GKN shares traded 26 pence or 3.4 per cent lower at 745 by 0818 GMT in thin volume of 123,477 shares. The stock was among the bigger decliners in the FTSE 100 index, which dropped 2.4 per cent.

Analysts noted that the stock had already been lifted 36P in the past two sessions, after reports that the company would deliver a good set of results despite the negative factors that have weighed on the engineering sector in recent weeks.

In the event, profits were at the top end of expectations but not above the range, analysts said. Looking forward, they said the key to the stocks outlook would likely to be any comments from the company on its second half outlook.

"Obviously the results do show pleasing progress for a company operating in these sort of markets, there isnothing that the market can really complain about but they have not exceeded expectations," said analyst John Lawson at Salomon Smith Barney.

"GKN is doing what the market would like to see, which is to grow at a quite comfortable rate," Lawson said. "What the company says about its perspectives on the US market will be one of the things that clearly affects the stock."

GKN's figures showed a 12 per cent rise in pre-tax profit before exceptional items to 228 million pounds, compared with expectations mostly between 219.0 million pounds and 230.5 million.

Chief executive CK Chow said the company had performed very strongly in the first six months, particularly in its automotive and industrial service businesses. At constant exchange rates, profit before tax and one-off items would have been up 17 per cent, he said.

"In terms of current trading, demand schedules for automotive components are generally good and our industrial services businesses are continuing to grow strongly," Chow said.

Chow saidthe company was on track to hit expectations for the full year and shrugged off the importance of sterling strength and the Asia Financial crisis.

"It looks a good set of figures and there is a positive statement across the board," said another analyst.

"Some people who had been at the bottom end of the range will no doubt be looking to put their estimates up, but the key issue is the second half," the analyst said. "The big question is how positive they are for the second half."