Engineering firm GKN has warned that profits will only be “slightly above” 2016 after it disclosed a £40 million hit linked to legal claims and a £15 million writedown.
The company said in a stock market announcement that it has been made aware of two “probable claims” which are expected to result in a charge of around £40 million in the fourth quarter.
One claim relates to GKN Aerospace and the other GKN Driveline, but the firm did not reveal any further details.
In addition, GKN Aerospace North America will book a £15 million non-cash charge at its Alabama facility, relating to “revised assumptions” on programme inventory and receivables balances.
“As a result of these, together with continuing operational challenges in GKN Aerospace North America, the Group now expects management profit before tax for 2017 to be slightly above 2016,” the firm said.
In better news, GKN said that it achieved good organic sales growth in the third quarter, with its GKN Driveline division continuing to outperform the market.
Nigel Stein, chief executive of GKN, 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.
“In light of the trading performance in North American Aerospace, we are redoubling our efforts to improve our operational performance in that business, as well as developing actions to accelerate margin improvement plans across the Group.”