Why invest in Dowlais
Dowlais is a world-class business, well-positioned to deliver attractive shareholder returns. It has undergone a significant and successful transformation and now comprises two premium market-leading businesses and a nascent, exciting opportunity to support the transition to green energy. We have an experienced management team and a clear strategy to create superior shareholder value through delivering industry-leading financial performance and technology innovation supported by disciplined M&A.
2023 Financial Highlights
Reasons to invest
Well-diversified portfolio of market-leading businesses
Our portfolio of high-technology engineering businesses advance the world's transition to sustainable vehicles
GKN Automotive is a market leader in sideshafts, propshafts, AWD systems and advanced differentials. The core sideshaft portfolio is twice the size of the nearest competitor and benefits from geographical, customer and platform diversification. The business supplies over 90% of global OEMs, with no single customer representing more than 15% of revenues.
GKN Powder Metallurgy is a market leader in sinter metal components and a global #2 in metal powder production. The business has a well-diversified geographical presence, product portfolio and customer base with no single customer representing more than 7% of revenue.
GKN Hydrogen is a leader in the nascent metal hydride storage industry and is well-placed to capture strong growth across both the hydrogen storage and long duration energy storage market.
Well-positioned to capture growth from the transition to electrification
Our compelling product portfolios are completely aligned to the automotive transition to electrification
GKN Automotive: The core sideshaft business is powertrain agnostic, with content growth opportunity from increased fit rates and joint sizes on EVs. Although propshafts and AWD systems (27% of GKN Automotive’s FY 23 revenue) are exposed to ICE/Hybrid vehicles, the business’s ePowertrain components and eDrive systems portfolios offer growth potential for new EV platforms.
GKN Powder Metallurgy: The business has a strong and diversified core portfolio, serving both industrial and automotive markets. It has developed significant opportunities to generate incremental growth, including expanding into high-potential EV-ready product categories, such as iron powder for LFP batteries and sintered magnets for electric motors.
Strong margin trajectory and attractive free cashflow profile
We have a strong recent track record of margin expansion, with a clear path to industry-leading operating profit margins
In FY23, we generated an adjusted free cashflow of £93m, despite significant growth CAPEX and restructuring investments, with a clearly defined path to continue to grow free cash generation in the medium term.
GKN Automotive has a clear path to a 10% margin by 2026 with 200bps expansion expected from self-help.
GKN Powder Metallurgy had an adjusted operting margin of 9.2% in 2023. We expect this to grow further in 2024, putting it in the top quartile of Auto suppliers.
Strong balance sheet and a clear capital allocation policy enabling attractive shareholder returns
We will reinvest in the business to sustain future organic profitable growth, whilst maintaining a healthy leverage position, and returning excess cash to shareholders
In the medium term, we target a capital expenditure (CAPEX) in the range of 1.0x and 1.2x of depreciation.
We have achieved an adjusted leverage ratio of 1.4x, within our target range of 1.0x and 1.5x, with an aim to be closer to 1.0x in the medium term.
Our dividend policy is to pay out of between 25% and 35% of adjusted net income. The FY 23 full year dividend is 4.2p (30% of adjusted net income).
Additional excess cash will be redeployed into additional shareholder returns (share buy-back or special dividend) or bolt on M&A opportunities. A share buy-back programme of £50m was approved in FY 23.
Sustainability is central to our customer offerings
Sustainability is fully embedded in our purpose of Engineering Transformation for a Sustainable World
In FY23, we made significant progress towards our ESG commitments. We defined our sustainability strategy, submitted SBTi targets and established suitable governance to comply with all reporting and disclosure obligations. We also released our inaugural standalone sustainability report alongside our annual report.
