Financial Overview

(in million GBP)

	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012	Rate of change (%)	Factors
Overall
Sales	7,136	6,510	9.6	-
Operating profit	560	624	(10.3)	-
Sales by Division
Driveline Division	3,416	3,236	5.6	1)
Powder Metallurgy Division	932	874	6.6	2)

Factors
1) Driveline Divison
-In 2013, organic sales increased by 7 % year-on-year compared with global vehicle production which was up 4 %. Constant velocity jointed (CVJ) systems accounted for 63 % of the sales and non-CVJ sales were 37 %. 

2) Powder Metallurgy Division
-In 2013, organic sales increased by 6 % year-on-year, despite a fall in material surcharges, with strong growth in North America, Europe and China.

Divestiture

Emitec
-In April 2014, the Company announced that it intends to sell the outstanding shares in Emitec Gesellschaft fur Emissionstechnologie mbH for a cash consideration of GBP 46 million. Emitec, to date a 50-50 joint venture co-owned by Continental and the Company – will be integrated into Continental's Powertrain Division. (From a press release on April 30, 2014)

Contracts

Driveline Divison
-In September 2013, the Company announced that the 2014 "Range Rover Evoque" includes GKN All-Wheel Drive System. Land Rover's 'Active Driveline' has achieved a significant reduction in driveline spin loss, which in turn contributes to the 2014 "Range Rover Evoque"'s overall fuel consumption reduction of up to 11.4 % (depending on model). The GKN All-Wheel Drive System includes a GKN power transfer unit (PTU), linked to the transmission's final drive differential, containing a synchronizer and brake to disconnect the all-wheel drive system upstream of the PTU hypoid gears. At the rear of the system the GKN TWINSTER rear drive module (RDM) drives each rear wheel via an independent wet multi-plate clutch. In addition to the 'Active Driveline', GKN Driveline also supplies the all-wheel drive system for the 2014 "Range Rover Evoque" Standard Driveline. Power transfer units and Rear Drive Modules for both variants are produced in GKN Driveline Koping in Sweden with front sideshafts and propshafts supplied out of GKN Driveline Birmingham, UK.

-The Company's power transfer unit (PTU) has been adopted by Mitsubishi "ASX", and the production of the PTU has been localized in Shanghai, China.

-In July 2013, the Company has been selected to supply the front Final Drive Units (FDUs) for a number of BMW "X Series" vehicles. The Company's plant in Newton, North Carolina, will supply front FDUs for the current "X3" from August, as well as the "X6" later 2013. The Company also currently supplies sideshafts for the "X Series" models, as well as the torque-vectoring units for the "X6" and other "X" models.

Powder Metallurgy Division
-The Company's ring gears for start-stop technology has been adopted by Volkeswagen "Passat", Nissan "Serena", Peugeot "508", and it's been supplied to Valeo.

-Helical pully gear for electric power steering system has been supplied to ZF group.

-Pump components for a global double clutch transmission (DCT) has been supplied to Getrag.

Awards

Driveline Divison
-In June 2013, The Company announced that it has received three awards from Ford. Two GKN Driveline plants were honored with World Excellence Awards, GKN Driveline Newton and Shanghai GKN (SDS). GKN also received a special award, called 'Go Further.'

Powder Metallurgy Division
-The Company has received the Award of Distinction for its rear camshaft cap component used on Chrysler four-cylinder engines in the "Dodge Dart".

R&D Activities

Driveline Divison
-The Company has been named as a key member of a new GBP 16 million government-backed development consortium. The Company's engineers will be part of a development program for next-generation hybrid and battery-electric powertrain technologies based on the "Range Rover Evoque" platform. The Company will be providing the eTransmissions for the project. The collaboration will design, develop and build three research vehicles showcasing state-of-the-art powertrain concepts for a mild hybrid electric vehicle (MHEV); a Plug-In Hybrid (PHEV) and a full Battery Electric Vehicle (BEV).

Product Development

Electrification of Drivetrain

Helical gear
-Lightweight, high performance helical gear for use in car transmissions.

Capital Expenditure

(in million GBP)

	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011
Automotive Division	142	159	113
Powder Metallurgy Division	51	47	44

Investments Outside UK

Driveline Divison
<Mexico>
-In September 2013, the Company announced the expansion of its key manufacturing facility in Villagran, Mexico. The 8,000 square meter expansion, which is expected to create 250 jobs in the area, will produce mainly constant velocity joint (CVJ) systems but also includes a new product development facility. It will increase the annual production of sideshafts from 7.5 million units today to 9.5 million units in 2015. The Company has invested over USD 233 million in its Mexican operations since 2005.

<China>
-In September 2013, GKN Drive Shaft (Chongqing) Co., Ltd. laid a cornerstone for its additional facility at the Chongqing New North Zone. The company will invest approximately USD 43.9 million to construct a 12,000-square-meter factory. New operations are scheduled to begin in July 2014. The expansion project is expected to increase the company's yearly production capacity to over 1 million sets. GKN Drive Shaft (Chongqing) was established jointly by GKN, Shanghai GKN Drive Shaft and Changan Automobile in August 2006. It mainly produces constant velocity universal joints for automakers such as Changan Ford, Changan Mazda, Changan Suzuki, Changan Automobile, Jianghuai Automobile, Great Wall Motor, Beijing Motor and SAIC-GM-Wuling.

-In July 2013, Shanghai GKN Drive Shaft has celebrated the opening of a second plant in Wuhan. The company has invested approximately GBP 15 million in the first phase of the construction project to set up a factory on 11,000 square meters of land. The new facility will produce precision driveline parts. It will be capable of manufacturing 11 million constant velocity joint drive shafts per year.

-In April 2013, the Company and HUAYU Automotive Systems Co. Ltd. (HASCO) have announced a major expansion of their Chinese joint venture, Shanghai GKN Driveshaft Co. Ltd. (SDS). SDS produces both sideshafts and propshafts, supplying domestic and western brands from eight manufacturing plants. The SDS expansion extends the scope of the JV to cover the complete GKN Driveline capability, including AWD and eDrive components and systems. As a result of this development, GKN Driveline's wholly-owned facility in Shanghai will become part of the expanded JV. SDS will change its name to Shanghai GKN HUAYU Driveline Systems Co. Ltd.

-In January 2013, Shanghai GKN Drive Shaft Co., Ltd. held a groundbreaking ceremony for the additional new factory at its Shanghai Shenjiang Plant. The plant to be constructed on 15,000 square meters of land is scheduled to be completed by August 2013. The new facility will have 8 driveshaft assembly lines, 2 environmentally friendly surface coating lines, 200 pieces of processing equipment and various cutting-edge testing devices. Having the capacity to produce hook joint-type drive shafts for 1 million vehicles a year, the plant will supply its products to automakers such as Shanghai VW, FAW VW, Sichuan Toyota, Mitsubishi Motors, Nissan, and Jiangling Motors.

<Poland>
-In September 2013, the Company continues to expand its facilities in Poland with the inauguration of the new 6,800 square meter production area. The new production area will mainly produce CVJ sideshafts and propshafts and includes new laboratories, offices and a logistic area. The expansion is part of the Company's development strategy plan for Central and Eastern Europe. The investment of PLN 100 million (approximately EUR 23.3 million) will create 100 additional jobs within the next five years, with 672 people being employed at the facility at present. Annual production volumes are set to increase to 6.5 million units in 2018 from the current 5.3 million.

Powder Metallurgy Division
<USA>
-In April 2013, the Company is planning a USD 10 million expansion of its US-based Gallipolis production facility in the state of Ohio. The project is expected to add 50 full-time jobs and generate up to USD 20 million in additional sales for the company over the next two to three years. The expansion will include the installation of a new 750 metric-ton, powder-compaction press along with other capital equipment to launch production of differential-gear components developed at the plant. The 175,000-square-foot facility currently has more than 160 employees and produces gears, clutch pressure plates and torque-converter components for a variety of customers, including Chrysler, General Motors, EXEDY, LuK USA and Allison Transmission. Production of the new components is expected to begin during the second half of 2013.

<Germany>
-The Company's facility in Bonn was expanded with the installation of state-of-the-art advanced sintering process equipment to manufacture high precision components used in electronic suspension.