Two "commercially sensitive" claims have been made against the Group's Aerospace and Driveline divisions.
Companies: GKN
GKN (LON: GKN) has today announced some bad news for its shareholders in typical Friday the 13th fashion, issuing a profit warning for the current fiscal year.
The Group, who develop and manufacture components for the airline and automotive industries has said in a trading update today iits Aerospace and Driveline divisions....
"Have been made aware of two probable claims which are expected to result in a charge of around £40 million in the fourth quarter of 2017."
It said both claims are "commercially sensitive" and that it couldn't say much more, other than it expects the charge to impact profits.
Management went on to say that trading in Q3 at GKN Aerospace had been "disappointing", with a "significant reduction in margins" due to ongoing pricing pressure and operational charges which have plagued the Group.
It also commented on GKN Driveline, saying profits continue to be hindered by raw material costs, and that margins for 2017 are expected to be similar to those of 2016.
Shares in the Group dove 9% in Friday's early morning trading.
Nigel Stein, Chief Executive, of GKN commented on the disheartening news, saying:
"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."
The true outcome of the mystery charges will come to light in February when the Group announces its full-year results.
The stock's price has fluctuated greatly in the past few years as Net Profit margins rise and fall, despite Revenues growing an average of 9% per year over the past five years.
GKN trades at a PE ratio exactly that of the industry median of 10x, and has a market cap of £6bn.