Divisional performance against Group strategy
Strategic objective Progress
• Maintained strong positions in wheels, shafts, clutches and industrial products. Leading in our • Secured awards from longstanding customers Caterpillar, John Deere and Liugong. chosen markets • New customers secured – Kubota (wheels); GE Wind (controls and sensors). • Invested and expanded product portfolio in Taicang, China. Leveraging a strong global presence
Differentiating ourselves through technology Driving operational excellence
• Winning incremental business with new technique of active controlled clutches. • Leveraging outstanding product know-how in synergy driveshafts. • Introducing new process technology to produce hot induction forming wheels. • Restructuring actions taken to improve efficiency and mitigate the effects of depressed market conditions.
Sustaining above market growth
Sales in GKN Land Systems were lower than the prior year primarily due to a significant decline in agricultural equipment markets. Demand for construction equipment was also weaker while industrial sales were slightly down. The organic decrease in sales was £44 million (6%) and the adverse impact of currency translation was £39 million (5%). The organic decrease in trading profit was £18 million, which includes £11 million of restructuring charges. £5 million of the restructuring charges relates to two chassis contracts which end during 2016, reducing sales by £25 million in 2016. The negative impact of currency translation was £2 million (5%). Trading margin was 5.1% (2014: 5.7%), excluding restructuring charges. 2015 was a year dominated by tough market conditions which impacted trading and necessitated restructuring actions to right size the business for the future. Good progress was made to further develop
See pages 6 and 7 for more information on our strategic framework
capabilities and expand the product portfolio in Taicang, China. In addition, new technology such as integrated continuous slip clutches, hot induction forming wheels and synergy driveshafts is winning new business and new services, such as one for condition monitoring industrial shafts, and focus on niche, low capital opportunities with specific customers. During the year around £110 million of annualised sales in new and replacement business was won, helping to ensure GKN Land Systems is outperforming the market.
GKN’s Other Businesses reported combined sales in the year of £42 million (2014: £94 million). The change reflects a £1 million organic decrease in sales, the £51 million impact from the disposal of Emitec on 31 July 2014 and £2 million adverse currency translation impact more than offsetting the £2 million benefit from acquisitions. Trading profit was £1 million (2014: £5 million profit) reflecting the disposal of Emitec and the start-up costs of GKN Hybrid Power. Corporate costs, which comprise the costs of stewardship of the Group and operating charges and credits associated with the Group’s legacy businesses, were £18 million (2014: £20 million), primarily due to a £7 million past service credit following completion of a Pension Increase Exchange exercise in the UK partly offset by a £5 million charge relating to an environmental matter in a legacy business.
Other Businesses and corporate costs
GKN’s Other Businesses comprise Cylinder Liners (which is a 59% owned venture mainly in China, manufacturing engine liners for the truck market in the US, Europe and China), EVO eDrive Systems (a developer of axial flux motors) and GKN Hybrid Power (a flywheel energy storage and hybrid system manufacturer), acquired on 1 April 2014. During the year, GKN Hybrid Power delivered its innovative fuel-saving solution for 45 buses.
GKN plc Annual Report and Accounts 2015