GKN rallies on acquisition of aerospace supply firm; operating profit beats expectations
Updated : 09:15
Shares in GKN rose sharply after it announced an agreement to acquire Dutch aerospace supply firm Fokker Technologies Group from Arle Capital for an enterprise value of €706m and posted better-than-expected first-half operating profit.
The engineering company, which will fund the deal through a £200m share placing and existing debt facilities, said the transaction was an “excellent strategic and cultural fit”.
Chief executive Nigel Stein said: “It strengthens GKN Aerospace’s market leadership, manufacturing footprint and technology. This transaction will increase our shipset value on key growth programmes in both the commercial and military markets including Fokker’s complementary positions on the A350 and the F-35.
“Fokker’s sizable China operations also help boost GKN Aerospace’s activity in this important region. Fokker is a great business with a strong brand and has significant technology heritage. We believe that it will benefit from GKN’s operational focus and long-term approach. I look forward to welcoming the Fokker workforce to GKN.”
For the year ended 31 December 2014, Fokker reported revenue of €758m, earnings before interest, tax, depreciation and amortisation of €76m and operation earnings before interest and tax of €53m. It had total assets of €814m.
Completion of the deal is expected to take place I the fourth quarter of this year.
Societe Generale said: “We think the market will view the deal favourably as it reinforces GKN’s position in aerostructures and will continue to tilt the group portfolio to aerospace.”
In a separate statement, the company said operating profit for the six months ended 30 June rose 2% to £346m from £340, beating consensus estimates by around 3%.
GKN posted a 5% drop in pre-tax profit to £212m from £224m amid weakness in some of the company’s key markets.
Profit before tax and exceptional items rose 4% to £307m from £296m.
Stein said: “We have continued to perform well against our key markets and report good results in spite of some end market weakness, particularly in GKN Land Systems. We expect these trends to continue in the second half and for 2015 to be another year of growth. “
Earnings per share were up 1% on last year to 14.5p from 14.4p, impacted by an increased tax rate of 24% and the interim dividend increased 4% to 2.9p per share.
Sales were up 1% organically at £3.85bn from £3.83bn and about 1% ahead of consensus expectations.
At 09:14, GKN shares were up 7.3% at 316.40p.