GKN: spreading its bets - FT.com Finance textbooks scoff at companies that diversify: investors can achieve the same results more efficiently themselves. But for those already holding GKN shares, the British company's exposure to aerospace, agricultural and construction markets, as well as to auto parts, has helped it to dodge the woes of Europe's small car sector and the wider downturn in defence spending. Reporting full-year results on Tuesday, GKN's operating profits, on a like-for-like basis, were up 14 per cent from 2010 on sales that were 13 per cent higher. In fact, there was double-digit sales growth in all divisions except for aerospace - and even there, a 10 per cent improvement on the civil side (now almost two-thirds of the total) offset a 7 per cent decline on military. New chief executive Nigel Stein thinks this will continue, and is upping margin targets for every division except driveline, the auto parts business which still accounts for almost 45 per cent of group sales. Driveline's margin last year was 7.1 per cent and it has yet to make its 8-10 per cent target. But after the shares" recent run - they have risen by almost a third since mid-December - investors may want to be careful. Profit-taking was evident on Tuesday with the stock down 5 per cent. For a start, production slippage is a risk on the aerospace side. Another drawback is GKN's pension scheme, underfunded by £870m at year-end, compared with £600m at end-2010 (as a result of discount and inflation rate changes). Addressing this will cost GKN £30m annually under a plan unveiled last year. Trouble is, the deficit may also deter bid interest. Conversely, GKN itself has not been shy about acquisition - witness 2011"s Getrag deal - and rumours that it could be interested in Volvo Aero persist. At 220p, GKN trades on a forward multiple of just 9 times earnings. Maybe the textbooks are right.