LONDON, UK: Dowlais Group plc, a leading specialist engineering group in the automotive industry, has released its audited financial results for the fiscal year ending December 31, 2023. The company has reported a significant revenue increase and robust profit margins, reflecting strong performance and strategic advancements in the sector.

Financial Highlights:

• Revenue Surge: The group’s adjusted revenue soared to £5,489 million, marking a 6.3% increase from the previous year. This growth is attributed to heightened automotive sales and successful inflation recovery strategies.
• Profit Growth: Adjusted operating profit reached £355 million. When excluding new stand-alone plc costs, this represents a 20% increase from the prior year.
• Margin Improvement: The adjusted operating margin expanded by 30 basis points to 6.5%, propelled by sales volume, operational efficiencies, and enhanced commercial pricing. Margins improved by 90 basis points after adjusting for stand-alone plc costs.
• Automotive Sector Triumph: The automotive division saw a 7.0% increase in adjusted revenue and a 27% boost in adjusted operating profit, culminating in a margin improvement of 110 basis points to 6.9%, with a second-half margin of 7.3%.
• Powder Metallurgy Steady Growth: The Powder Metallurgy division reported a 3.5% growth in adjusted revenue and a 3.1% increase in adjusted operating profit, achieving an adjusted margin of 9.2%.

Operational Setbacks:

• A comprehensive review of Powder Metallurgy’s medium-term trading prospects led to a non-cash goodwill impairment charge of £449 million, resulting in a statutory operating loss of £450 million for the group.

Earnings and Cash Flow:

• The group’s adjusted basic earnings per share were 13.8 pence, while a statutory loss per share of 36.0 pence was primarily due to the goodwill impairment and other restructuring charges.
• Dowlais Group plc generated £93 million in adjusted free cash flow, surpassing expectations and reducing net debt to £847 million. The leverage ratio now stands at 1.4x, aligning with the target range.

Dividends and Share Buy-Back:

• In accordance with its dividend policy, the Board has proposed a final dividend of 2.8 pence per share, totaling 4.2 pence for the year 2023.
• The Board plans to initiate a share buy-back programme worth up to £50 million starting in April 2024.

Portfolio and Sustainability Developments:

• The Automotive division celebrated record business wins, securing over £6 billion in forecast lifetime revenue, diversified across various customer segments.
• Powder Metallurgy is shifting focus, with 72% of new business wins catering to EV or propulsion-neutral products.
• The company’s hydrogen initiatives have shown promising commercial progress and revenue growth.
• Dowlais Group plc has set ambitious net-zero targets, with the Automotive division’s goals endorsed by the Science Based Targets Initiative (SBTi) and Powder Metallurgy’s targets awaiting validation.
• The group has made strides in sustainability, with Powder Metallurgy receiving a Platinum medal from EcoVadis and the Automotive division earning a Silver rating.

Liam Butterworth, Chief Executive Officer, said: “2023 was a year marked by significant progress and transformation for Dowlais, following the Group’s successfully executed demerger and listing on the London Stock Exchange. Through excellent execution we delivered on our commitments with a strong financial and operational performance, demonstrating resilience, expanding margins, generating free cash flow above our expectations and reducing our financial leverage.

In recognition of this performance, confidence in the long-term outlook and focus on shareholder returns, the Board has announced its intention to launch a share buy-back programme of up to £50 million and recommended a final dividend, which when approved, will result in total full year dividends of 4.2 pence per share.

During our first year of ownership, we have undertaken a full review of the medium-term prospects of Powder Metallurgy and as a result we have recognised a non-cash goodwill impairment.

We have also appointed a new CEO to lead the business. In the short to medium term we expect steady performance and will continue to focus on accelerating change to realise the long term financial potential of this market-leading business.

As we look forward, current industry forecasts imply a slight decline in global light vehicle production in 2024. Based on these external forecasts and our current order book, we anticipate Group revenues will be similar to the prior year, at constant currency, with a modest reduction in the first half offset by an improvement in the second half due to the expected timing of several new programme launches.

On this basis, and with our strong continued focus on operational efficiencies, we expect to further expand operating margins and grow free cash flow in 2024. We remain confident of achieving our margin target of 10%+ in Automotive over the medium-term, largely underpinned by announced restructuring.”

www.dowlais.com

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