NEWS RELEASE                                                                                                     

GKN plc

Interim Management Statement

21 October 2014

GKN plc, the global engineering business that serves the aerospace, automotive and land systems markets, today issues the following Interim Management Statement covering the period since

1 July 2014.

Market Overview

Demand in the Group's principal markets has been broadly consistent with our expectations at the time of our half year results.  The commercial aerospace market was robust and global light vehicle production was up 2%.  Agricultural equipment demand fell sharply while military aerospace, construction and industrial markets were broadly flat. 

Group Results  

Against this backdrop and in our seasonally lower quarter, GKN continued to make good progress with sales for the three months ended 30 September 2014 reaching £1,789 million.  This represented a 3% organic increase which was offset by £119 million (6%) adverse currency translation, due to sterling's strength against most major currencies.  The net impact of acquisitions and divestments was a reduction in sales of £15 million.

Third quarter trading profit increased to £160 million.  Organic trading profit increased by £20 million (14%) while the adverse currency translation impact was £11 million and the reduction due to acquisitions/divestments was £1 million.  Trading margin increased to 8.9%.  Group profit before taxation increased 6% to £139 million.

Outlook

We see little change in our markets for the remainder of the year.  The automotive market is forecast to remain positive with a lower rate of growth in the final quarter.  Aerospace markets are robust whilst the agricultural equipment market looks set to continue its recent decline.  As previously stated, the strength of sterling will adversely affect reported results, but the Group continues to expect 2014 overall to show another year of progress.  

Summary

Nigel Stein, Chief Executive, GKN plc, commented:

"We have delivered a good performance in the third quarter despite adverse currency translation continuing to impact reported sterling results.  Looking forward to the rest of the year, tougher prior year comparators mean that organic growth is likely to be more modest but we expect our market leading positions, advanced technology and extensive global footprint to make 2014 another year of progress."

Divisional Markets and Performance

GKN Aerospace

GKN Aerospace achieved organic sales growth of 3% driven by good commercial demand, military remaining flat, and offset by adverse currency translation of 5%.  Trading profit increased 18% to £72 million, benefitting from a £14 million organic increase, including income of £4 million for a further milestone achieved in relation to Composite Technology and Applications Limited, the joint venture that was disposed of in December 2013.  There was a positive benefit from disposals of £1 million while adverse currency translation was £4 million (7%).  The trading margin improved to 13.3%.

Automotive 

Global light vehicle production in the third quarter of around 20.7 million vehicles was 2% ahead of the comparable period in 2013 with good growth in China (+8%), North America (+8%) and India (+4%) and declines in Europe (-1%), Japan (-3%) and Brazil (-17%).

Due to stronger prior year comparators, this rate of growth is forecast to slow to 1% in the fourth quarter. 

GKN Driveline

GKN Driveline delivered a good third quarter result with organic sales increasing 7%, ahead of global automotive production, offset by 8% adverse currency translation impact.  Trading profit was £62 million with the organic increase of £9 million being partly offset by £5 million adverse currency translation.  Trading margin was 7.5% (2013: 6.9%).  The results benefited from a strong performance in China, North America and Europe although sales in Japan and Brazil were down in line with the market. 

GKN Powder Metallurgy

GKN Powder Metallurgy's organic sales increased 3%.  Adverse currency translation reduced sales by 7% and trading profit by £2 million.  Trading margin was slightly lower due to a major equipment failure at one plant and softer sales in Brazilian industrial markets. 

GKNLand Systems

GKN Land Systems markets fell sharply, particularly for Agricultural equipment demand where the outlook progressively worsened during the period.  Demand remained broadly flat for construction and industrial equipment.  

Sales were down 15%, representing a 10% organic decline and 5% adverse currency translation.  Trading profit and margin were lower due to the rapid decline in sales.   

Other businesses

Sales in the quarter for GKN's other businesses reduced to £17 million (2013: £26 million) reflecting the disposal of the Group's share of the Emitec joint venture.

Financing

There has been no material change to the Group's financial position with net debt at 30 September 2014 of £857 million (30 June 2014: £813 million).

Immediately after the quarter end, on 1 October, the credit rating agency, Moody's, upgraded GKN from a non-investment grade rating of Ba1 (positive), to the investment grade rating Baa3 (stable).  GKN's three credit ratings are now Baa3 stable outlook (Moody's), BBB- stable outlook (Fitch) and BB+ positive outlook (S&P).  

Management Changes

During the period it was announced that Marcus Bryson, CBE, Chief Executive Aerospace and Land Systems is retiring from the Group and, with effect from 31 December 2014, will step down from the Board.  From that date, Kevin Cummings, CEO GKN Aerospace and Phil Swash, CEO GKN Land Systems will report directly to Nigel Stein, Chief Executive.

IMS Call

There will be a call for analysts and investors at 09.00am today.  Dial in details are:

Direct dial:                   +44 (0) 203 139 4830

UK toll-free:                 0808 237 0030

Conference ID:            55858705# 

Participants dialling into the call from outside the UK can find a local number in the following file:

http://wpc.1726.planetstream.net/001726/FEL_Events_International_Access_List.pdf

Conference ID as above.

A replay of the conference call will be available for 30 days at the following numbers or will be available thereafter on the Group's website. Audio Playback:                        

Direct dial:                   +44 (0) 203 426 2807

UK toll-free:                 0808 237 0026

Conference ID:            651177# 

Final Results Announcement

The Group intends to issue its 2014 full year results announcement on 24 February 2015.

Notes

(1)        Financial information set out in this announcement, unless otherwise stated, is presented on a management basis which aggregates the sales and trading profit of subsidiaries (excluding certain subsidiary businesses sold and closed) with the Group's share of the sales and trading profit of joint ventures.  References to trading margins are to trading profit expressed as a percentage of sales. Management profit or loss before tax is management trading profit less net subsidiary interest payable and receivable and the Group's share of net interest payable and receivable and taxation of joint ventures.  These figures better reflect performance of continuing businesses.  Where appropriate, reference is made to organic results which exclude the impact of acquisitions/ divestments as well as currency translation on the results of overseas operations. 

Further information:

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

Cautionary Statement

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

Notes to Editors

GKN plc is a global engineering business serving the aerospace, automotive and land systems markets.  It has operations in more than 30 countries, around 50,000 employees in subsidiaries and joint ventures and had sales of £7.6 billion in the year ended 31 December 2013.  GKN plc is listed on the London Stock Exchange (LSE: GKN).