September 27, 2023
Market Report: US car strikes put brakes on GKN automotive spin-off Dowlais

Market Report: US car strikes put brakes on GKN automotive spin-off Dowlais

GKN investors faced a turbulent session yesterday.

The 264-year-old group – which made cannonballs used at the Battle of Waterloo and Spitfires for the Battle of Britain – was bought by Melrose in 2018 for £8 billion in a highly controversial deal.

The GKN Aerospace business remains part of Melrose, while GKN Automotive has been spun off into a separate listed group called Dowlais.

In an update yesterday, DowLisz warned that its results for 2023 were likely to be affected by proposed strike action in the US.

Union veterans are in talks with carmakers Stellantis, Ford and General Motors over salaries.

Split: The GKN Aerospace business remains part of Melrose, while GKN Automotive has been demerged as a separate listed group called Dowlais.

Dollis said demand for the car parts it makes looks ‘uncertain’ for leading manufacturers as a result of the impending strikes.

This caps an otherwise strong first half, in which the mid-cap business’s revenues rose 12 per cent to £2.8 billion, while profits rose 39 per cent to £177 million.

Dowlis said trading in the six months to the end of June had exceeded expectations and would have raised its annual outlook if potential strike action had not dominated trading.

Stifel analyst Mark Davis Jones said DowLisous should manage to ‘withstand a few weeks of production disruptions and still have declining numbers’ if the strike goes ahead.

But he warned that ‘the prolonged controversy will clearly put pressure on the performance of the second part.’

Dowlis shares fell 7.3 per cent or 9.3p to 118.75p.

In Melrose, the aerospace business warned it faced a £200 million loss from an engine parts issue affecting a US firm.

Stock Watch – Keyword Studio

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Keyword Studios fell 4.6 per cent, or 68p, to 1405p after the video game developer warned that entertainment strikes in the US were hurting its business.

The group, which provides services to companies such as Call of Duty maker Activision Blizzard, said revenue rose 19.4 percent to £330 million in the first six months of 2023.

But the actors’ strike in the US has hit its audio businesses and marketing studios, meaning organic revenue growth could take a hit.

On Monday, Pratt & Whitney owner RTX said 700 of its engines, which power the Airbus A320neo jet, will need to be pulled for quality inspections from this year to 2026.

With GKN Aerospace’s involvement in the Pratt & Whitney engine programme, Melrose estimated it could lose up to £200 million by 2026. Shares fell 1.3 per cent or 6.2p to 479.3p.

The US was also proving tough for Chemring, which makes military explosives and technology to help its customers launch rockets and satellites into orbit.

Kemmering warned it was waiting for the US Department of Defense (DoD) to approve some countermeasures delivery, which has revenues of around £25 million.

It said officials wanted to assess the quality of raw materials provided by a supplier.

This means delivery of the £25 million order could be delayed beyond the current financial year.

Chemring shares fell 6.1 per cent or 18.5p to 286p.

But it wasn’t all doom and gloom for the industry. BAE Systems, Britain’s biggest defense company, won another £130 million order from the government for arms as military spending increases due to the Ukraine war.

Shares rose 0.5 per cent or 5.5p to 1044p.

Fund manager JTC said it should beat market forecasts after rising revenue in the first six months of this year with the recent acquisition of US firm South Dakota Trust Co. Shares rose 8.7 per cent or 58.5p to 733p.

DX Group rose 0.5 per cent or 0.2p to 43.2p after the delivery firm’s largest shareholder Getmore backed a takeover offer from private equity firm HIG European Capital Partners announced on Monday.

Home improvement business Vicks rose 3.5 per cent or 4.9p to 143.4p as it said sales were ‘resilient’ in the six months to July 1 and reiterated it expected to meet market forecasts for an annual profit of £45 million to £48 million. should do.

The FTSE 100 rose 0.4 percent, or 30.66 points, to 7527.53 and the FTSE 250 rose 0.1 percent, or 19.86 points, to 18542.3.


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