Why invest in Dowlais
Dowlais is a world-class business, well-positioned to deliver attractive shareholder returns. Following a significant and successful transformation, we now comprise two premium, market-leading businesses. With an experienced management team and a clear strategy, we are focused on creating superior shareholder value through industry leading financial performance and technology innovation.
2024 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 (~£3.9bn revenue in FY 24) is a global leader in sideshafts, propshafts, AWD systems and advanced differentials, with a core sideshaft portfolio twice the size of its nearest competitor. The business supplies >90% of global OEMs, with no single customer representing more than 12% of revenues.
GKN Powder Metallurgy (~£1bn revenue in FY 24) is global leader in sintered metal components and the largest producer of iron powder. The business boasts a geographically diverse presence, a robust product portfolio, and a well-diversified customer base, with no single customer accounting for more than 7% of revenues.
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, which accounted for 57% of GKN Automotive’s 2024 revenue, works with all types of powertrains, including electric, hybrid, and traditional engines. As more vehicles adopt electric powertrains, demand for larger joints and higher installation rates presents a growth opportunity. Sideshaft revenue outside of China, had a CAGR of 4.3% between 2021-2024, in line with the market. While propshafts and AWD systems, which accounted for 24% of GKN Automotive’s 2024 revenue, are mainly tied to ICE and hybrid vehicles, our ePowertrain components business—accounting for 11% of revenue—has potential for growth with new EV platforms. Additionally, our strong market position in China, representing 14% of our revenue, gives us a unique advantage in expanding alongside the fast-growing Chinese OEM market.
GKN Powder Metallurgy: TThe business has a strong and diversified core portfolio, serving both industrial and automotive markets. It has also 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.
Resilient cost base with strong margins and free cash flow potential
Since 2019, both our businesses have undertaken significant efforts to localise their supply chains and reduce the impact of geopolitical risk.
The Group now operates largely local for local supply chains, with production centres focused on serving their respective regions. We successfully navigated the post-COVID inflationary environment, fully offsetting inflation through customer recoveries. In 2024, amidst market volatility driven by a slowdown in BEV adoption, we proactively managed costs, mitigating the margin drop-through from the 30% assumed in our financial model to just 6% and expanding our margin by 10bps to 6.6%.
Margin Profile:
GKN Automotive: Achieved an adjusted operating margin of 6.8% in 2024, as stringent cost management along with performance initiatives and pricing recovery mitigated impact of lower volumes.
GKN Powder Metallurgy: Delivered an adjusted operating margin of 9.1%, placing it in the top quartile of automotive suppliers.
Free cash flow growth: The Group has strong cash flow generation potential, and it is well-positioned to improve adjusted free cashflow largely driven by:
- Margin expansion and operational efficiencies.
- Reduced CAPEX requirements as new Hungary plant and expanded Mexico plant become fully operational.
- Lower restructuring spend as self-help projects are completed by 2026.
- Elimination of cash losses following the disposal of GKN Hydrogen.
Sustainability is central to our customer offerings
Sustainability is embedded in our purpose of engineering transformation for a sustainable world.
- People: Committed to providing a safe, inclusive workplace and protecting human rights across our operations.
- Supply Chain: Focused on maintaining integrity and ethical standards throughout our supply chain.
- Environment: Dedicated to reducing our environmental footprint and contributing to sustainable manufacturing.
Disciplined Capital Allocation Policy
Dowlais maintains a strong balance sheet and a disciplined capital allocation strategy to drive shareholder returns:
- CAPEX: Targeting capital expenditure of 1.0x–1.2x depreciation in the medium term.
- Leverage: Target leverage ratio of 1.0x-1.5x. Adjusted leverage ratio for 2024 was 1.7x, slightly above the target.
- Dividends: Dividend policy targeting a payout of 25%–35% of adjusted net income, with an FY24 dividend of 4.2p.
- Share Buyback: Additional excess cash is expected to be returned to shareholders. In April 2024, we commenced a £50m share buyback program, of which £31.7m was completed prior to its termination, following the announcement of the recommended combination with American Axle & Manufacturing Holdings, Inc. (“AAM”)
