Final Results
600 Group PLC
25 June 2004
25th June 2004
THE 600 GROUP PLC
PRELIMINARY RESULTS FOR THE PERIOD TO 3 APRIL 2004
CHAIRMAN'S STATEMENT
The current recovery in global economic activity has started to have an
increasingly positive impact on investment levels in our major western markets.
This improvement, together with new product introductions and cost reductions,
enabled the Group to generate an improved performance in the second half of the
year.
Market conditions
Both the UK and North American markets showed overall signs of recovery as the
year progressed, although monthly demand data continued to be very erratic.
Other European markets remained depressed, but those in the Far East continued
to be buoyant.
In 2003, China maintained its position as the world's largest consumer of
machine tools, with the market growing a further 27% over 2002. The rest of Asia
benefited from this continued rapid economic expansion.
Results
Headline turnover in the period was down £1.8m from £68.1m to £66.3m. Adjusting
for exchange rate movements and the different number of weeks in the comparable
periods, the reduction was only £0.9m. Excluded from these turnover figures are
the Group's commission only agency sales which increased from £0.3m to £9.3m as
a result of several major contracts for automated machines for the Canadian
automotive industry.
Net operating expenses before pension credit and restructuring costs showed a
further £2.0m reduction, comprised of a real cost reduction of £0.9m resulting
from recent restructuring programmes, a £0.4m increase in agency commissions
received and a £0.7m exchange rate effect.
The result before tax improved by £1.6m from a £1.4m loss to a profit of £0.2m,
reflecting a £0.6m reduction in gross profit resulting from the lower turnover,
savings of £2.0m in net operating expenses before pension scheme credit and
exceptional items, an increase of £1.1m in the SSAP 24 calculated pension credit
following the changes made to the scheme from April 2003, the absence of any
profit on asset disposals (2003 benefited from a £1.8m profit from the sale of
the surplus Witney site) and a decrease in reorganisation costs from £1.6 to
£0.7m.
Net funds increased by £2.5m from £7.4m to £9.9m, compared with a £4.1m decrease
last year. Dividends absorbed £3.1m and cash flows relating to reorganisation
costs totalled £1.0m. The £2.8m proceeds from the disposal of the Witney site
were received in the first half of the year.
Dividend
The board recommends a final dividend of 4.0p, maintaining the full year
dividend of 5.5p.
People
On behalf of the board, I should like to record our continued appreciation of
the efforts of all our employees during a period of extremely difficult trading
conditions.
Outlook
Increasing optimism in business surveys, together with improving capacity
utilisation, indicate that the recent positive trends in our western markets
should continue. However, confidence levels are likely to be affected by
short-term economic and political factors, making the recovery in our markets
both gradual and erratic, as well as geographically unbalanced, especially in
the early part of the year.
Accordingly, during the coming year, we shall continue to focus on the
development of our strategic supply and marketing alliances in the Far East,
market share improvements in our western markets and the development of our
product range, while maintaining tight controls on costs and assets.
With our international coverage, coupled with our extensive and updated product
range, I am confident that we shall continue to benefit from the opportunities
that are now developing in the international machine tool market.
Michael Wright
Chairman
25 June 2004
Enquiries:
THE 600 GROUP PLC
Tony Sweeten, Group Chief Executive
John Fussey, Group Finance Director Telephone: 0113 2776100
GCG Hudson Sandler
Nick Lyon Telephone: 020 7796 4133
GROUP CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
During the last six years of unprecedented recession in the major machine tool
markets in the developed world, we have refocused and restructured our
operations while consistently generating cash. At the same time, we have
invested to upgrade our products, modernise our manufacturing facilities and
extend our global distribution network, thus enhancing our ability to compete
and grow in the improving market environment.
Market trends
Clear signs of improvement in the US market became evident during 2003. Although
the recovery is now well established, demand still has some way to go to return
to historically normal levels after the exceptional and unsustainable
over-cooling experienced in 2002. However, despite this improving trend, the
recent weakening of the dollar against the European currencies has increased the
competitive challenge for imported products.
In the UK, although recovery began more recently, there are also encouraging
signs of returning confidence. Economic forecasts are positive and order levels
have shown a small but steady improvement since the beginning of 2004. The
biennial MACH exhibition held in Birmingham in April 2004 was the most
successful for six years, generating high levels of interest and a good order
intake for our companies.
Continental Europe has again been characterised by a strong east/west split with
continued growth in the smaller, emerging markets in the east, where low labour
costs are fuelling continued expansion in manufacturing capacity. The German
market, by contrast, has been depressed for the last two years and is showing no
sign of recovery, while France remains very weak.
The Far East remains the powerhouse of global machine tool consumption, with
China strengthening its position as the world's largest market. Although there
are understandable concerns about the sustainability of its recent,
unprecedented growth rates, all the evidence suggests that the Chinese market
will remain strong for some years to come and that China's neighbours will
continue to benefit.
Overall, there is every indication that the current year will be characterised
by continued growth in world demand for machine tools, with all major markets
improving except probably those of mainland Western Europe.
Strategic development
Our strategy has been based on clear and consistent principles throughout the
recession. These are:
• to focus on machine tools, with strong global brands that enjoy a
reputation for quality and value;
• to maintain an extensive programme of new product development to sustain
our strong market position;
• to build strategic alliances with overseas partners to improve our
global selling network and exploit suitable opportunities for low-cost
sourcing;
• to reduce our cost base to ensure that we can compete effectively; and
• to maintain a strong balance sheet through a consistent emphasis on
inventory reduction and cash generation.
In consequence, we enter the current year with our best-ever product range, with
new models offering both higher performance and better value than those they
have replaced. Over the last six years we have reduced our headcount by 50%,
without compromising our ability to meet demand when markets recover. We also
enjoy efficient production, a strong international selling organisation,
including a successful strategic partnership in China, and a very robust balance
sheet with net funds of £9.9m at the year end.
United Kingdom operations
600 Lathes achieved improvements in sales, margins and inventory, helped by the
introduction of a new production planning system. Although total headcount was
further reduced during the year, we strengthened personnel in a number of key
areas including design, manufacturing and customer support.
The Colchester Tornado range of 3 axis lathes was our most successful product
group, achieving sales growth of more than 50%. This has now been complemented
by the introduction of a new family of 5 axis Tornado machines, developed on our
recently updated computer-aided design facilities. These products were formally
launched in April at MACH2004, where we also unveiled a striking new look for
the whole Tornado range.
The Harrison Alpha range of high-tech slant-bed lathes has benefited from
continued development and we saw increased sales of the new 1000 Series products
during the year.
This was the first full year of trading by our Colchester direct sales force in
the UK. It has already proved to be a profitable and successful development.
600 Centre, our UK marketing operation for imported machine tools, achieved
improved profits despite fierce competition in a difficult trading environment.
Order intake showed a significant uplift as a result of two turn-key packages
for a major new client in the automotive industry and a substantial
refurbishment project in the aerospace sector. We continue to seek opportunities
to expand our agency base.
Pratt Burnerd International and Crawford Collets, our market leading producer of
work-holding systems, benefited from extension and modernisation of its Halifax
factory to accommodate production transferred from our plant in Witney. Sales in
Germany continued to show outstanding growth, following the decision to focus on
specialist applications. We are also experiencing a significant upturn in demand
from the US, where we have recently increased our distribution channels.
Gamet Bearings, manufacturing super high precision taper roller bearings for
machine tools and similar applications, continued to operate close to full
capacity, with improved demand from all its major export markets driving a
planned increase in sales outside the Group. During the year we undertook a
£0.3m capital project to automate bearing production, enabling the company to
produce components more accurately, faster and at lower cost.
Electrox, our laser manufacturing business, achieved strong growth in laser
markers in the UK, but total sales were adversely affected by weak US demand
combined with the strength of Sterling. We have already extended our UK customer
base into the medical, lighting and general engineering industries, and see
substantial further potential here and in the automotive and aerospace sectors.
During the year we launched the new Cobra 2 range of markers which are
value-engineered to maintain profitability in an increasingly price competitive
market place.
600 Machinery International, our global trading business, completed a major
contract to sell lathes and vertical machining centres to the Middle East,
though the unrest in this region made it difficult to secure new business there.
Good progress was made in establishing new markets in the Far East, particularly
in Thailand and Malaysia.
Overseas operations
Parat, our German distribution business, improved its performance despite the
poor economic and industrial climate. Sales of Fidia machining centres held up
well, benefiting from Parat's strong and long-standing customer relationships,
particularly in the automotive sector. At the beginning of 2004 the company
assumed responsibility for the sales and service of Colchester lathes - a major
opportunity given that Germany has the largest installed base of Colchester
products in the world, comprising more than 30,000 machines. A profitable
operation was quickly established and we will benefit from a full year's
contribution in 2004/05.
600 France continued to make progress in the education market, but industrial
demand remained weak. New distributors for the important Paris and Lyons markets
were appointed during the year.
Clausing Industrial, our North American manufacturing and distribution business,
operated in a market that declined by 9% overall in 2003, though recovery began
during the year and has been sustained to date. Sales of low-cost Colchester
standard lathes were a particular bright spot with Clausing again increasing its
market share, particularly in the vocational education market. Good progress was
also made in sales of Richmond vertical machining centres and Clausing and
Ibarmia drills. Inventories were substantially reduced and the company continued
to generate cash.
600 Machine Tools Canada enjoyed an excellent year, benefiting from substantial
commission sales of high-tech Fuji automated turning equipment to the automotive
parts sector. Sales of value-engineered manual products from 600 Lathes also
remained strong.
600 International, our Prague office with responsibility for co-ordinating Group
sales and procurement in Central and Eastern Europe, had a successful year.
Sales of Colchester and Harrison lathes to the new EU accession states in
Eastern Europe progressed well and our Slovakian and Hungarian distributors are
both investing in new showrooms in anticipation of continued growth. New
distribution channels were established in Bulgaria and Romania and we have begun
to develop a sales network for a wide range of Group products in Russia.
600 Machine Tools Australia improved its performance and again benefited from
strong sales to the Department of Defence. We are focusing on the expansion of
our range of high-tech agencies and on providing the business with the right
products and resource to increase its sales into the aerospace, automotive and
domestic appliance industries.
600SA, our operation in South Africa, had another excellent year with all
divisions achieving improved results. Strong sales of Fanuc wire-cut products
were a particular highlight in machine tools and we completed major contracts
for both forestry equipment and lorry-mounted cranes. Investment in our
production facilities for waste compactors has further strengthened our
competitive edge. We are progressing discussions with potential partners to help
us meet the Black Economic Empowerment criteria in order to maximise our
potential in this market place.
Outlook
The prospects for our industry and for The 600 Group are brighter than they have
been for several years. We have come through a long and painful period of
retrenchment, refocusing and restructuring, yet we have never starved the
business of capital investment for new products or more efficient processes.
Hence we are well positioned to expand our output to meet demand as our major
markets in North America and the UK recover and those in Eastern Europe and the
Far East continue their recent strong growth. We have an excellent product
portfolio, with all our companies offering new and improved models that offer
our customers enhanced performance at lower cost. The range of opportunities
before us is enhanced still further by our financial strength. I believe that we
are strongly placed to create improving value for our shareholders in the years
ahead.
Tony Sweeten
Group Chief Executive
25 June 2004
AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
53 week period ended 52 week period ended
3 April 2004 29 March 2003
£000 £000
Turnover 66,323 68,072
Cost of sales (49,863) (51,029)
Gross profit 16,460 17,043
Net operating expenses (16,390) (20,442)
Net operating expenses before pension scheme credit and exceptional items (17,896) (19,929)
- Pension scheme credit 2,160 1,046
- Exceptional items - restructuring costs (654) (1,559)
Total net operating expenses (16,390) (20,442)
Operating (loss) before pension credit and exceptional items (1,436) (2,886)
Operating profit/(loss) 70 (3,399)
Profit on sale of property - 1,800
Profit/(loss) on ordinary activities before interest and taxation 70 (1,599)
Net interest receivable and similar income 116 159
Profit/(loss) on ordinary activities before taxation 186 (1,440)
Taxation (charge)/credit (20) 171
Profit/(loss) for the financial period 166 (1,269)
Dividends (3,115) (3,087)
Retained (loss) for the financial period (2,949) (4,356)
Earnings per share - basic 0.3p (2.3)p
Earnings per share - diluted 0.3p (2.3)p
AUDITED CONSOLIDATED BALANCE SHEET
At 3 April 2004 At 29 March 2003
£000 £000
Fixed assets
Intangible assets - goodwill 2,753 3,003
Tangible assets 13,116 14,430
Investments 84 84
15,953 17,517
Current assets
Stocks 20,346 24,965
Debtors:
- falling due within one year 15,195 18,959
- falling due after one year 34,729 31,974
49,924 50,933
Investments 1,162 1,269
Cash at bank and in hand 9,569 12,522
81,001 89,689
Current liabilities
Creditors: amounts falling due within one year:
- short-term borrowings (754) (6,278)
- other creditors (14,565) (16,812)
(15,319) (23,090)
Net current assets 65,682 66,599
Total assets less current liabilities 81,635 84,116
Creditors: amounts falling due after more than one year:
- loans and other borrowings (75) (73)
- other creditors (1,317) (1,206)
(1,392) (1,279)
Provisions for liabilities and charges (8,271) (7,692)
Net assets 71,972 75,145
Capital and reserves
Called-up share capital 14,206 14,025
Share premium account 13,675 13,521
Revaluation reserve 1,749 1,685
Capital redemption reserve 2,500 2,500
Profit and loss account 39,842 43,414
Shareholders' funds - equity 71,972 75,145
AUDITED CONSOLIDATED CASH FLOW STATEMENT
53 week period ended 52 week period ended
3 April 2004 29 March 2003
£000 £000
Net cash inflow/(outflow) from operating activities 4,420 (166)
Returns on investments and servicing of finance 63 103
Taxation repaid/(paid) 544 (206)
Capital expenditure (752) (920)
Acquisitions and disposals - acquisitions - (455)
Dividends paid (3,086) (3,086)
Net cash inflow/(outflow) before use of liquid resources and 1,189 (4,730)
financing
Management of liquid resources 30 221
Financing (2,540) (1,167)
Decrease in cash in the period (1,321) (5,676)
Reconciliation of movement in cash flow to movement in net funds
Decrease in cash in the period (1,321) (5,676)
Cash outflow from decrease in debt and lease financing 2,875 1,176
Cash inflow from decrease in liquid resources (30) (221)
Change in net funds resulting from cash flows 1,524 (4,721)
New finance leases entered into (77) (38)
Exchange movement 1,015 681
Movement in net funds in the period 2,462 (4,078)
Net funds brought forward 7,440 11,518
Net funds carried forward 9,902 7,440
Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from
operating activities
Operating profit/(loss) 70 (3,399)
Depreciation of fixed assets 2,039 2,283
Amortisation of goodwill 186 187
Profit on sale of fixed assets (excluding property) (40) (165)
Decrease in stocks 3,659 721
Increase in pension prepayment (2,578) (1,046)
Decrease in debtors 2,665 2,562
Decrease in creditors (1,581) (1,309)
Net cash inflow/(outflow) from operating activities 4,420 (166)
Cash, for the purpose of the cash flow statement, comprises cash in hand and
deposits repayable on demand, less overdrafts payable on demand.
Liquid resources are defined as term deposits and amounts held as current assets
- investments.
NOTES
1. The financial information set out above does not constitute the
company's statutory accounts for the period ended 3 April 2004 or the period
ended 29 March 2003 but is derived from those accounts. Statutory accounts for
2003 have been delivered to the registrar of companies, whereas those for 2004
will be delivered following the company's Annual General Meeting. The auditors
have reported on the 2003 accounts; their report was unqualified and did not
contain a statement under section 237(2) or (3) of the Companies Act 1985.
2. The annual report will be posted to all shareholders in due course and
will be available on request from the Secretary, The 600 Group PLC, 600 House,
Landmark Court, Revie Road, Leeds LS11 8JT.
3. The final dividend of 4.0p per share, if approved by shareholders at
the Annual General Meeting, will be paid on 13 September 2004 to shareholders on
the register at 13 August 2004.
This information is provided by RNS
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