View from City Road: GKN's world view wide of the mark
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.GKN held the complacent view this spring that a revival in UK and US car markets would offset the impact on its automotive component businesses of a downturn in Continental Europe. Since the Continent takes more than half its sales, this took some doing and the wish has proved wide of the mark.
There has been an 8 per cent pick- up so far in both the UK, where GKN is well ensconced with Honda and Toyota, and the US, where GKN's exposure to Ford and Chrysler has led to outperformance. But this has offset only a third of the 17.5 per cent slump in Continental European production. Global car building fell by 8 per cent.
As a result GKN's pre-tax profits on continuing operations fell by 8 per cent in the half-year to 30 June, including a one-third drop in the Continental European contribution. The gains made by translating overseas profits into a devalued sterling were offset by an increased redundancy bill in the UK and Europe.
Fortunately, GKN can still cover its dividend payments. At the current share price of 489p, a yield of 5.3 per cent is more support for the shares than a prospective price/earnings ratio of 25 (assuming the market consensus forecasts of pounds 125m pre-tax for the whole year).
Although the European market remains bloody, there is a glimmer of light. In line with its new GM-inspired purchasing policy, Volkswagen is planning a fivefold increase in orders to UK suppliers. GKN's driveline products are in pole position in terms of quality.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments