Management sales (including the impact of Fokker)
Management profit before tax (including the impact of Fokker)
margins under pressure, and it took concerted management effort together with some help from one-off items to hold profits broadly level with 2014. GKN Powder Metallurgy had a very good year, growing profits by 6% organically and taking its margin to 12%. Through their operational excellence and skill in developing hard to make ‘Design for PM’ components, the team succeeded in securing a record level of new orders. GKN Land Systems gave a creditable performance, with organic sales down by 6% in very tough market conditions. The team worked hard to address falling sales by cutting costs, and the results reflect the impact of an £11 million restructuring charge.
We measure long-term financial success using three key metrics: growth above market; margin improvement within an 8% to 10% range; and return on invested capital (ROIC) at around 20% before tax, delivering increasing cash flow and dividend growth. Against that framework our performance in 2015 was respectable. In summary, and ignoring the two months’ impact of Fokker: • Group sales grew organically by 2%, with growth above the market in both automotive businesses. GKN Aerospace’s growth was slightly below the overall market. GKN Land Systems, with its differing markets, is hard to measure, but its results certainly compare favourably with most of its peers.
• Group margin held steady at 9.2% in spite of the headwind from lower profits in GKN Land Systems. • ROIC moved up slightly, heading towards the 20% target. • Cash flow and dividend both increased.
Avoiding accidents at work is a top priority for all GKN employees. I was pleased with our good performance this year – shown in our KPIs on page 12 – however we will look for even further improvement in 2016. Being the best at what we do is part of our philosophy. Harnessing new technology is an important part of our aim to move ahead of our competitors and consolidate our market-leading positions.
Our financial goals
To deliver sustainable shareholder value over the long term, our financial goals are based on a balanced approach between sales growth, margin and return on invested capital (ROIC). Our automotive businesses outperformed the market in 2015; at 9.2% Group trading margin exceeded our minimum target of 8%, while we continued to make progress on ROIC at 17.8%. Further details are set out in the Group Finance Director’s review on pages 14 and 15.
Growth above market
Delivering strong financial returns Trading margin 8-10% ROIC 20%
Increasing cash flow, EPS and dividends
GKN plc Annual Report and Accounts 2015