Dowlais Group plc, a specialist engineering group focused on the automotive sector, has announced its half-year results for 2023. The company reported strong margin expansion, positive free cash flow, and an accelerated transition to electric vehicles (EVs). The adjusted revenue for the first half of 2023 was £2,830 million, a 10% increase compared to the same period last year on a constant currency basis. Adjusted operating profit was £177 million, a 40% increase, with a 140 basis point margin improvement. The margin improvement was driven by volume increases, operational efficiencies, and improved commercial terms with customers. The automotive segment saw a 12% increase in adjusted revenues and a 92% increase in adjusted operating profit, with a 270 basis point margin improvement, all on a constant currency basis. The powder metallurgy segment saw a 2% increase in revenue on a constant currency basis, with improved operating profit compared to the second half of 2022.
Dowlais Group also reported positive free cash flow of £33 million, better than expected despite significant investment in capital expenditure and restructuring. The company's net debt was £849 million, lower than expected, resulting in a reduction in leverage to 1.4x. Dowlais Group announced its inaugural interim dividend of 1.4 pence per ordinary share and is targeting a sustainable and progressive annual dividend of approximately 30% of adjusted underlying profit after tax.
The company highlighted its accelerated transition to EVs, with strong new business bookings across the group. The automotive segment reported record bookings, with a forecast lifetime revenue of over £3 billion, the majority of which is EV-related. Dowlais Group secured a contract to supply a 3-in-1 eDrive system for a high-performance SUV. The powder metallurgy segment expanded its EV portfolio and reached a commercial agreement for the supply of magnets for the EV market after the reporting period.
Looking ahead, Dowlais Group stated that first-half trading was ahead of expectations, and full-year expectations remain unchanged. The company is closely monitoring the potential impact of UAW strike action. CEO Liam Butterworth expressed satisfaction with the strong first half of the year and the company's progress towards its margin target. He also expressed excitement about the future of the group.