Dowlais Group (DWL) H1 2024 earnings summary

Executive summary

• Over 75% of revenues from Driveline, China JV, and Powder Metallurgy outperformed their markets in H1 2024, despite BEV production volatility impacting ePowertrain.

• Strategic actions included rigorous cost control, commercial recoveries, ongoing restructuring, a strategic review of Powder Metallurgy, and the disposal of GKN Hydrogen, eliminating future cash losses.

• Management is focused on transitioning to powertrain-agnostic products for sustainable growth and cash generation.

Financial highlights

• Adjusted revenue declined 5.1% year-over-year to £2,571m in H1 2024; adjusted operating profit fell 9% to £151m, with margin down 30bps to 5.9%.

• Adjusted free cash flow was £10m, down from £33m; adjusted EPS was 4.9p, down 30% year-over-year; interim dividend maintained at 1.4p per share.

• Statutory revenue was £2,289m (down 10%); statutory operating loss was £57m; statutory basic EPS was a loss of 7.3p.

• Foreign exchange headwinds reduced revenue by £114m; full-year FX impact expected at £200m.

• Net debt increased to £915m; leverage ratio at 1.6x, above the target range.

Outlook and guidance

• Full-year revenue is expected to decline mid- to high-single-digit due to weaker volumes, BEV volatility, and adverse customer mix; adjusted operating margin forecasted between 6% and 7%.

• Adjusted free cash flow for 2024 will be lower than prior year due to reduced volume and higher restructuring costs.

• Management remains committed to achieving double-digit margins in auto in the medium term, with restructuring programs on track to deliver 200bps of margin expansion.