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Engineering group GKN reported a 12 per cent rise in annual profits in spite of slipping margins in its two core businesses, aerospace and automotive, and a £39m restructuring charge.
Annual management pre-tax profits, which strip out the effects of currency hedging, rose from £603m to £678m on sales that were 22 per cent higher at £9.4bn.
Reported pre-tax profits rose 19 per cent to £292m. The company said it expected to grow organically above the market in both aerospace and automotive next year.
The global aerospace industry is expected to rise by 2 per cent next year, according to Teal forecasts, GKN said. The company expects sales growth to beat the markets.
In the motor industry, global car production is expected to rise slightly as falling a US market holds back growth in China. GKN said it expects to grow higher than the market rate.
Last summer GKN said it would cut costs in an effort to save £30m annually and arrest falling margins, which resulted in a £39m charge during the year.
Margins in aerospace fell from 10.9 per cent to 10.2 per cent due to the acquisition of Fokker and also ramp up costs on new engines.
In automotive, margins fell from 8.2 per cent to 7.9 per cent as the group blamed “excess launch costs” on a US programme to make parts for all-wheel drive cars.
Its powder metal business, which also serves the global auto market, saw margins slip from 12 per cent to 11.7 per cent. Free cash flow for the group fell from £370m to £201m.
Chief executive Nigel Stein said:
This is a good set of results with GKN continuing to make underlying progress in line with our expectations.
We expect 2017 to be another year of further growth, helped by the benefits of the actions taken in 2016.