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Shares in engineer GKN have made a worrying breach of October’s 298p post profits warning lows, just over a month since we highlighted the risk of more bad news. A much bigger charge following a review of its Alabama facility (£80-130m vs £15m prev.) will fuel real concern about more skeletons in its North American Aerospace closet. A probable £40m in commercially sensitive claims (one in Aerospace, on from Driveline) could also yet worsen.
As if that wasn’t enough, CEO designate Kevin Cummings is off with immediate effect, barely six weeks before he was supposed to take the helm, the board preferring development under alternative leadership. The rest of guidance may well remain unchanged but shareholder patience is threadbare with so much bad news overshadowing efforts to improve margins and cash flow.
The shares have delivered a typical plunge (-10%), attracting bargain hunters to fuel a brief rebound (+6%), however the turn-back from 296p highs (-3.5%) suggests this morning’s breakdown may merely become the latest hurdle for any share price recovery.
Mike van Dulken, Head of Research, 16 Nov 2017
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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