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 hydrogen operations.

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

Financial highlights

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

• Adjusted free cash flow dropped to £10m from £33m; net debt increased to £915m; leverage at 1.6x.

• Adjusted EPS was 4.9p, down 30% year-over-year; interim dividend declared at 1.4p per share.

• Foreign exchange headwinds impacted revenue by GBP 114 million in H1, with a full-year impact expected at GBP 200 million.

• Statutory basic EPS was a loss of 7.3p.

Outlook and guidance

• Full-year revenues expected to decline mid- to high-single-digit due to weaker volumes, BEV volatility, and adverse customer mix; operating margin forecasted between 6.0% and 7.0% at constant currency.

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

• Capex at the lower end of 1.0x–1.2x depreciation; net finance costs £100m–£110m (P&L), £80m–£90m (cash); restructuring £105m–£115m (cash); tax rate 25%.

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