GKN lifts sales forecast for electric car unit as it fights off Melrose hostile takeover
Engineering giant GKN, which employs more than 300 people in Shropshire, has sought to bolster its defences against a hostile takeover by Melrose with new figures suggesting its business is poised to accelerate as part of the electric car revolution.
The FTSE engineering group said it expected sales in 2020 from the unit, which turns out the parts that send battery power to car wheels, to be £275m, 36 per cent better than the £200m previously forecast and up from £33m in 2017.
Turnover would hit £500m by 2022, thanks to recent big contract wins, it said in a statement.
GKN also announced that the order book for electric driveline – a small part of its business that is rapidly growing – hit a record £2bn at the end of 2017. This reflects a series of significant programme wins for the unit, otherwise known as eDrive, with major global automakers.
GKN, which has a major operation in Telford and employs about 340 people at Hadley Park making structural parts including wheels, last reported its divisional breakdown of sales and orders in August.
The recent uplift was possible due to a series of important contract wins since then, a person close to the company said.
The boost in sales targets comes as GKN attempts to convince investors to reject the hostile cash-and-shares offer from Melrose.
The bid has come at a difficult time for GKN, left without a successor to former chief executive Nigel Stein and in the wake of two profit warnings.
However, the company has argued that Melrose's offer, 80 per cent in shares and 20 per cent in cash, significantly undervalues the group.
A statement on behalf of Melrose said: "Research and development is a key part of the Melrose equation and GKN's announcement is part of the justification of the premium that we are offering to GKN shareholders as we seek to create a £11bn value powerhouse by merging our two businesses."
The GKN team – led by Anne Stevens, the former non-executive who has been promoted to chief executive in the face of the Melrose bid – argues that accepting the offer would hand a significant share in the future benefits of growth to the bidders' shareholders.
Ms Stevens has said she intends to reverse the company's poor record on cash and margins with a restructuring plan and by better supporting growing businesses such as eDrive.
GKN makes parts and systems for roughly half the world's passenger cars. However, the shift to hybrid electric vehicles could threaten that position. GKN has been investing heavily for years in electric technology.
In 2017, the research and development hit to profits was £36m, with total investment of more than £123m over the past six years, GKN said.
But the company said this was now paying off.
"Whilst impacting near-term financial performance, this investment is now delivering strong sales and order book growth," the group said in a statement.
