency translation impact
  • Trading margin improved 60bps to 8.9%
  • Profit before tax (management basis) up 6%, with £24 million of adverse currency this half offsetting restructuring costs of £25 million in the first half of 2013
  • Reported profit before tax was £224 million (2013(*): £127 million)
  • Earnings per share up 4% to 14.4p
  • Interim dividend increased 8% to 2.8 pence per share (up 6% on a normally weighted basis)
  • Return on average invested capital of 16.9% (2013: 16.6% excluding GKN Aerospace Engine Systems)
  • Free cash flow of £19 million (2013: £77 million), after £54 million repayment of a UK Government refundable advance
  • Net debt of £813 million (31 December 2013: £732 million), reflecting normal seasonality

"This is another good performance, particularly in GKN Driveline which delivered 11% organic sales growth. We have continued to outperform our key markets and report good underlying financial results in spite of sterling's strength and some end market weakness - we expect these trends to be maintained in the second half. GKN is continuing to make encouraging progress against its strategy."

Nigel Stein
Chief Executive, GKN plc

Divisional Highlights

Sales
(£m)
Organic sales growth
Trading margin
%
2014
2013
%
2014
2013
GKN Aerospace
1,100
1,123
3
11.0
10.5
GKN Driveline
1,765
1,728
11
8.0
6.8
GKN Powder Metallurgy
471
480
6
11.3
10.0
GKN Land Systems
426
487
-9
7.3
9.2
Group
3,828
3,869
6
8.9
8.4

The Group figures include Other Businesses (Emitec, Cylinder Liners, GKN Hybrid Power and Evo Electric).

GKN Aerospace

  • Organic growth in commercial aerospace (+5%) offsets decline in military (-2%)
  • Strong commercial order book with a trend towards global suppliers
  • Integration of North American engine components into GKN Aerospace Engine Systems

GKN Driveline

  • Growth significantly ahead of global auto production helped by increasing content per vehicle
  • Trading margin improved to 8.0%

GKN Powder Metallurgy

  • Continued growth ahead of global auto production and trading margin increased to 11.3%
  • Upgrade of North American capacity underway

GKN Land Systems

  • Organic sales down 9% due to challenging markets and chassis contracts ending in 2013
  • Strong cost control results in trading margin of 7.3%
  • Investing to support industrial product sales in North America and capability in China, including enhanced position in Huading Wheels venture

Outlook

Commercial aircraft production should continue to be strong whereas military markets are forecast to decline. GKN Aerospace's 2014 organic sales are expected to show modest growth, reflecting these conflicting trends.

In automotive, external forecasts suggest that global light vehicle production should grow around 3% in the second half as comparators get tougher. Increases are expected in China, North America and India, while Europe is forecast to be flat and Japan and Brazil decreasing. Against this background, GKN Driveline and GKN Powder Metallurgy are expected to continue to grow organically above the market.

Softer agricultural equipment markets in Europe and North America are likely to more than offset the slight improvement in European industrial and construction markets. As a result, GKN Land Systems 2014 sales are expected to be lower than 2013.

The strength in sterling will adversely affect reported results. However the Group's underlying progress is expected to continue due to the benefits of its diverse exposure to global markets, strong customer positions and healthy order books.

Notes

(1) Financial information set out in this announcement, unless otherwise stated, is presented on a management basis as defined on page 13.

Cautionary Statement

This announcement contains forward looking statements which are made in good faith based on the information available to 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.

Further Enquiries

Analysts/Investors:

Guy Stainer
Investor Relations Director
GKN plc
T: +44 (0)207 463 2382
M: +44 (0)7739 778187
E: guy.stainer@gkn.com

Media:

Chris Fox
Group Communications Director
GKN plc
T: +44 (0)1527 533238
M: +44 (0)7920 540051
E: chris.fox@gkn.com

Andrew Lorenz
FTI Consulting
T: +44 (0)207 269 7113
M: +44 (0)7775 641807

There will be an analyst and investor meeting today at 09.30am at UBS, Ground Floor Presentation Suite, 1 Finsbury Avenue, London EC2M 2PP.

A live videocast of the presentation will be available at http://www.gkn.com/investorrelations/Pages/Webcasts.aspx.
Slides will be put onto the GKN website approximately 45 minutes before the presentation is due to begin, and will be available to download from the GKN website at: http://www.gkn.com/investorrelations/Pages/results-and-presentations.aspx?year=2014.
Questions will only be taken at the event.

A live dial in facility will be available by telephoning: +44 (0) 1452 555 566, Conf ID: 75444300
A replay of the conference call will be available until 28 August 2014 on:
Standard International Number: +44 (0) 1452 550 000
Replay Access Number: 75444300
This announcement together with the attached financial information thereto may be downloaded from:
www.gkn.com/media/Pages/default.aspx.

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