Filton Acquisition & A350 Contract Win

Transcription

1 Filton Acquisition & A350 Contract Win September 2008

2 Filton Transaction highlights Strategic rationale compelling Long 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 clearance Completion expected at the end of the year *See slide 9 1 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

3 Transaction details Consideration 100 million in cash on completion Up to 36 million deferred consideration - Volume related Employees enter GKN pension scheme with initial GKN funded top up Financed through own resources Life of programme supply on all current Airbus programmes - circa 375 million revenues in 2009 A320 A330 A340 A380 A400M 2 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

4 GKN Aerospace Builds on strong track record of growth Sales nearly doubled 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 3 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

5 GKN Aerospace positioned for the future (shipset values US$) New Programmes 2007 participation A380 A400M JSF CH53K $M $1 billion annual revenues at rate production 4 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

6 Market Trends Aircraft production: Civil & Military Aerostuctures market trends 50 $83.5B 72.1% $32.3B 27.9% $118.3B 76.3% $36.8B 23.7% Total $115.8bn Civil Military Total $155.1bn Metallic Titanium Composite Civil sector 4% Real Compound growth Composite/Titanium CAGR 12.4% Source: Flight International/Teal/GKN Source: PWC/CPIL 5 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

7 Rebalances revenue streams Status quo GKN Aerospace FY08 Estimate Pro forma GKN Aerospace FY08 Estimate End market diversification Military 58% Civil 42% Military 46% Civil 54% EADS 6% Boeing 27% EADS 27% Customer diversification Other 27% UTC (Pratt & Sikorsky) 13% Rolls Royce 2% GE Northrop Grumman 4% Bombardier 4% Honeyw ell 4% Agusta Westland 4% 5% Lockheed Martin 4% Rolls Royce 2% Other 20% Northrop Grumman 3% Bombardier 3% Honeyw ell 3% Agusta Westland 3% 4% Lockheed Martin 3% Boeing 22% UTC (Pratt & Sikorsky) 10% GE 6 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

8 GKN Aerospace Filton Acquisition Role of Filton in Airbus UK Broughton Machined Spars & Ribs Filton Facility Leading & Trailing Edge Assembly Wing Major Sub-Assemblies Broughton Wing assembly Final Assembly Line Filton Facility Broughton Complex pipes & Ducts Complex machined Parts Wing box assembly 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 7 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

9 A400M GKN Existing Programmes Participation with Filton (Ship Set Value In US$) Order backlog (Aug 2008) 189 A A A A320 2,725 $M GKN Filton Total backlog value over $6bn 8 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

10 Filton Value Creation Value creation through cost reduction Headcount reduction across indirects and overheads Benefits through consolidation procurement, greater productivity and efficiency Savings through changes to site costs and removal of Airbus central services Power 8 savings for Airbus acceptable operating margins and strong cash generation for GKN Accretive 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%. 9 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

11 US dollar exposure and tax Dollar exposure Airbus pricing and payments in natural currencies for three years sterling and US Dollar Year 4 onward mutually agree dollar conversion pricing and hedging Natural hedge improvements from sourcing Review in 2011 to agree conversion of dollars and hedging Further review in 2015 Tax Filton profits to be offset against existing GKN UK tax losses effectively tax free for several years 10 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

12 GKN A350 Participation Design, Build and Assembly of Rear Wing Spars and Assembly Of Wing Trailing Edge Structure 11 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

13 The Airbus Composite Technology Journey A330/340 Component Build to Print A380 A400M Wing Trailing Edge Spar & WTE Design and Build Design and Build A350 WTE Assy. Design & Build Next Generation Single Aisle Filton Resin Film Infusion Developed Auto Tape &DDF Technology ALCAS Complex Spar GKN Integrated Wing Closed Cell Structure High Rate Manufacture 12 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

14 A350 Participation Strategic programme target for GKN Balances 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 13 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

15 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 14 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

16 Filton - Summary Strategically sound and earnings enhancing GKN moves into top 3 Global aerostructures suppliers No 1 in Europe Tier 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 Airbus Life 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 15 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

17 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 the Company 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. 16 GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008

18 Contacts Sir Kevin Smith Chief Executive Bill Seeger Finance Director David Rood Investor Relations Tel Peter Baillie Director, Corporate Communications Tel GKN FILTON ACQUISITION and A350 CONTRACT WIN - 15 SEPTEMBER 2008