Chairman’s Statement

Our global footprint, combined with our leading product positions and strong technology and customer base, has enabled us to take advantage of the market opportunities that arose.

Results and dividend

2010 was a year in which the benefits of the decisive restructuring actions taken during the recession saw us emerge much stronger as a business, with a lower cost base and improved operational efficiency. In the recovery that has followed, our global footprint, combined with our leading product positions and strong technology and customer base, has enabled us to take advantage of the market opportunities that arose. As a result, we delivered management profit before tax of £363 million and earnings per share of 20.7p. Our strong cash flow performance contributed to a reduction in net debt to £151 million, underlining the strength of our balance sheet.

Against the background of this strong performance and our confidence in the future, the Board is recommending to shareholders a final dividend of 3.5p per share. Together with the interim dividend of 1.5p, this will bring the dividend for the year to 5.0p per share. This is in line with our progressive dividend policy, designed to align dividends with the long term trend in earnings.

We continue to make progress in addressing the Group’s pension liabilities. In April, we announced an innovative asset-backed cash payment scheme to provide £30 million per annum to the UK pension scheme for the next 20 years. The combination of this and other actions taken to improve the funding of the UK scheme should contribute to a significant reduction in the pension deficit once the results of the current triennial funding valuation are implemented.

Our return to the FTSE 100 Index in September after an absence of some six years was very pleasing. We are one of only two surviving members of the original FT 30 Index, the oldest continuous index in the UK, established in 1935.

Board matters

2010 has seen a number of changes in the composition of the Board. At the AGM in May, Sir Peter Williams and Sir Christopher Meyer retired from the Board as non-executive Directors. Sir Peter had also been Chairman of the Remuneration Committee and our Senior Independent Director. In October, Helmut Mamsch also retired from the Board as a non-executive Director. I would like to take this opportunity to thank them all for their contributions to the Company during their time on the Board.

We welcomed Shonaid Jemmett-Page as a new non-executive Director in June. Shonaid has a strong financial background together with extensive experience of Asia which is an important market for our businesses. A recruitment process to identify a further non-executive Director is nearing its conclusion and an announcement will be made in due course. This appointment will again ensure that we have an appropriate balance of executive and independent non-executive Directors on the Board.

One of the Board highlights of the year was the visit to China in September when Directors not only had the opportunity to visit Shanghai Expo, but also toured GKN’s expanding operations in China and met with some of our major Chinese customers.


The publication of the new UK Corporate Governance Code in June introduced changes that move the emphasis of the Code towards Board quality, risk and accountability to shareholders. Whilst the revised Code does not apply to GKN until the 2011 financial year, we have gone some way to meeting certain of the new provisions. We recently conducted an externally facilitated Board evaluation which focused on those areas that will inform and assist the Board’s effectiveness in driving the Company forward through its next stage of growth and development. We are currently reviewing the output from the evaluation with a view to implementing agreed changes as soon as practicable. Shareholders can be assured of our continued commitment to strong governance disciplines; these and the processes that underpin them are described in more detail in Corporate governance.

Sir Trevor Holdsworth

Before leaving Board matters, I would like to pay tribute to Sir Trevor Holdsworth who died in September 2010. Sir Trevor had a long and successful career with GKN culminating in his tenure as Chairman from 1980 to 1988, a period of considerable change and uncertainty in the industrial world. Sir Trevor helped to transform GKN from a manufacturer predominantly of steel, nuts and bolts, and screws and fasteners into areas such as constant velocity technology for the automotive market, effectively laying the strong foundations of the GKN of today. GKN owes him a tremendous debt.


As we progress to the next phase in our development, we do so as a Group much more balanced between earnings contributions from our Automotive and Aerospace businesses and with promising opportunities for growth in our Land Systems division. Supported by strong operational performance and rapid growth in the emerging markets we serve, we look forward to the future with confidence.

Roy Brown