Final Results
600 Group PLC
30 June 2005
30th June 2005
600 GROUP PLC
PRELIMINARY RESULTS FOR THE PERIOD TO 2 APRIL 2005
CHAIRMAN'S STATEMENT
Having come through an exceptionally long recession, the Group is now seeing a
gradual improvement in overall market demand and our resources are being
focussed increasingly on opportunities for organic growth.
After the improved performance reported at the half year, the second half result
was disappointing due to a short-term softening in some of our western markets,
coupled with slippage in a new supply programme.
Market conditions
The UK and North American markets continued to be erratic, showing signs of
recovery in the first half of the year but easing during the second half as
short-term economic uncertainties returned. As in the previous year, other
European markets remained depressed, but those in the Far East continued to be
buoyant.
Results
Despite these market conditions, the Group's underlying order intake increased
by 5% with increases in all geographic areas with the exception of Australia.
Our outstanding order book also increased slightly, but is still below our
optimal level.
Our UK factoring, lasers and USA businesses all showed increased turnover, but
these improvements were largely offset by reduced sales from the lathes business
where output was restricted due to start-up problems on new component supply
contracts.
The resulting profit before tax improved from £0.2m to £1.6m.
The improvement in gross profit from 25% to 27% is due principally to the
changes in business and product mix.
Net operating expenses before pension credit and exceptional items increased by
£1.2m. Distribution costs increased by £0.8m reflecting a very high level of
exhibition expenditure together with increased direct selling costs in the UK
and Germany and other operating income was down by £0.2m as a result of lower
commission-only sales in Canada.
The SSAP24 calculated pension scheme credit increased by £0.2m and the sale of
surplus plant and machinery following our increase in sub-contracted
manufacturing generated a profit of £0.4m. There were no exceptional costs
relating to restructuring during the year.
Net funds decreased by £3.3m from £9.9m to £6.6m. Dividends absorbed £3.1m and
the net cash outflow from operating activities was £0.2m.
Dividend
The board recommends a final dividend of 4.0p, maintaining the full year
dividend of 5.5p.
People
The constitution of the board has changed significantly during the past year.
Peter Bullock retired in September after sixteen years' service as a
non-executive director and I should like to record our thanks for his
contribution during this period and our best wishes for the future. I was
pleased to welcome Andrew Dick to the board as Group Managing Director from the
start of the current year. For an initial period, he will shadow Tony Sweeten,
with a view to succeeding him as Group Chief Executive at the appropriate time.
On behalf of the board, I should like to record our continued appreciation of
the efforts of all our employees during the year.
Outlook
Capacity utilisation levels in western markets continue to show an improving
trend, indicating continued growth in demand for machine tools in the longer
term, albeit at a slower rate than last year. However, as I have highlighted in
previous statements, short-term confidence levels in the machine tool market
continue to be dominated by economic and political events. This market
background will continue to have a significant influence in the coming half
year.
Accordingly, our priority during the current year will be to continue the
transition to a Group focussed increasingly on organic growth, concentrating our
efforts on the expansion and exploitation of the new sources of supply and the
use of our extensive international presence to develop improved marketing
initiatives, especially in new growth markets.
Even though it is anticipated that the Group will remain free of net debt and
cash positive, the new International Accounting Standards coming into force in
the current year will result in future dividend payments being linked directly
to future operating results.
With our wide geographic coverage, a continuously updated product range and
strengthened management teams, I am confident that we are in a strong position
to increase our market share and to benefit from the longer-term opportunities
that are likely to develop in the international machine tool market.
Michael Wright
Chairman
30 June 2005
Enquiries:
Enquiries:
The 600 Group PLC
Tony Sweeten, Group Chief Executive
John Fussey, Group Finance Director Telephone: 0113 2776100
Hudson Sandler
Nick Lyon Telephone: 020 7796 4133
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
Last year saw recovery in our major markets in the USA and UK and continued
buoyancy in the Far East. These trends are set to continue, although they are
likely to include significant short-term fluctuations, as demonstrated during
the last few months. Our drive to enhance our products, raise efficiency and
build international strategic alliances has created a solid platform for growth
and we have further strengthened our operational management to ensure that we
make the most of the opportunities before us.
Market trends
This was a year of exceptional growth in the world economy. The principal
drivers were the continued rapid expansion of the Chinese economy and recovery
in the USA, both of which were reflected in strong demand for machine tools. The
UK market also returned to growth, while the newer EU member states and other
economies in Eastern Europe continued to progress. However, there was no sign of
improvement in the major Western European markets of Germany, Italy or France.
Despite its strong growth, China has proved a challenging market in which to
secure sales of imported product because of the combined effects of intense
competition, import duties and the weak local currency. Our strategic alliances
for the sourcing of low-cost products have progressed steadily, though teething
issues of quality control in particular meant that we did not maximise sales
opportunities last year. Now that this learning curve is being addressed, there
is real potential to develop sales of value products that complement our newer,
high-tech lines.
All our businesses have maintained their focus on innovation and we have many
excellent new products in the pipeline. We are particularly excited by the
potential for our new fibre laser products which offer substantial advantages in
improved reliability and reduced maintenance costs. Significant growth
opportunities have already been identified in the aerospace and medical sectors
where laser marking of components and instruments will help to improve their
traceability.
Strategic development
Our clear and consistent strategy has enabled us to weather the worst recession
in our industry in living memory, while remaining financially robust. Our key
strategic principles continue to be:
• 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 positions;
• to develop strategic alliances with appropriate 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 sound balance sheet.
We have completed the restructuring of the Group and now have an efficient
business with the right mix of technologies, skills and leadership to address
the challenging markets of the next decade. Our product portfolio is in
excellent shape, with new lines steadily enhancing both the performance and the
value we can offer to our customers and we have well-qualified and highly
motivated new managing directors in place in the majority of our key operations.
United Kingdom operations
600 Lathes benefited from the successful launch of the new Colchester Tornado
range and the introduction of a new family of sub-spindle models. The new
MultiTurn range of flatbed CNC centre lathes also generated good volume growth
in its first full year of sales.
We were particularly pleased by the growth in export orders for Tornado products
and the expansion of the EU stimulated increased demand for our whole range from
distributors in the new member countries in Eastern Europe.
Our programme to outsource the manufacture of our range of standard lathes has
progressed during the year, although problems with production scheduling and
quality assurance meant that we did not achieve our projected sales towards the
end of the year. These difficulties are now being addressed.
The management team at 600 Lathes has been significantly strengthened with a new
managing director now in place and additional resources provided in engineering
and product development where a significant programme of innovation and range
extension is under way. We have also consolidated our manufacturing process by
bringing on site a state-of-the-art metal fabrications facility which has
enabled us to reduce lead times while making product improvements and cutting
costs.
600 Centre, our UK marketing operation for imported machine tools, achieved a
good increase in both sales and profits, driven mainly by growth in the
automotive and medical sectors. We supplied a number of high-specification Fanuc
Robodrills to a major customer as part of a total engineered solution for the
manufacture of engine components and also enjoyed strong demand for Fanuc
Robodrill machining centres and wire cut machines for the production of
artificial joints. We continued our successful drive to broaden our agency base
by securing sole UK selling rights for the Toyoda-Mitsui Seki range of machining
centres and cylindrical grinding machines.
Pratt Burnerd International, our market-leading producer of workholding systems,
successfully completed integration of the Crawford Colletts product range in
both manufacturing and sales. Significant cost savings in collett production are
being achieved, aided by investment in new plant, and we saw an encouraging
increase in US orders towards the end of the year as Pratt Burnerd America took
over responsibility for distribution of the Crawford range. We have also
improved our European sales network and gained a number of blue chip customers,
helping us to raise our profile on the Continent as the leading supplier of
specialist workholding systems.
Gamet Bearings, manufacturing super high precision taper roller bearings for
machine tools and similar applications, realised all the expected benefits of
our major capital investment to automate production. As well as delivering
improved efficiency and productivity, this investment has given Gamet additional
flexibility and capability to develop new business opportunities outside its
traditional machine tools market. An initial breakthrough was achieved with a
contract to supply bearing components for the aerospace industry and there are
further contracts in the pipeline.
Electrox, our laser manufacturing business, achieved further strong growth in
sales of laser markers. We made particularly encouraging progress in the USA,
benefiting from strong market growth and our application of additional
resources, including the refurbishment of our US office to provide a more
effective centre for sales, applications advice and service support. We also
successfully established a presence in a number of new and growing markets in
Scandinavia and Eastern Europe. In the final quarter we introduced a new Cobra
ES entry-level complete laser and workstation which has proved very successful.
The most exciting new development in the current year will be the introduction
of fibre laser technology which will offer substantially extended product life,
increased reliability and reduced maintenance costs. We are also pressing ahead
with plans to expand sales into a number of new target markets. We have recently
secured approved supplier status with Rolls-Royce for product marking by its
component manufacturers and are pursuing opportunities in both the US and UK to
develop sales of laser marking technology to ensure the traceability of medical
implants and instruments.
600 Machinery International, our global trading business, benefited from the
completion of a long-term contract in Egypt during the year. Although our
traditional Middle East markets remained relatively quiet, we secured a large
contract in Oman towards the end of the year and continued our successful drive
to raise our profile in Far Eastern markets, notably in China, Thailand and
Malaysia.
Overseas operations
Parat, our German distribution business, faced an extremely challenging market
place as domestic consumption of machine tools again declined. Against this
background, the business did well to stabilise sales of Harrison and Parat
products and successfully re-established the Colchester brand in the German
market after assuming responsibility for its sales and service in 2004. Parat's
growing reputation for high quality servicing of lathes is playing an important
part in securing sales of new products. The business secured a new agency for
Sachman and Rabaudi machining centres. These complement the established FIDIA
range, sales of which have been severely affected as major customers curtailed
their investment programmes following the expansion of the EU into Eastern
Europe.
600 France also continued to operate in a depressed and highly competitive
market, with industrial demand remaining weak. These effects have been partially
offset by further progress in the education sector, which is now our largest
generator of turnover and where we expect to gain further contracts in the
current year. Work is continuing to extend our market coverage in preparation
for the availability of our new product ranges.
Clausing Industrial, our North American manufacturing and distribution business,
benefited from a strong recovery in US machine tool consumption during the year,
led by large orders for sophisticated turnkey projects and aided by a special
Government tax relief programme during 2004. Sales of Group CNC lathes showed
the largest increase, aided by the successful introduction of the Colchester
MultiTurn and Storm 'T' series lathes, the latter being the US name for the
Tornado. Orders for vari-speed lathes reached their highest level for a decade,
reflecting healthy demand for Colchester standard products and the first full
year of sales for the new Triumph low-cost range. Good growth was also achieved
in sales of surface grinders, sawing machines and drills. This was partially
offset by significant reductions in demand for Metosa lathes and Kondia milling
machines, owing to the weakness of the US Dollar against the Euro.
600 Machine Tools Canada had a relatively disappointing year after reporting
excellent results last time. This mainly reflected a shortfall in large agency
sales, though the business was successful in winning smaller orders from a
number of new customers. It has also extended its high-tech portfolio,
reorganised its service department and is improving its nation-wide distribution
network.
600 International, our Prague office with responsibility for co-ordinating Group
sales and procurement in Central and Eastern Europe, continued to perform well.
Good growth was achieved in sales of Colchester and Harrison lathes to new EU
member states including Slovakia, the Czech Republic and Poland. Following the
appointment of a new distributor, we also made our first sales of these brands
in Russia and have secured new distribution channels in the Baltic states.
600 Machine Tools Australia maintained its strong sales level of the previous
year, despite a lull in spending by important Government customers such as the
Department of Defence. Sales of Group products showed a healthy increase and our
extended range of high-tech machinery is achieving increased recognition in the
market place.
600SA, our operation in South Africa, had another successful year. Strong sales
of Fanuc wire cut machines were again the highlight of performance in machine
tools. The Fassi range of lorry-mounted cranes also sold well and we achieved
major improvements in production efficiency and quality standards in our
operation manufacturing waste compactors. In forestry, we secured distribution
rights for the Terex/Fuchs range of products to replace our former Timberjack
agency. Most importantly for the future, at the beginning of the current year we
sold 25.1% of the company to a South African individual, strengthening the
senior management team. This step has improved our Black Economic Empowerment
rating and thus will enable us to maximise sales opportunities for all our
products in this market place in the years ahead.
Outlook
I believe that the prospects for the Group are good. Demand from China and the
US remains strong and we expect the UK market to remain in growth, albeit at a
slower rate than last year. In both of our core UK businesses in lathes and
lasers, we have revitalised management teams under new leadership, focusing on
major opportunities for growth. 600 Lathes has its new overseas supply chain and
has a number of new developments in hand to extend and improve its already
excellent product range. Electrox is poised to launch an exciting new technology
and to secure major new markets. Clausing, also under new management, is well
placed to reap the benefits of continued growth in the US and our businesses in
Eastern Europe, South Africa and Australia are all well positioned to make
progress.
Tony Sweeten
Group Chief Executive
30 June 2005
AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
52-week period 53-week period
ended ended
2 April 2005 3 April 2004
£000 £000
Turnover 66,682 66,323
Cost of sales (48,582) (49,644)
Gross profit 18,100 16,679
Net operating expenses (17,015) (16,609)
Net operating expenses before pension scheme credit and exceptional items (19,355) (18,115)
- Pension scheme credit 2,340 2,160
- Exceptional items - restructuring costs - (654)
Total net operating expenses (17,015) (16,609)
Operating loss before pension credit and exceptional items (1,255) (1,436)
Operating profit 1,085 70
Profit on sale of fixed assets 392 -
Profit on ordinary activities before interest and taxation 1,477 70
Net interest receivable and similar income 149 116
Profit on ordinary activities before taxation 1,626 186
Taxation charge (731) (20)
Profit for the financial period 895 166
Dividends (3,127) (3,115)
Retained loss for the financial period (2,232) (2,949)
Earnings per share - basic 1.6p 0.3p
Earnings per share - diluted 1.6p 0.3p
AUDITED CONSOLIDATED BALANCE SHEET
At 2 April 2005 At 3 April 2004
£000 £000
Fixed assets
Intangible assets - goodwill 2,560 2,753
Tangible assets 11,916 13,116
Investments 84 84
14,560 15,953
Current assets
Stocks 23,213 20,346
Debtors:
- falling due within one year 15,704 15,494
- falling due after one year 37,062 34,729
52,766 50,223
Investments 580 1,162
Cash at bank and in hand 7,751 9,569
84,310 81,300
Current liabilities
Creditors: amounts falling due within one year:
- short-term borrowings (1,622) (754)
- other creditors (16,761) (14,565)
(18,383) (15,319)
Net current assets 65,927 65,981
Total assets less current liabilities 80,487 81,934
Creditors: amounts falling due after more than one year:
- loans and other borrowings (92) (75)
- other creditors (1,329) (1,317)
(1,421) (1,392)
Provisions for liabilities and charges (9,383) (8,570)
Net assets 69,683 71,972
Capital and reserves
Called-up share capital 14,212 14,206
Share premium account 13,680 13,675
Revaluation reserve 1,760 1,749
Capital redemption reserve 2,500 2,500
Profit and loss account 37,531 39,842
Shareholders' funds - equity 69,683 71,972
AUDITED CONSOLIDATED CASH FLOW STATEMENT
52-week 53-week period
period ended ended
2 April 2005 3 April 2004
£000 £000
Net cash (outflow)/inflow from operating activities (213) 4,420
Returns on investments and servicing of finance 184 63
Taxation repaid 44 544
Capital expenditure (135) (752)
Dividends paid (3,127) (3,086)
Net cash (outflow)/inflow before use of liquid resources and financing (3,247) 1,189
Management of liquid resources 8 30
Financing 783 (2,540)
Decrease in cash in the period (2,456) (1,321)
Reconciliation of movement in cash flow to movement in net funds
Decrease in cash in the period (2,456) (1,321)
Cash (inflow)/outflow from decrease in debt and lease financing (772) 2,875
Cash inflow from decrease in liquid resources (8) (30)
Change in net funds resulting from cash flows (3,236) 1,524
New finance leases entered into (53) (77)
Exchange movement 4 1,015
Movement in net funds in the period (3,285) 2,462
Net funds brought forward 9,902 7,440
Net funds carried forward 6,617 9,902
Reconciliation of operating profit to net cash inflow/(outflow) from operating activities
Operating profit 1,085 70
Depreciation of fixed assets 1,808 2,039
Amortisation of goodwill 182 186
Profit on sale of fixed assets (38) (40)
(Increase)/Decrease in stocks (2,905) 3,659
Increase in pension prepayment (2,752) (2,578)
Decrease in debtors 399 2,665
Increase/(Decrease) in creditors 2,008 (1,581)
Net cash (outflow)/inflow from operating activities (213) 4,420
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 2 April 2005 or the period ended 3
April 2004 but is derived from those accounts. Statutory accounts for 2004
have been delivered to the registrar of companies, whereas those for 2005
will be delivered following the company's Annual General Meeting. The
auditors have reported on the 2004 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 12 September 2005 to shareholders
on the register at 12 August 2005.
This information is provided by RNS
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