GKN credits cost-cutting for 62% increase in profits: Automotive components businesses in Continental Europe bounce back faster than expected
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Your support makes all the difference.SIR David Lees, chairman of GKN, yesterday reported a 62 per cent rise in half-time pre-tax profits to pounds 97m, and said 1994 would be much better for the company than had been predicted at the end of last year, writes Terence Wilkinson.
He said the upturn was largely based on cost-cutting - the company had spent pounds 60m on redundancy payments since 1990, shedding 1,000 to 2,000 people a year - although volume had strengthened ahead of expectations during the second quarter.
In particular, profits from the group's key automotive component businesses in Continental Europe had bounced back faster than forecast six months ago.
Continental profits jumped by 60 per cent to pounds 43m, accounting for the bulk of a 36 per cent rise in group profits to pounds 87m.
Analysts upgraded profit estimates yesterday and GKN shares ended 6p higher at 657p.
Westland, acquired by GKN in April after a hostile bid, contributed pounds 5.5m as a new subsidiary and pounds 8.2m as a former associate, including pounds 4m from an arbitration award against the Arab Organisation for Industrialisation.
Since its takeover, Westland has received a pounds 115m windfall payment from the AOI and earlier this month outstanding litigation was settled with a further pounds 50m payment, which will appear in GKN's full-year figures.
Alan Jones, former Westland chairman now in charge of GKN's defence side, said the propects of an AOI settlement had not looked good during the bid and GKN's backing helped conclude a favourable outcome.
Bolstered by the AOI payment, GKN had net cash of pounds 76m at the end of June compared with net borrowings of pounds 10 at the start of the year. Earnings per share rose 73 per cent but the interim dividend was unchanged at 8p.
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