Final Results

RNS Number : 1292L

600 Group PLC

27 July 2011

 

The 600 Group PLC

Full Year Results

for the 52 Weeks to 2 April 2011

 

The 600 Group PLC, the diversified engineering Company, today announces its full year results for the 52 Weeks to 2 April 2011.

Highlights:

Financial

·      Underlying profit from operations * of £1.2m. (2010: loss of £1.1m)

·      Profit from operations of £2.5m (2010: loss of £6.8m)

·      Operating expenses reduced from £21.4m to £14.1m  (This equates to an improvement of £15.8m in two years).

·      Revenue increased by 11% to £50.6m

·      Basic earnings per share on continuing operations 6.2p (2010: loss of 15.2p per share)

·      Gross profit 32.3% (2010: 31.8%)

·      Strong balance sheet with additional borrowing facilities in place

* Underlying operating profit refers toProfit/(loss) from operations before restructuring costs, charge for share-based payments, net pension credit and impairment of intangible assets on the face of the Consolidated income statement.

Operational

·      Integration of machine tool facility in Poland progressing well

·      Recovery in US markets for Machine Tools and Precision Engineering products

·      Much improved performance in Mechanical and Waste Handling in South Africa

·      Transfer from Main Market to AIM

·      Martin Temple will stand down at the AGM and be succeeded by Paul Dupee

Commenting, David Norman, Chief Executive of The 600 Group PLC said:

" The Group is now well positioned with a much lower breakeven point and a strong order book at the end of the period compared to the same time last year. The successful integration of FMT Colchester in Poland, introduction of lean manufacturing techniques and capacity improvements throughout our European factories will be the basis for further profitable development of the Group which should provide a sound platform for future growth."

More Information on the group can be viewed at: www.600group.com

Enquiries:
The 600 Group PLC	Tel: [phone]
David Norman, Chief Executive
Martyn Wakeman, Finance Director
Cadogan PR Limited	Tel: [phone]
Alex Walters	Tel: [phone]
Emma Wigan
FinnCap	Tel: [phone]
Sarah Wharry
Ben Thompson
Tony Quirke (Corporate Broking)

Chairman's Statement

Overview

The Group has continued to see an improvement in its global markets during the financial year and, following the inflow of funds from a shareholder loan in August 2010, working capital constraints were reduced and revenue increased. In November 2010 we acquired a machine tool manufacturing facility in Tarnow, Poland for €1m. Since the acquisition we have progressively transferred production of machines which were previously outsourced to Asia. We are in the process of introducing lean manufacturing methods along with additional CNC equipment in order to increase capacity and future output.  Our new manufacturing company in Poland will allow us to transition to a new business model for machine tools.  Our intention is to manufacture most of the Group's requirements in Poland and Heckmondwike for sale to customers through our international sales organisation.  The integration of our new factory in Poland in conjunction with an increase in machine output will be key elements of our immediate strategy, the execution of which is a key task for the executive management.

Financial Highlights

The second half of the financial year showed an improved performance with overall revenue for the financial year increasing by 11% to £50.6m (2010: £45.4m) including the benefit of a non-recurring contract of £2m in South Africa. Full year gross margin rose slightly to 32.3% (2010: 31.8%) and net operating expenses reduced by £7.3m to £14.1m (2010: £21.4m), including restructuring costs of £1.1m (2010: £5.4m) and a net pension credit of £2.6m (2010: £0.9m) arising from the change to using the consumer price index as the measure of price inflation as opposed to the retail price index. The Group profit from operations before restructuring costs, charge for share-based payments, net pension credit, impairment of intangible assets and tax for the full year was £1.2m (2010: loss of £1.1m).

After net financial income of £0.8m (2010: charge of £1.9m) the Group profit before tax was £3.3m (2010: loss before tax of £8.7m). The basic earnings per share was 5.0p (2010: loss per share (16.6)p) and diluted earnings per share 4.3p (2010: loss per share (16.6)p).

Financing

At the year end, net debt was £4.8m (2010: £4.3m). The Group has bank facilities of £7.2m and is in advanced discussions with a new lender to extend the Group's existing financing requirements in the UK by £1.8m. Documentation of the new facility is agreed and execution and completion is expected shortly. The Board believes that this is sufficient for the Group's ongoing requirements

In accordance with FRC guidelines, the Board has assessed the Group's funding and liquidity position and concluded that the going concern basis for the preparation of its accounts continues to be appropriate.

Dividend

As previously stated, any future dividend payments will be dependent upon the Group's results. Accordingly, the Board does not recommend the payment of a dividend at this time.

Strategy

Following the completion of its turnaround programme the Group is positioned to grow organically and by selective acquisition consistent with its positioning as a diversified industrial engineering group. As part of this strategy the acquisition of the machine tool facility in Poland should prove to be transformational for the Group and enable it to reduce delivery times and improve its working capital performance.  These benefits are likely to be more visible during the second half of the new financial year although the Group is expected to continue to trade profitably in the first half of the year whilst the machine tools division executes the agreed strategy.

AIM Listing

On 15 June 2011 we held a General Meeting and a resolution was passed to move the Group from a Main Market listing to the AIM market. We believe that AIM is a market more appropriate for a Group of our size and offers greater flexibility and reduced costs particularly with regard to corporate transactions. The final day of dealings on the Official List was 13 July 2011 with commencement of trading taking place on 14 July 2011.

Directorate changes

In February 2011 Paul Dupee and Derek Zissman joined the Board as Non-Executive Directors. At the same time, Christopher Cundy, a Non-Executive Director, stood down.

Paul Dupee, an American national, is an experienced private equity investor and currently managing partner of Haddeo Partners LLP, a substantial shareholder in the Company. Mr Zissman, a Chartered Accountant, was until 2008 Vice Chairman of KPMG LLP.

Outlook

We continue to be cautious in our outlook and will maintain close control over the level of costs. Our level of order intake continues to be stable and our order book is significantly higher than the corresponding period last year.  A combination of successful execution of the strategy for machine tools and improved order fulfillment, in all divisions, should enable the Group to build on the recent turnaround in its performance and make further progress in the next financial year.

Re-election of Chairman

I joined the Board of the Company as non-executive director in April 2007 and became Chairman at the subsequent Annual General Meeting in September 2007. It soon became clear to me that the Group had a number of issues, some of which were deep rooted and structural, including many legacy issues and the need to clearly define the strategic direction. During my period as Chairman we have addressed these issues whilst at the same time managing the consequences of the very severe downturn in our main markets in 2008/9.  In August 2008 I took the decision to appoint a new CEO and, along with the Board's clear backing and support, initiated a rapid turnaround strategy. Following the completion of the turnaround strategy the Group is considerably stronger than when I became Chairman and well placed to proceed to the next stage of its development. Consequently, I believe that this is a suitable time for me to stand down and accordingly I will not be putting myself forward for re-election at the AGM on 14 September 2011 and Paul Dupee will succeed me as Chairman. Despite the difficulties which we have had to face up to as a Board, during my tenure, I have enjoyed my period as your Chairman.  I will be following future progress with interest and would like to thank shareholders, employees and my colleagues on the Board for the support I have received in my role as Chairman over the last four years. Finally, I would like to wish the Company every success in the future.

MARTIN TEMPLE CBE

CHAIRMAN

27 JULY 2011

Chief Executive's Review of Operations

The challenging market conditions experienced in the previous financial year began to ease during the year with the recovery in North America leading the way followed by improvements in other territories.

Background to the Results

The major elements of the turnaround were completed in 2009/10; however, some residual transition projects took place during 2010/11 which had been part of the original plan for returning the Group to profit.

The difficult lending environment referred to in my last report continued to have some impact on the Group and its customers during the year. There were also some improvements, notably in North America where a supportive relationship is now in place with Bank of America. Our businesses in Australia and South Africa also had access to the necessary levels of working capital finance throughout the year. The lending landscape in Europe continued to be characterised by caution despite the Group's modest level of debt. In order to provide additional funding, an arrangement was entered into with Haddeo Partners LLP to advance £2.5m to the Group over a five year term which also involved the issue of warrants. These warrants can be used by the holders to either convert the loan into shares or to purchase shares for a cash consideration. These arrangements are well documented and were subject to shareholder approval at an EGM on 27^th August 2010.

The machine tools business is undergoing significant change following the acquisition in November of FMT Colchester in Poland. The Group's reliance on outsourcing has reduced and a business model centred on the manufacture of our own products and supplying them through our international sales organisation has become the cornerstone of our strategy for this business area. Some of the €1m consideration and associated working capital requirements were financed by a subsequent placement of shares which raised £1.76m prior to costs, a process which was underway during the last week of the financial year.

Sales increased by 11% to £50.6m which generated a full year underlying profit from operations * of £1.2m. This represents a positive swing of £2.3m when compared to prior year. Gross margin rose slightly to 32.3% whilst operating expenses reduced from £21.4m to £14.1m.  This is an improvement of £15.8m in two years, a small amount of this improvement being attributable to discontinued activities.

The Group

As outlined in my report last year, the Group has been repositioned as a diversified engineering Group with four principal areas of activity:

Machine Tools (39%)

·      Market leading brands; Colchester, Harrison and Clausing.

·      Continuation of positive forecasts from the Oxford Economics Group.

·      Increased vertical integration following the acquisition of FMT Colchester, Poland.

Precision Engineered Components (20%)

·      High precision bearings and work holding equipment.

·      Spares sales generated from an installed base of machines in excess of 100,000.

·      Machining capability in Poland for OEM requirements.

Laser Marking (14%)

·      Proprietary technology and software.

·      Diversity of customers from pharmaceutical to telecommunications.

·      Growth market with an increasing requirement for product and component traceability.

Mechanical Handling and Waste (27%)

·      Positive GDP growth rates forecast for sub Saharan Africa.

·      Continuing requirements driven by the electrification programme in South Africa.

* Underlying profit from operations refers toprofit/(loss) from operations before restructuring costs, charge for share-based payments, net pension credit and impairment of intangible assets on the face of the consolidated income statement.

Turnaround

Most of the major initiatives which were required to return the Group to profit have now been completed.  During the year, the spares and service centre in Indiana was transferred into our Michigan facility whilst at the same time the information system was upgraded.  This was a difficult project which was well executed. In Australia, our operations in Sydney transferred into a lower cost building. The breakeven point in the Group is now significantly lower than at any time in the Group's recent history.

Markets

Machine Tools

The recovery in the US which was evident towards the end of 2009/10 continued to gain traction during the course of the year. This was followed by an improving order book within Europe and the Middle East and included some recovery in production CNC machines which had been the most badly affected area during the downturn. Conventional and workshop CNC machines have, however, continued to be our most successful product groups.

Oxford Economics Group prepares a biannual forecast covering all major geographical areas and the latest forecast continues to be positive with regard to our main markets.

Precision Engineered Components

The US led the recovery in orders for chucks which also followed a similar pattern to machine tools with Europe again subsequently seeing some recovery. The market for bearings was one of the last areas to experience a severe downturn, however a recovery has been clear in recent months. Spare parts were helped by the introduction of web based ordering as part of the IT upgrade in the US.

Laser Marking

A number of customer projects had been put on hold in 2009/10, particularly in the US. These were released as confidence began to return to the market. The US and Germany were two key markets during the year where our Electrox division held its own against some much larger industry players. We continue to focus on our own technology including the next generation of software in order that we can maintain a large degree of technological independence within the industry. A number of product development initiatives are also in the pipeline.

Mechanical and Waste Handling

Following the management changes in 2009/10, the team in South Africa delivered a much improved performance. Relationships with key northern hemisphere suppliers were further developed and the association with Altec was strengthened following our success with Eskom, the South African state utility, for supply of double insulated aerial platforms required for the electrification programme. This was a major contract with most of the work taking place within our Johannesburg workshop. Other market segments also showed recovery.

Operations

Some restructuring will be required as the machine tools business moves further towards the new business model.  Manufacturing of machines in Poland has continued to increase and given the quality being achieved, we have been able to simplify the process of shipping to customers without the need for secondary operations in the UK.  The focus is now switching from restructuring towards capacity improvements in all our manufacturing businesses which will involve the adoption of lean manufacturing processes and investments in new CNC equipment where satisfactory paybacks can be achieved.

Corporate and Social Responsibility

The Group takes it responsibilities to all its stakeholders seriously including employees. Many employees had been working reduced hours during the lowest point of the downturn and this continued for several months in some cases. During the year normal working was reinstated in all locations and once again I would like to thank all those employees who made personal sacrifices during this period of economic uncertainty.

ISO 18001 and ISO14001, being the international standards for health and safety and the environment respectively, are planned for implementation in Heckmondwike during the new financial year.

Outlook

The Group is now well positioned with a much lower breakeven point and a strong order book at the end of the year compared to the same time last year. The successful integration of FMT Colchester in Poland, introduction of lean manufacturing techniques and capacity improvements throughout our European factories will be the basis for further profitable development of the Group which should provide a sound platform for future growth.

DAVID NORMAN

GROUP CHIEF EXECUTIVE

27 JULY 2011

Consolidated income statement

For the 52-week period ended 2 April 2011

	52-week	53-week
	period ended	period ended
	2 April	3 April
	2011	2010
	£000	£000
Revenue	50,564	45,376
Cost of sales	(34,251)	(30,933)
Gross profit	16,313	14,443
Other operating income	332	176
Other operating expenses	(14,133)	(21,393)
Profit/(loss) from operations before restructuring costs, charge for share-based payments, net pension credit and impairment of intangible assets	1,167	(1,081)
Restructuring costs	(1,098)	(5,401)
Net pension credit	2,570	897
Charge for share-based payments	(127)	(67)
Impairment of intangible assets	-	(1,122)
Profit/(loss) from operations	2,512	(6,774)
Financial income	10,910	8,607
Financial expense	(10,154)	(10,541)
Profit/(loss) before tax	3,268	(8,708)
Income tax credit/(charge)	307	(8)
Profit/(loss) for the period from continuing operations	3,575	(8,716)
Post tax loss of discontinued operations	(704)	(798)
Total profit/(loss) for the period	2,871	(9,514)
Attributable to:
Equity holders of the Parent Company	2,871	(9,423)
Non-controlling interest	-	(91)
Profit/(loss) for the period	2,871	(9,514)
Basic profit/(loss) per share
Continuing operations	6.2p	(15.2)p
Total	5.0p	(16.6)p
Diluted profit/(loss) per share
Continuing operations	5.3p	(15.2)p
Total	4.3p	(16.6)p

Consolidated statement of comprehensive income

for the 52-week period ended 2 April 2011

	52-week	53-week
	period ended	period ended
	2 April	3 April
	2011	2010
	£000	£000
Profit/(loss) for the period	2,871	(9,514)
Other comprehensive income/(expense)
Foreign exchange translation differences	4	716
Net actuarial losses on employee benefit schemes	2,235	(3,109)
Impact of changes to defined benefit asset limit	(4,130)	3,070
Deferred taxation	(67)	-
Revaluation of properties	-	418
Impairment of properties through revaluation reserve	-	(1,019)
Other comprehensive (expense)/income for the period, net of income tax	(1,958)	76
Total comprehensive income/(expense) for the period	913	(9,438)
Attributable to:
Equity holders of the Parent Company	913	(9,545)
Non-controlling interest	-	107
Total recognised income and expense	913	(9,438)

Consolidated statement of financial position

as at 2 April 2011

	As at	As at
	2 April	3 April
	2011	2010
	£000	£000
Non-current assets
Property, plant and equipment	10,661	9,996
Intangible assets	1,350	1,457
Deferred tax assets	2,704	2,294
	14,715	13,747
Current assets
Inventories	18,742	19,393
Trade and other receivables	8,922	9,499
Cash and cash equivalents	1,052	823
	28,716	29,715
Total assets	43,431	43,462
Non-current liabilities
Employee benefits	(1,849)	(4,137)
Loans and other borrowings	(2,218)	-
Deferred tax liabilities	(1,817)	(1,735)
	(5,884)	(5,872)
Current liabilities
Trade and other payables	(11,900)	(11,435)
Income tax payable	(83)	(114)
Provisions	(252)	(229)
Loans and other borrowings	(3,629)	(5,151)
	(15,864)	(16,929)
Total liabilities	(21,748)	(22,801)
Net assets	21,683	20,661
Shareholders' equity
Called-up share capital	14,315	14,308
Share premium account	13,899	13,766
Revaluation reserve	1,475	1,433
Capital redemption reserve	2,500	2,500
Equity reserve	160	-
Translation reserve	1,697	1,570
Retained earnings	(12,363)	(13,550)
Total equity attributable to equity holders of the Parent Company	21,683	20,027
Non-controlling interest	-	634
Total equity	21,683	20,661

Consolidated statement of changes in equity

As at 2 April 2011

	Ordinary	Share		Capital
	share	premium	Revaluation	redemption	Translation	Equity	Retained		Minority	Total
	capital	account	Reserve	reserve[1]	reserve	reserve	earnings	Total	Interest[2]	equity
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
At 29 March 2009	14,308	13,766	1,969	2,500	1,117	-	(4,155)	29,505	527	30,032
Loss for the period	-	-	-	-	-	-	(9,423)	(9,423)	(91)	(9,514)
Other comprehensive income:
Foreign currency translation	-	-	131	-	453	-	-	584	132	716
Revaluation of property	-	-	418	-	-	-	-	418	-	418
Impairment of property through revaluation reserve	-	-	(1,019)	-	-	-	-	(1,019)	-	(1,019)
Minority share of property revaluation	-	-	(66)	-	-	-	-	(66)	66	-
Net actuarial losses on employee benefit schemes	-	-	-	-	-	-	(3,109)	(3,109)	-	(3,109)
Impact of changes to defined benefit asset limit	-	-	-	-	-	-	3,070	3,070	-	3,070
Total comprehensive income	-	-	(536)	-	453	-	(9,462)	(9,545)	107	(9,438)
Transactions with owners:
Credit for share-based payments	-	-	-	-	-	-	67	67	-	67
At 3 April 2010	14,308	13,766	1,433	2,500	1,570	-	(13,550)	20,027	634	20,661
At 4 April 2010	14,308	13,766	1,433	2,500	1,570	-	(13,550)	20,027	634	20,661
Profit for the period	-	-	-	-	-	-	2,871	2,871	-	2,871
Other comprehensive income:
Foreign currency translation	-	-	42	-	(38)	-	-	4	-	4
Net actuarial losses on employee benefit schemes	-	-	-	-	-	-	2,235	2,235	-	2,235
Impact of changes to defined benefit asset limit	-	-	-	-	-	-	(4,130)	(4,130)	-	(4,130)
Deferred tax	-	-	(66)	-	-	-	(1)	(67)	-	(67)
Total comprehensive income	-	-	(24)	-	(38)	-	975	913	-	913
Transactions with owners:
Share capital subscribed for	7	133	-	-	-	-	-	140	-	140
Shareholder loan issue with convertible warrants	-	-	-	-	-	160	-	160	-	160
Non-controlling interest reversal	-	-	66	-	165	-	85	316	(634)	(318)
Credit for share-based payments	-	-	-	-	-	-	127	127	-	127
Total transactions with owners	7	133	66	-	165	160	212	743	(634)	109
At 2 April 2011	14,315	13,899	1,475	2,500	1,697	160	(12,363)	21,683	-	21,683

¹  The capital redemption reserve was set up on cancellation and repayment of cumulative preference shares in 2001.

²  The minority interest related to the 25.1% in 600SA Holdings (Pty) Limited acquired by a South African individual on 3 April 2005 which was divested during the financial year.

Consolidated cash flow statement

For the 52-week period ended 2 April 2011

	52-week	53-week
	period ended	period ended
	2 April	3 April
	2011	2010
	£000	£000
Cash flows from operating activities
Profit/(loss) for the period	2,871	(9,514)
Adjustments for:
Amortisation of development expenditure	513	528
Depreciation	994	974
Impairment of goodwill	-	1,122
Net financial (income)/expense	(756)	1,934
Net pension credit	(2,570)	-
Profit/(loss) on disposal of plant and equipment	16	(14)
Equity share option expense	127	67
Income tax (income)/expense	(307)	8
Operating cash flow before changes in working capital and provisions	888	(4,895)
Decrease in trade and other receivables	549	2,166
Decrease in inventories	578	5,714
Increase/(decrease) in trade and other payables	652	(3,597)
Decrease in employee benefits	(788)	(1,076)
Cash generated/used in operations	1,879	(1,688)
Interest paid	(645)	(454)
Income tax (paid)/received	(53)	24
Net cash flows from operating activities	1,181	(2,118)
Cash flows from investing activities
Interest received	7	22
Proceeds from sale of property, plant and equipment	245	128
Acquisition of Polish manufacturing company	(632)	-
Purchase of property, plant and equipment	(1,002)	(576)
Development expenditure capitalised	(406)	(239)
Net cash flows from investing activities	(1,788)	(665)
Cash flows from financing activities
Proceeds from issue of ordinary shares	140	-
Proceeds from issue of shareholder loan net of costs	2,104	-
(Repayment)/Proceeds from external borrowing	(171)	555
Net cash flows from financing activities	2,073	555
Net increase/(decrease) in cash and cash equivalents	1,466	(2,228)
Cash and cash equivalents at the beginning of the period	(3,371)	(1,075)
Effect of exchange rate fluctuations on cash held	-	(68)
Cash and cash equivalents at the end of the period	(1,905)	(3,371)

NOTES

1.Basis of preparation

The 600 Group PLC is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on the London Stock Exchange.

The Group Consolidated Financial Statements incorporate accounts, prepared to the Saturday nearest to the Group's accounting reference date of 31 March, of the Company and its subsidiary undertakings (together referred to as the Group). The results for 2011 are for the 52-week period ended 2 April 2011. The results for 2010 are for the 53-week period ended 3 April 2010. The Parent Company financial statements present information about the Company as a separate entity and not about its Group.

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under adopted IFRS.

IFRS and IFRIC are issued by the International Accounting Standards Board (the IASB) and must be adopted into European Union law, referred to as endorsement, before they become mandatory under the IAS Regulation.

There have been no further alterations made to the accounting policies as a result of considering all amendments to IFRS and IFRIC interpretations that became effective during the accounting period as these were considered to be immaterial to the Group's operations or were not relevant.

There are a number of standards and interpretations issued by the IASB that are effective for financial statements after this reporting period. The following have not been adopted by the Group:

	Effective for accounting periods starting on or after:
International Financial Reporting Standards:
IAS 24 *  "Related party disclosures (revised)"	1 January 2011
IFRS 7 "Amendment to Financial Instruments: Disclosures on derecognition"	1 July 2011
IAS 12 "Amendment to Income taxes on deferred tax"	1 January 2012
IFRS 9 "Financial Instruments"	1 January 2013
International Financial Reporting Interpretations Committee:
IFRIC 14 *  "IAS 19 Prepayment of a minimum funding requirement (amendment)	1 January 2011
IFRIC 19 *  "Extinguishing financial liabilities with equity instruments"	1 July 2010

·  These standards and interpretations have been endorsed by the European Union

The application of these standards and interpretations are not anticipated to have a material effect on the Group's financial statements except for additional disclosure.

The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The consolidated financial statements are presented in sterling rounded to the nearest thousand.

2. GOING CONCERN

The financial statements are prepared under the historical cost convention except that properties are stated at their fair value.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement and the Group Chief Executive's Review of Operations.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. This includes consideration of working capital requirements and the impact of funding any further reorganisation costs. Further cost saving and result enhancing actions continue to be reviewed by the Board on a regular basis.

The Group is in advanced discussions with a new lender to extend the Group's existing financing requirements in the UK by £1.8m. Documentation of the new facility is agreed and execution and completion is expected shortly. The overseas bank overdrafts in place around the Group are all due for renewal within the next 6 months. The Group has held discussions with its overseas bankers about its future borrowing needs and no matters have been drawn to its attention to suggest that renewals may not be forthcoming on acceptable terms. The Group also considers that alternative sources of finance would be available should the need arise.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

3. SEGMENT INFORMATION

IFRS 8 requires operating segments to be identified on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. The chief operating decision maker has been identified as the Executive Directors. The Executive Directors review the Group's internal reporting in order to assess performance and allocate resources.

The Executive Directors consider there to be four operating segments being Machine Tools, Precision Engineered Equipment, Laser Marking and Mechanical and Waste Handling.

The Executive Directors assess the performance of the operating segments based on a measure of operating profit/(loss). This measurement basis excludes the effects of restructuring costs, costs in relation to closed operations and impairment of intangible assets from the operating segments. Central costs are apportioned across the various segments on an allocation linked to turnover.

The following is an analysis of the Group's revenue and results by reportable segment:

52-week period ended 2 April 2011

		Precision		Mechanical
	Machine	Engineered	Laser	and Waste
	Tools	Equipment	Marking	Handling	Total
	£000	£000	£000	£000	£000
Segmental analysis of revenue
Revenue from external customers	19,518	9,909	7,025	14,112	50,564
Inter-segment revenue	2,142	1,500	332	-	3,974
Total segment revenue	21,660	11,409	7,357	14,112	54,538
Less: inter-segment revenue					(3,974)
Total revenue per statutory accounts					50,564
Segmental analysis of profit from operations before restructuring costs, charge for share-based payments, net pension credit and impairment of intangible assets
Reportable segment profit/(loss)	108	163	208	688	1,167
Group profit from operations (adjusted)					1,167
Restructuring costs					(1,098)
Net pension credit					2,570
Charge for share-based payments					(127)
Impairment of intangible assets					-
Group profit from operations					2,512
Other segmental information
Reportable segment assets	23,099	7,705	5,813	6,814	43,431
Reportable segment liabilities	11,506	4,228	2,470	3,544	21,748
Fixed asset additions including Acquisitions	1,480	169	42	154	1,845
Depreciation and amortisation	697	236	519	55	1,507

53-week period ended 3 April 2010

		Precision		Mechanical
	Machine	Engineered	Laser	and Waste
	Tools	Equipment	Marking	Handling	Total
	£000	£000	£000	£000	£000
Segmental analysis of revenue
Revenue from external customers	18,537	11,986	6,727	8,126	45,376
Inter-segment revenue	1,989	900	896	-	3,785
Total segment revenue	20,526	12,886	7,623	8,126	49,161
Less: inter-segment revenue					(3,785)
Total revenue per statutory accounts					45,376
Segmental analysis of loss from operations before restructuring costs, charge for share-based payments, net pension credit and impairment of intangible assets
Reportable segment (loss)/profit	(767)	62	(268)	(241)	(1,214)
Inter-segment profit					133
Group loss from operations (underlying)					(1,081)
Restructuring costs					(5,401)
Credit in respect of past pension scheme service net of curtailment cost					897
Charge for share-based payments					(67)
Impairment of intangible assets					(1,122)
Group loss from operations					(6,774)
Other segmental information
Reportable segment assets	23,585	10,171	7,302	2,404	43,462
Reportable segment liabilities	11,464	6,648	3,206	1,483	22,801
Fixed asset additions	353	143	40	40	576
Depreciation and amortisation	662	170	613	57	1,502

Inter-segment pricing is determined on an arm's length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Geographical segmental analysis of revenue is shown by origin and destination in the following two tables:

Segmental analysis by origin	2011			2010
	£000	%	£000		%
Gross sales revenue:
UK	21,111	41.8	21,796		48.0
Other European	865	1.7	1,098		2.4
North America	15,216	30.1	12,034		26.5
Africa	14,113	27.9	10,809		23.8
Australasia	3,234	6.4	3,424		7.5
Less: Inter-company	(3,975)	(7.9)	(3,785)		(8.2)
Revenue	50,564	100.0	45,376		100.0

Segmental analysis by destination:	2011			2010
	£000	%	£000		%
Gross sales revenue:
UK	6,325	12.5	7,392		24.6
Other European	6,260	12.4	7,325		24.6
North America	17,884	35.4	14,095		25.7
Africa	14,284	28.2	10,949		17.4
Australasia	3,252	6.4	3,463		4.2
Central America	167	0.3	121		0.3
Middle East	1,629	3.3	949		1.5
Far East	763	1.5	1,082		1.7
Revenue	50,564	100.0	45,376		100.0

There are no customers that represent 10% or more of the Group's revenues.

4. Other operating income/operating expenses

	2011	2010
	£000	£000
Other operating income	332	176
Operating expenses:
- administration expenses	9,546	17,213
- distribution costs	4,587	4,180
Total operating expenses	14,133	21,393

5. Restructuring costs, CHARGE FOR SHARE-BASED PAYMENTS, net pension credit and impairment of intangible assets

Restructuring costs and costs in relation to closed operations are items of expenditure that, in the judgement of management, should be disclosed separately on the basis that they are material, either by their nature or their size, to an understanding of the financial performance and significantly distort the comparability of financial performance between accounting periods.

Items of expense that are considered by management for designation as restructuring costs include such items as redundancy costs, plant, property and equipment impairments, inventory impairments, receivable impairments and onerous lease costs.

	2011	2010
	£000	£000
Cost of sales
Inventory impairments(1)	201	1,209
Asset impairments(2)	-	38
Operating costs
Other restructuring costs(3)	897	4,154
Restructuring costs	1,098	5,401

¹  At 2 April 2011, the Group conducted a review of the net realisable value of its inventory carrying values. This has resulted in a charge of £0.2m (2010 - £1.2m).

²  At 3 April 2010, a review of the carrying value of property, plant and equipment was undertaken following the decision to exit certain production facilities. This resulted in a charge of £0.03m.

³  At 2 April 2011, the Group had incurred £0.9m (2010 - £4.2m) in relation to reorganising and restructuring the business. These costs comprise staff redundancy and contract severance costs, costs relating to exiting leased premises, professional fees and other costs.

The cash cost of the restructuring in 2011 was £0.9m (2010: £1.9m).

During the period, a credit of £2.6m (2010: £0.9m) arose in respect of changes to the assumptions within the Group's pension and healthcare plans and was primarily as a result of using the consumer price index as the measure of price inflation as opposed to the retail price index due to the UK Government's announcement that the former will be used from April 2011 onwards. The directors have taken the view that the actions of the company in the past have created a valid expectation for scheme members to receive RPI-linked benefits. The scheme booklet refers specifically to the RPI and deferred benefit statements sent to members also refers to RPI-linked benefits.

The directors believe that the announcement of the change to CPI by the government and subsequent changes to payments made by the Company have changed this constructive obligation and so the gain should be recognised under UITF 48 as a benefit change through the Consolidated income statement.

Additionally a charge of £nil (2010: £0.3m) arose in respect of curtailment costs incurred under the Group's UK pension plan.

During the period, a credit of £nil (2010: £1.2m) arose in respect of past pension service costs as a result of an amendment to the benefits arising under the Group's US healthcare plan. The amendment has resulted in future increases to the plan being capped.

Also, at 3 April 2010, a review of the carrying value of intangible assets was conducted and the goodwill relating to the Parat operation in Germany and the Gamet operation in the UK was found to be impaired. A charge of £1.1m was recognised in relation to this.

A charge for share-based payments of £127,000 (2010: £67,000) was incurred during the period.

6. Results of discontinued OPERATIONS

	2011	2010
	£000	£000
Results of the discontinued operations
Revenue	303	2,872
Expenses	(1,007)	(3,670)
Loss from discontinued operations	(704)	(798)

The discontinued operations relate to the closure of operations in Germany. The income tax charge in respect of the above discontinued operations is £nil (2010: £nil). The cash outflow from discontinued operations of £704,000 is shown within the £1,181,000 cash inflow from operating activities in the consolidated cash flow statement.

7. Financial income and expense

	2011	2010
	£000	£000
Interest income	34	22
Expected return on defined benefit pension scheme assets	10,876	8,585
Financial income	10,910	8,607
Bank overdraft and loan interest	(415)	(409)
Shareholder loan interest	(118)	-
Other loan interest	(55)	-
Other finance charges	(31)	-
Finance charges on finance leases	(51)	(45)
Interest on defined benefit pension scheme obligations	(9,484)	(10,087)
Financial expense	(10,154)	(10,541)

8. TAXATION

	2011	2010
	£000	£000
Current tax:
Corporation tax at 28% (2010: 28%):
- current period relating to prior period	-	-
Overseas taxation:
- current period	(60)	(8)
Total current tax charge	(60)	(8)
Deferred taxation:
- current period	(213)	-
- prior period	580
Total deferred taxation credit	367	-
Taxation credited/(charged) to the income statement	307	(8)

Tax reconciliation

The tax charge assessed for the period is lower than the standard rate of corporation tax in the UK of 28% (2010: 28%). The differences are explained below:

	2011			2010
	£000	%	£000		%
Profit/(Loss) before tax	3,268		(8,708)
Profit/(Loss) before tax multiplied by the standard rate of corporation tax
in the UK of 28% (2010: 28%)	915	28.0	(2,438)		(28.0)
Effects of:
- expenses not deductible	475	14.5	503		5.8
- non-taxable income	(1,053)	(32.2)	-		-
- overseas tax rates	44	1.3	18		0.2
- deferred tax prior period adjustment	(580)	(17.7)	-		-
- unrecognised losses utilised/tax not recognised on losses	(219)	(6.7)	1,925		22.9
- impact of rate change	111	3.4	-		-
Taxation charged/(credited) to the income statement	(307)	(9.4)	8		0.1

Following the enactment of legislation in the UK to reduce the corporation tax rate from 28% to 26% from 1 April 2011, the effective tax rate this year includes the impact on the income statement of calculating the UK deferred tax balances at the lower UK corporation tax rate. The impact of this rate change is a £111,000 increase in the tax charge in the income statement. Proposed future reductions in the UK tax rate to 23% will be reflected when the relevant legislation is substantively enacted.

9. EARNINGS PER SHARE

The calculation of the basic profit per share of 5.0p (2010: loss of (16.6)p) is based on the earnings for the financial period attributable to the Parent Company's shareholders of £2,871,000 (2010: loss of £(9,423,000)) and on the weighted average number of shares in issue during the period of 57,349,063 (2010: 57,233,679). At 2 April 2011, there were 16,511,898 potentially dilutive shares on option with a weighted average effect of 9,863,832 shares which resulted in a diluted profit per share was 4.3p (2010: (16.6)p). The basic profit per share for continuing operations is 6.2p (2010: loss of (15.2)p) and the basic loss per share for discontinued operations is (1.2)p (2010: (1.4)p). The diluted profit per share for continuing operations is 5.3p (2010: (15.2)p) and the diluted loss per share for discontinued operations is (1.0)p (2010: (1.4)p).

	2011	2010
Weighted average number of shares
Issued shares at start of period	57,233,679	57,233,679
Effect of shares issued in the year	113,462	-
Weighted average number of shares at end of period	57,347,141	57,233,679

10. Cash and cash equivalents

	2011	2010
	£000	£000
Cash at bank	952	673
Short-term deposits	100	150
Cash and cash equivalents per statement of financial position	1,052	823
Bank overdrafts	(2,957)	(4,194)
Cash and cash equivalents per cash flow statement	(1,905)	(3,371)

11. analysis of net funds

	At			At
	3 April	Exchange		2 April
	2010	movement	Cash flows	2011
	£000	£000	£000	£000
Cash at bank and in hand	673	3	276	952
Overdrafts	(4,194)	(28)	1,265	(2,957)
	(3,521)	(25)	1,541	(2,005)
Debt due within one year	(378)	18	(14)	(374)
Shareholder loan	-	-	(1,957)	(1,957)
Finance leases	(579)	(7)	27	(559)
Term deposits (included within cash and cash equivalents on the balance sheet)	150	-	(50)	100
Total	(4,328)	(14)	(453)	(4,795)

12. ACQUISITIONS

In November 2010 the Group acquired 100% of the shares of FMT Colchester z.o.o., a machine tool manufacturer, in Poland. The consideration of €1m was paid in stages with €500,000 paid upon acquisition, €250,000 paid in February 2011 and the final €250,000 being due on 31 July 2011.

	€000	£000
Cash paid	750	632
Deferred consideration	250	211
Total consideration	1,000	843

The deferred consideration of £211,000 is included within Trade and other payables at the period-end.

Identifiable assets acquired
	€000	£000
Plant and machinery	1,000	843

The fair value of the plant and machinery was evaluated by the directors. No inventory was included in the acquisition.

FMT Colchester's revenue post acquisition up to 2 April 2011 was £865,000 with a profit from operations of £56,000.

13. Post balance sheet events

The group raised approximately £1.76m through an institutional placing of 5,787,574 new ordinary shares of 1p each at a price of 30.5p per share on 5 April 2011. This raised the total number of shares in issue to 63,721,253 at that date.

Subsequent to the period-end 150,000 of the share warrants attached to the shareholder loan have been exercised which leaves the total number of shares in issue currently at 63,871,253.

11,650,000 warrants remain from the original 12,500,000 warrants attached to the £2.5m shareholder loan. These warrants can be used by their holders to either convert their element of the shareholder loan into shares or to purchase shares for a cash consideration.

On 23 May 2011 a circular was issued to the shareholders of The 600 Group Plc proposing to cancel the admission of the Company's Ordinary shares from the Official List and to trading on the London Stock Exchange's Main Market and to apply for the admission of the Company's Ordinary Shares to trading on AIM. This resolution was approved at a General Meeting held on 15 June 2011. The final day of dealings on the Official List was 13 July 2011 with commencement of trading on AIM taking place on 14 July 2011.

14. STATUTORY ACCOUNTS

The financial information set out above does not constitute the Group's statutory accounts for the 52 weeks ended 2 April 2011 or the 53 week period ended 3 April 2010 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the registrar of companies and those for 2011 will be delivered following the Company's Annual General Meeting. The auditor has reported on the 2011 accounts; their report was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

15. Cautionary statement

This report contains certain forward looking statements with respect to the financial condition, results, operations and business of The 600 Group PLC.  These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future.  There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts.  Nothing in this report should be construed as a profit forecast.

16.  Directors' liability

Neither the Company nor the Directors accept any liability to any person in relation to this report except to the extent that such liability could arise under English law.  Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000.

17. ANNUAL REPORT AND ACCOUNTS

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, Union Street, Heckmondwike, West Yorkshire, WF16 0HL.

 

END

 

 

FR BRGDRDXDBGBL