Filton Acquisition & A350 Contract Win - · PDF file2 GKN FILTON ACQUISITION and A350...

September 2008

Filton Acquisition & A350 Contract Win

1 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

Filton – Transaction highlights

Strategic rationale compellingLong term strategic supplier relationship with Airbus

Secures A350 contracts in wing composites

Rebalances civil and military exposures

Significantly strengthens GKN’s market position today and for the future

Accretive to underlying earnings* in first full year and strong cash generation

Strong order book supports healthy cash flow profile

Subject to EU competition clearanceCompletion expected at the end of the year

*See slide 9


Transaction detailsConsideration

£100 million in cash on completionUp to £36 million deferred consideration - Volume related 2010-2015Employees enter GKN pension scheme with initial GKN funded top upFinanced through own resources

Life of programme supply on all current Airbus programmes - circa £375 million revenues in 2009

A320 A330 A340 A380 A400M


GKN Aerospace – Builds on strong track record of growth

Sales nearly doubled 2003-8

Excellent position in aerospace composite technology

Leaders in titanium structures, cockpit canopies and electric de-icing

Broad customer base in both aircraft structures and engine components

Strong presence in US military market and all major new programmes


GKN Aerospace – positioned for the future(shipset values US$)

$M0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

CH53K

JSF

A400M

A380

747-800

787

$1 billion annual revenues at rate production

New Programmes – 2007 participation


Market Trends

Source: Flight International/Teal/GKN

5.27.9

12.0

4.4

8.0 18.9

25.9 26.9

17.1

0

10

20

30

40

50

2007 2011 2017

Metallic Titanium Composite

Composite/Titanium CAGR – 12.4%Source: PWC/CPIL

Civil sector – 4% Real Compound growth

Total $155.1bn

Total $115.8bn

$83.5B

72.1%

$32.3B27.9% $118.3B

76.3%

$36.8B23.7%

Aircraft production: Civil & Military

Civil Military

Aerostuctures market trends

2007 2016


Boeing 27%

Other27%

EADS6%

Agusta Westland

4%

Lockheed Martin4%

Honeyw ell4%

Bombardier4%

Northrop Grumman

4%

Rolls Royce2% GE

5%

UTC (Pratt & Sikorsky)

13%

Rebalances revenue streams

Customer diversification

Status quo GKN AerospaceFY08 Estimate

Pro forma GKN AerospaceFY08 Estimate

Boeing 22%Other

20%

EADS27%

Agusta Westland

3%

Lockheed Martin

3%Honeyw ell

3%

Bombardier3%

Northrop Grumman

3%

Rolls Royce2%

GE4%

UTC (Pratt & Sikorsky)

10%

End market diversification

Civil42%

Military58%

Military46%

Civil54%


GKN Aerospace – Filton Acquisition Role of Filton in Airbus UK

Located near Bristol, in the heart of “Aerospace district” in South West region

Employs c.1,500 people

Centre of excellence in wing systems and assemblies

Supplies full range of Airbus models: A320 family, A340 family, A380, A400M and A350

BroughtonMachined Spars & Ribs

Filton FacilityComplex pipes & DuctsComplex machined Parts

Filton FacilityLeading & Trailing Edge AssemblyWing Major Sub-Assemblies

BroughtonWing assembly

Final Assembly Line

BroughtonWing box assembly


0 1 2 3 4 5 6 7 8 9

A320

A330

A340

A380

A400M

$M

GKN – Existing Programmes Participation with Filton (Ship Set Value In US$)

GKN

FiltonTotal backlog value over $6bn

Order backlog(Aug 2008)

189

190

33

451

2,725


Filton Value Creation

Value creation through cost reductionHeadcount reduction across indirects and overheadsBenefits through consolidation procurement, greater productivityand efficiencySavings through changes to site costs and removal of Airbus central services

Power 8 savings for Airbus – acceptable operating margins and strong cash generation for GKNAccretive to underlying earnings* in first full year

*Before restructuring and impairment charges, amortisation of non-operating intangible assets and other non-cash charges arising on business combinations, profits and losses on sale or closure of businesses and changes in fair value of derivative financial instruments and after tax at a cash tax rate of 17%.


US dollar exposure and tax

Dollar exposureAirbus pricing and payments in natural currencies for three years –sterling and US DollarYear 4 onward – mutually agree dollar conversion pricing and hedging

Natural hedge improvements from sourcingReview in 2011 to agree conversion of dollars and hedgingFurther review in 2015

TaxFilton profits to be offset against existing GKN UK tax losses –effectively tax free for several years


GKN A350 Participation

Design, Build and Assembly of Rear Wing Spars and Assembly Of Wing Trailing Edge Structure


1998 2001 2004 2008 2015-20

A330/340Component

Build to Print

A380Wing Trailing EdgeDesign and Build

A400MSpar & WTE

Design and Build

Resin Film Infusion Developed Auto Tape

&DDF Technology

ALCASComplex Spar

Integrated WingClosed Cell

Structure

A350WTE Assy.

Design & BuildNext Generation

Single Aisle

Filton

GKN

The Airbus Composite Technology Journey

High Rate Manufacture


A350 Participation

Strategic programme target for GKNBalances presence on Boeing 787

Demands high rate composite manufacture

Strengthens focus on primary wing structures

A350 current firm order book of 452 aircraft and 106 options with quality airlines

Qatar (80), Emirates (70), Singapore (20)

Airbus “target” market penetration – at least 1,500 aircraft


A350 Participation

GKN content circa £0.9m per aircraft

Investment in specific engineering and design and generic facility capitalisation

£125 million over 5 years

£60 million Government Launch Investment approved

Delivers revenues of circa £130m at rate production in 2017

*Sterling values based on $2:£1


Filton - Summary

Strategically sound and earnings enhancing

GKN moves into top 3 Global aerostructures suppliers – No 1 in EuropeTier One – A leader in wing structures and composites

$3 billion revenues and double digit margins in 2010

Balanced sector positions and customer mix

Strategic Supplier relationship with AirbusLife of Programme across Airbus platforms

Opportunities for synergies with existing Aerospace businesses

Helps secure A350 position and future R&D programmes

Strong order book supports healthy cash flow profile

Significantly strengthens GKN’s market position today and for the future


Forward looking statements

This presentation includes “forward-looking statements”. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding theCompany’s financial position, business strategy, plans and objectives of management for future operations, the expected timing and strategic and financial effects of the Filton Acquisition and trends in the Aerospace industry, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors which could cause the actual results, performance or achievements of the Company or the markets and economies in which the Company operates to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.


Contacts

Sir Kevin SmithChief Executive

Bill SeegerFinance Director

David Rood Investor RelationsTel 020 7463 [email protected]

Peter Baillie Director, Corporate CommunicationsTel 01527 [email protected]

Filton Acquisition & A350 Contract Win - · PDF file2 GKN FILTON ACQUISITION and A350...

Documents

Transcript of Filton Acquisition & A350 Contract Win - · PDF file2 GKN FILTON ACQUISITION and A350...