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GKN parent posts adjusted operating profit for 2018

GKN Aerospace shareholder Melrose Industries has generated an £847 million ($1.12 billion) adjusted operating profit for 2018, following its acquisition of the UK aerostructures specialist last April.

On a statuary basis, Melrose delivered an operating loss of £392 million, on revenue worth £8.61 billion for the year ended in December. But balanced against costs for amortisation, restructuring efforts, asset impairments, exchange rate and IFRS-related inventory accounting effects, the result led to an adjusted profit, Melrose documents show.

The turnaround specialist says the results are "ahead of the board's previous expectations".

GKN generated a £341 million adjusted operating profit on revenue worth £3.53 billion on an annualised basis – including the January-April period under the manufacturer's previous ownership.

The company's US aerostructures operations delivered a £6 million operating loss.

However, Melrose says these operating results are "approaching operational break-even, on a run rate basis, and relationships with key aerospace customers have been much improved".

In regard to GKN's entire business, Melrose foresees "significant potential" for performance improvement through "loss-making contraction resolution".

Meanwhile, efforts are also under way to improve supply chain and procurement processes.

"Many initiatives" have been started to drive operational excellence, while investments have been directed to "historically underinvested parts of the business", Melrose says.

An accounting deficit in GKN's UK pension scheme has also been reduced to £588 million, from £691 million at the end of 2017.

Chairman Justin Dowley describes 2018 as a "transformational year" for Melrose. He states: "The former GKN businesses are proving their potential to offer the outstanding opportunities we expected and much has already been achieved.

"Despite the current economically uncertain environment, we have every confidence that we will be able to continue to unlock the substantial shareholder value from the former GKN businesses," he says.

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