GKN share price hit by £40m charges
GKN has seen a chunk wiped off its market value this morning after it revealed it is facing unspecified claims worth £40 million.
The engineering giant, which has an operation at Hadley Park in Telford, brought forward its update from next week as it delivered the news of the two "significant external claims" and warned that profits may not meet expectations this year.
In the statement the group said: "GKN has been made aware of two probable claims which are expected to result in a charge of around £40 million in the fourth quarter of 2017.
"One relates to GKN Aerospace and the other GKN Driveline. Both claims are commercially sensitive with no additional information disclosable at this time."
Shares were down by about seven per cent in early trading at 325p, leaving its market capitalisation about £450 million lower than it had been the previous day.
The company also reined in its expectations for profits for the year as it also warned over "operational challenges" in North America which will leave its full-year pre-tax profits "slightly ahead" of 2016.
Chief executive Nigel Stein said: "GKN continues to grow well against its end markets although recent margin performance has not met our expectations.
"In addition, it is disappointing that we expect to have to provide for two unexpected claims which will slow our steady growth in profits."
He added: "With our excellent market positions and leading-edge technologies, I am confident that the Group is in a strong position and has a bright future.”
GKN is currently building a new wheel line in Telford, with the company's Wheels & Structures operation investing millions to install the new equipment.
Due to be completed next summer, the investment is intended to give the plant at Hadley Park the best off-road wheels rim line and paint facility in the world.
The £8.8 billion-turnover engineering giant's operation at Telford, formerly part of the land systems division but latterly classed within Other Businesses, makes a variety of products including chassis for cars and off-road vehicles like tractors and diggers.
It had struggled last year amid a downturn in agricultural markets and the end of certain contracts, leading to a number of people being made redundant. About 340 people are now employed at Hadley Park.