4 Jun 2008 07:00
4 June 2008
THE 600 GROUP PLC
PRELIMINARY RESULTS FOR THE PERIOD TO 29 MARCH 2008
The 600 Group PLC is an international group, manufacturing and marketing machine tools, machine tool accessories, lasers and many other engineering products. We operate from 28 locations worldwide and sell our products in over 100 countries. Our international marketing and distribution network handles both Group products and those of other quality manufacturers.
HIGHLIGHTS
Sales revenue increase of 4% from £75.6m to £78.9m for continuing operations
Gross profit margins improved to 30% (2007: 29%) reflecting increased production efficiencies and improved sourcing, despite an underlying increase in raw material costs
Operating profit before net financing income and tax of £1.3m compared to a profit of £1.1m in the previous year
Non recurring expenses of £0.6m compared to £Nil in the previous year
Profit before tax up 23% to £3.6m compared with £2.9m last year
Losses incurred from discontinued businesses of £2.3m compared to losses of £0.8m last year
Strong balance sheet maintained including net funds of £3.2m
Strong order book maintained for delivery in 2008/9
Enquiries:
| The 600 Group PLC | |
| Andrew Dick, Group Chief Executive | |
| Martyn Wakeman, Group Finance Director | Telephone: 0113 277 6100 |
| Hudson Sandler | |
| Nick Lyon | Telephone: 020 7796 4133 |
CHAIRMAN'S STATEMENT
The 600 Group PLC (the "600 Group" or the "Group") has continued to make positive progress in the implementation of its strategy, which evolved from the strategic review undertaken in 2006. There was a further improvement in our performance during the year together with additional product launches, consolidation of our North American operations and better supply chain performance.
Market conditions
Our European operations experienced significant growth during the year with our North American and South African markets continuing to improve despite the adverse impact of exchange rates and general economic conditions. The UK business showed more limited growth having benefited from a one-off contract in the previous year.
Results
Our order book increased over the year and order intake activity across the Group continued at an encouraging level particularly in North America and South Africa. Sales revenue from continuing operations increased by 4% to £78.9m (2007: £75.6m). After adjustment for the disposal of Erickson Machine Tools last year and adjusting for the impact of discontinued businesses, sales were £81.8m (2007: £75.7m) with underlying growth being 8%.
Gross profit margins improved to 30% (2007: 29%) as a result of increased production efficiencies and improved sourcing and despite an underlying increase in raw material costs. Operating income increased by £0.5m mainly as a result of the sale of a piece of land no longer required for future growth plans. Operating expenses increased by £1.7m due to the continued investment in the Group's sales, marketing and distribution activities together with non-recurring expenses of £0.6m.
Operating profit before net finance income and tax of £1.3m improved from a profit of £1.1m last year. Net finance income, principally due to the impact of the Group's pension scheme, increased to £2.3m from £1.8m last year resulting in profit before tax improving to £3.6m compared to a profit of £2.9m last year.
Following a review of the future opportunities for the Group in the Canadian market a decision was taken to discontinue the Group's direct operations in Canada. This resulted in the closure of parts of the Canadian business and the recognition of associated redundancy, operating losses, closure and inventory write down costs. Further costs were also incurred in relation to the closure of the French operation principally related to final closure and redundancy costs. The post tax loss relating to discontinued businesses is £2.3m (2007: losses of £0.8m).
New accounting guidance was issued in the form of IFRIC 14 which clarified that pension scheme surpluses should only be recognised if the company has an unconditional right to the surplus. This is not the case for the Group. Following these developments the IAS 19 asset of £15.6m included in 2007 has not been recognised.
Net funds at the year end were £3.2m (2007: £4.4m). Net cash outflow from operating activities was £0.3m (2007: £0.9m) and net cash outflow from investing activities, principally capital and development expenditure, was £1.1m (2007: £0.8m).
Strategy Update
Our core strategy remains to develop a customer-focused business concentrating on the North American, UK and European markets and based on our two strategic growth platforms of machine tools and laser marking, supported by our technologies business. However, the Board considers our strategy on a regular basis and, in the current economic climate, will continue to review opportunities to maximise value for shareholders.
The relationship with our Chinese partners continues to form a key part of the Group's strategy. The agreement with Chinese machine tool company, The Dalian Machine Tool Group (DMTG), to establish a 50:50 joint venture, based in Germany, to market and distribute 'Dalian' branded products across the whole of Europe is in the process of being finalised. The operation is not anticipated to have a material financial impact on 600 Group's results until the financial year commencing 29 March 2009.
On 30 January 2008 we entered into an agreement to sell certain assets in Canada to Semcan Inc. This included the property and service-related inventories. The proceeds of C$3.0m (£1.5m) were settled as to C$2.4m (£1.2m) in cash and C$0.6m (£0.3m) in the form of a promissory loan note which can be redeemed for cash on 31 January 2009. Subsequently, our US business opened a new sales office in Ontario which is focused on the 600 Solutions business. 600 Solutions delivers a broad range of high performance machine tools to Canada which will generate a commission-based revenue stream.
As part of our continuing cost reduction and cash generation initiative, on 19 May 2008, we commenced a redundancy programme of 70 employees in our North American and UK operations. It is anticipated that we will achieve annualised savings of £2.1m as a result of this reduction in our workforce at an estimated one-off cost of £0.9m. The redundancies will be completed in the first half of the current financial year. In addition, we have recently agreed terms, subject to contract, for the sale and leaseback of our properties in Colchester and Halifax.
As noted in the 2007 Annual Report and the 2008 Interim Results, the 600 Group Pension Scheme is significant in terms of its size and impact. The Group accounts for its pension arrangements in accordance with IAS 19 and this accounting is based on a series of actuarial assumptions. The 2008/9 income statement credit generated under IAS 19 is expected to reduce significantly from the £1.9m generated in 2007/8. This is because the Scheme has moved to de-risk its asset holdings, leading to lower forecast future returns and because increasing corporate bond returns will generate a higher IAS 19 income expense.
Dividend
We have previously stated that dividend payments will be related directly to our operating results. Although we have made good progress during the year, the Board does not yet consider that it is appropriate to pay a dividend.
People
In April 2007, I was appointed by the Board as a non-executive director and I succeeded Michael Wright as non-executive Chairman of the Group at the end of July last year. Tony Sweeten also retired as a director at the same time, but continues to be available to assist the Board in a consultancy capacity until 31 December 2008.
Stephen Rutherford joined the Board as a non-executive director on 1 October 2007. Stephen brings extensive international experience to the Board, particularly in the Far East.
On behalf of the Board, I should like to record our continued appreciation of the efforts of all our employees during the year.
Outlook
The medium term outlook for the Group will be dependent on the impact of any changes in our main markets as a result of financial, economic and political events. The current industry forecasts indicate that the rate of growth in the machine tool market is nearing its peak in the current cycle and has slowed in North America and the UK. However, we believe that we will continue to benefit from our investment in product development, supply chain and distribution in the more challenging market conditions and we are involved in a number of thriving sectors such as aerospace, medicine and oil & gas. Overall growth in demand for laser marking is forecast to continue although sales in North America have declined. We will continue to closely monitor the performance of our businesses as we further implement the Group's strategy.
Martin Temple
Chairman
4 June 2008
GROUP CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
Overall, the year has been one of solid progress, with further success on the achievement of our strategic objectives, namely the capture of a greater share of the growing market for machine tools and laser marking. Underlying revenue increased 8% despite the weakness of the dollar and South African Rand. We continue to increase and strengthen our product offering and have made further advances in the development of our distributor base across our target markets. In addition, we have continued to develop and deepen our relationship with our manufacturing partners, especially in China.
In spite of our heavy investments across several fronts, we have remained cash positive and we are continually evaluating our operational effectiveness to ensure we maximise profitability.
Market Background
There are clear signals that the global market for machine tools is now approaching its peak within the current cycle; growth in consumption remains in the low cost economies of the Far East, especially China, but even this is now starting to moderate. During the year, and for the time being, activity levels remain strong in Western Europe, especially Germany. From a small base, Eastern Europe also continues to grow. However, activity levels have definitely slowed in both the UK and North America. In particular, we have noticed that many smaller customers, albeit busy in terms of current activity, are both reluctant to spend on capital items and are also finding credit availability increasingly difficult. Nevertheless, we are involved in several thriving sectors of the market such as aerospace, medicine and oil & gas.
Within the laser marking market, most regions of the world continue to show good growth. However, our largest market, the USA, has slowed significantly as customers postpone the acquisition of what can still be seen as a discretionary purchase.
Despite political uncertainty, volatility, weakness of the rand and power outages, South Africa continues to invest strongly in its infrastructure which means further opportunities for our business.
Strategic Development
As commented upon in the Chairman's Statement, we continue our strategy of developing a customer focused business concentrating on the North American, UK and Continental European markets and based on our two strategic growth platforms of machine tools and laser marking, supported by our accessories business. Our unique three-pronged approach to selling machine tools is standing us in good stead as the rate of growth in the market appears to be slowing.
We are in the process of finalising a joint venture agreement with our Chinese partner, DMTG, for the sale of their Dalian branded products across Europe.
In North America, we continue to develop our capabilities as a provider of CNC machine tools, enhancing both our product offering and our distributor capabilities.
We have launched the next generation of our highly successful 'Tornado' range of CNC slant bed lathes.
We have continued the development of our unique EFT Raptor lasers which have now gained full acceptance across our key markets.
Overall our investments, in line with our strategy, have positioned our business for further growth during the coming year.
REVIEW OF OPERATIONS
United Kingdom
Machine Tools
Our main manufacturing facility in Heckmondwike has continued to improve its performance both operationally and financially. Output of our high level 'Tornado' slant bed turning centres increased slightly during the year, offset by a reduction in the number of flat bed CNC 'Alpha' lathes. Delivery from China has further improved in terms of both quantity and quality and much of our product range is now in free supply for the first time in several years. At the recent 'MACH' machine tool exhibition, we presented our new, fully in-house developed twin turret, twin spindle 'TT' turning centre. This lathe represents a major step forward in our technology and was extremely well received by both our UK and overseas customers and distributors. Commercial deliveries will begin in the final quarter of this calendar year.
Our UK distribution centre has consolidated its position as one of the country's leading providers of machine tools across the full spectrum. We supply high level turnkey solutions from the likes of Toyoda Mitsui, Fuji and Fanuc through our own mid range Colchester Harrison products to the value range 'Dalian' supplied by our partner DMTG. This three-pronged strategy allows us to sell to all sectors of the market - from multi-million pound turnkey manufacturing cells within the aerospace sector down to single stand-alone machines for small machine tool job shops.
Laser Marking
Another excellent year of progress has seen the extending of our in-house developed 'Raptor' programme, using our unique EFT technology, the launch of our new electronics platform and the initial introduction of our new software package.
By global standards, the UK market for laser markers is relatively small; however, during the last two years we have built a dominant position in the UK and continue to find exciting new markets and applications for our product. Last year, we established several European distributors from our UK base and this year we have seen excellent progress and market penetration in Germany, Poland, Sweden and Ireland. During the year, we established a relationship with Han's Laser, China's largest laser manufacturer. Under the Agreement we will be able to source certain Han's Laser products, both complete systems and sub-assemblies, to enhance our product offering and also reduce our costs. Our exploration of the Chinese market has also led us to believe that certain of our own products can be viably sold into China. We will be launching our activities during the second quarter of this year.
Overall, unit sales grew by 25% during the year and we believe this momentum will be, at least, maintained during the coming year.
Machine Tool Accessories
Strengthened management during the year means that we now look forward to the development of the Pratt Burnerd International (PBI) and Crawford Collets with particular optimism. As we improve our manufacturing capability we more profitably exploit the increasing number of orders we are obtaining for this business. We are outsourcing more of our standard range of smaller chucks and collets which will allow us to concentrate on manufacturing more of the high value specially customised products for industries such as oil and gas, aerospace and automotive.
Gamet Bearings, our specialist high precision taper roller bearing manufacturing facility in Colchester, has had an exceptionally strong year. Improvements to our manufacturing process have allowed us to increase production by about 25% but this is still barely keeping pace with the increase in orders we are receiving quite literally from across the globe.
Germany
Our German operation Parat, based in Stuttgart has developed a strong momentum during the year. Overall sales have grown by 35% and we have seen excellent progress in the sale of our own Colchester-Harrison products. The bi-annual 'EMO' exhibition, the world's largest machine tool show, was held in Hanover in September 2007. For The 600 Group this was the best and biggest ever. In total we had 5 stands, all of which successfully attracted new leads and customers. EMO also saw the official launch of the Dalian brand, a collaboration between DMTG, China's largest machine tool manufacturer, and us. The impressive stand and range of machinery certainly made a major impact on the global machine tool industry. Our own collaboration with DMTG is being cemented through the formation of a 50/50 Joint Venture (JV). Based in Germany, the JV will market 'Dalian' branded products across both eastern and western mainland Europe. The body of this agreement has already been signed, premises identified and the final legal agreement will be signed during the next few weeks. In the meantime, significant distributor and customer interest has been generated and Dalian products are already being sold across Europe through our German operation.
North America
Machine Tools
Against a challenging economic background and a machine tool market which declined in 2007/8, we have seen sales growth in local currency terms. Our improved market penetration is due to the expansion and improvement in our product ranges, both CNC machines and conventional and also the continued growth in our distributor base. Our overall financial performance in the US has been impacted by both lack of product availability and additional rectification costs on imported product. Both of these are expected to improve during the current financial year. In order to further enhance our attractiveness to our customers and distributors, we are investing in new IT systems which will allow us, from the second half of this year to offer online spare parts ordering.
As reported in our January 2008 Interim Management Statement, we disposed of our Canadian distributor business to Semcan Inc. An excellent transition has allowed us to continue to serve the Canadian market, albeit more cost effectively. We have retained our own operation to sell the high value 'Solutions' machines such as Toyoda Mitsui, Fuji and Enshu and see excellent prospects for this business.
We continue to refine and enhance our product range and build up our distributor base and are, therefore, confident that despite the very challenging market environment, we will see improved market penetration and profitability during the coming year.
Laser Marking
Traditionally, the USA has been Electrox's single largest market - globally it is also our largest addressable market. We have substantially enhanced our capability with the establishment of regional sales and application offices. Unfortunately, the weakening US economic climate impacted this business during the second half of the year with many customers postponing purchase decisions on a product that can still be viewed as discretionary. Nevertheless, with our new products now being released, we believe that not only are we well placed from a technology standpoint, but also in terms of competitiveness to make further real gains in the year ahead.
Machine Tool Accessories - PBA
Our Pratt Burnerd Americas (PBA) business has seen an exceptionally good performance during the year. Excellent availability, customer service and quality mean that we continue to make real market share gains in this market. Additionally, the business benefited from a one-off order for the refurbishment of a large OEM plant. The introduction of a 'value' range of products during this year will further broaden our range. The close relationship with PBI in the UK allows PBA to quote and win many high-value customised projects, especially in the booming oil and gas sector.
South Africa
We continue to grow our South African business, which is focused on infrastructure, through our continually expanding product range and excellent levels of customer service. This has been achieved despite ongoing political and economic uncertainty, power outages and a volatile currency. All indicators suggest that this positive situation will continue until at least 2010. The only negative for us is the decline in value of the Rand which, when translated to sterling, reduced the profit contribution.
Australia
This market remains a challenge for us although the business is a small part of our Group. We have enhanced our product offering and continue to rationalise our operations to extract the best possible returns.
Corporate Social Responsibility
The Group remains highly sensitive to its responsibilities to its own employees, the wider community and the environment.
We have recently commissioned a risk survey across all our key facilities. The results of this are currently being analysed by management and any areas or operations not fully complying with the latest guidelines will establish corrective action plans.
Our key operations conform to the ISO9001 Quality Standard. During the coming year, we will evaluate the possibility of moving to the Environmental Quality Standard ISO14001 where appropriate.
Each of our operations is encouraged to play a fully supportive role within its own local community.
Outlook
Despite the overall more challenging economic environment, we started the current year with a healthy order book, including a major aerospace contract, and our order levels have remained reasonable during the first two months of the current year. We believe we will continue to make progress during the coming months, as we benefit from our recent investments in product development, supply chain and distribution and our continuing cost reduction programme. We will also continue to evaluate our portfolio of businesses to ensure that each one is capable of delivering appropriate returns to our shareholders within a reasonable time frame.
Andrew J Dick
Group Chief Executive
4 June 2008
UNAUDITED CONSOLIDATED INCOME STATEMENT
| 52-week period ended 29 March 2008 | 52-week period ended 31 March 2007 Restated | ||||
| Total | Total | ||||
| £000 | £000 | ||||
| Revenue | 78,878 | 75,649 | |||
| Cost of sales | (55,196) | (53,424) | |||
| Gross profit | 23,682 | 22,225 | |||
| Operating income | 884 | 385 | |||
| Operating expenses | (23,218) | (21,491) | |||
| Operating profit before financing income and expense | 1,348 | 1,119 | |||
| Financial income | 11,306 | 10,373 | |||
| Financial expense | (9,042) | (8,561) | |||
| Profit before tax | 3,612 | 2,931 | |||
| Income tax charge | (1,034) | (696) | |||
| Profit for the period from continuing operations | 2,578 | 2,235 | |||
| Post tax loss of discontinued business | (2,332) | (794) | |||
| Total profit for the financial period | 246 | 1,441 | |||
| Attributable to: | |||||
| Equity holders of the parent | 129 | 1,382 | |||
| Minority interest | 117 | 59 | |||
| Profit for the period | 246 | 1,441 | |||
| Basic earnings per share - continuing operations - total | 4.3p 0.2p | 3.8p 2.4p | |||
| Diluted earnings per share - continuing operations - total |
4.2p 0.2p |
3.7p 2.4p |
UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
| 52-week period ended 29 March 2008 | 52-week period ended 31 March 2007 Restated | |||
| £000 | £000 | |||
| Foreign exchange translation differences | 307 | (1,241) | ||
| Net actuarial gains on employee benefit schemes | 8,841 | 5,375 | ||
| Impact of changes to asset limit under IFRIC 14 | (11,430) | (8,170) | ||
| Deferred taxation on above items | 780 | 760 | ||
| Net income recognised directly in equity | (1,502) | (3,276) | ||
| Profit for the period | 246 | 1,441 | ||
| Total recognised income and expense for the period | (1,256) | (1,835) | ||
| Attributable to: | ||||
| Equity holders of the parent | (1,330) | (1,789) | ||
| Minority interest | 74 | (46) | ||
| Total recognised income and expense for the period | (1,256) | (1,835) | ||
| Effect of change in accounting policy | ||||
| Effect of adopting IFRIC 14 (note 1) | (10,899) | |||
| Attributable to: | ||||
| Equity holders of the parent | (10,899) | |||
| Minority interests | - | |||
| (10,899) |
UNAUDITED CONSOLIDATED BALANCE SHEET
| At 29 March 2008 | At 31 March 2007 Restated (note 1) | |||
| £000 | £000 | |||
| Non-current assets | ||||
| Property, plant and equipment | 12,603 | 13,034 | ||
| Intangible assets | 3,018 | 2,433 | ||
| Deferred tax assets | 1,605 | 1,190 | ||
| 17,226 | 16,657 | |||
| Current assets | ||||
| Inventories | 24,421 | 22,307 | ||
| Trade and other receivables | 19,015 | 19,479 | ||
| Cash and cash equivalents | 3,297 | 6,944 | ||
| 46,733 | 48,730 | |||
| Total assets | 63,959 | 65,387 | ||
| Non-current liabilities | ||||
| Employee benefits | (2,965) | (2,915) | ||
| Deferred tax liabilities | (1,479) | (1,702) | ||
| (4,444) | (4,617) | |||
| Current liabilities | ||||
| Trade and other payables | (20,561) | (18,227) | ||
| Income tax payable | (100) | (80) | ||
| Provisions | (370) | (417) | ||
| Loans and other borrowings | (131) | (2,547) | ||
| (21,162) | (21,271) | |||
| Total liabilities | (25,606) | (25,888) | ||
| Net assets | 38,353 | 39,499 | ||
| Shareholders' equity | ||||
| Called-up share capital | 14,308 | 14,287 | ||
| Share premium account | 13,766 | 13,747 | ||
| Revaluation reserve | 2,765 | 3,148 | ||
| Capital redemption reserve | 2,500 | 2,500 | ||
| Translation reserve | 113 | (172) | ||
| Retained earnings | 4,480 | 5,642 | ||
| Total equity attributable to equity holders of the parent | 37,932 | 39,152 | ||
| Minority interest | 421 | 347 | ||
| Total equity | 38,353 | 39,499 |
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
| 52-week period ended 29 March 2008 | 52-week period ended 31 March 2007 | |||
| £000 | £000 | |||
| Cash flows from operating activities | ||||
| Profit for the period | 246 | 1,441 | ||
| Adjustments for: | ||||
| Amortisation of development expenditure | 286 | 120 | ||
| Depreciation | 1,033 | 1,218 | ||
| Impairment of goodwill | - | 24 | ||
| Net financial income | (2,264) | (1,812) | ||
| (Loss)/Profit on disposal of plant and equipment | (173) | 40 | ||
| Equity share option expense | 70 | 14 | ||
| Income tax expense | 81 | 696 | ||
| Operating cash flow before changes in working capital and provisions | (721) | 1,741 | ||
| Decrease/(increase) in trade and other receivables | 699 | (4,602) | ||
| Increase in inventories | (1,923) | (2,433) | ||
| Increase in trade and other payables | 1,885 | 4,650 | ||
| Increase in employee benefits | 151 | 30 | ||
| Cash generated from the operations | 91 | (614) | ||
| Interest paid | (491) | (278) | ||
| Income tax received/(paid) | 92 | (8) | ||
| Net cash flows from operating activities | (308) | (900) | ||
| Cash flows from investing activities | ||||
| Interest received | 106 | 157 | ||
| Proceeds from sale of plant and equipment | 1,402 | 236 | ||
| Purchase of plant and equipment | (1,715) | (680) | ||
| Development expenditure capitalised | (876) | (548) | ||
| Net cash flows from investing activities | (1,083) | (835) | ||
| Cash flows from financing activities | ||||
| Proceeds from the issue of ordinary shares | 40 | 142 | ||
| (Repayment)/proceeds from external borrowing | (833) | 151 | ||
| Proceeds from disposal of non current asset investments | - | 64 | ||
| Net cash flows from financing activities | (793) | 357 | ||
| Net decrease in cash and cash equivalents | (2,184) | (1,378) | ||
| Cash and cash equivalents at the beginning of the period | 5,331 | 6,718 | ||
| Effect of exchange rate fluctuations on cash held | 150 | (9) | ||
| Cash and cash equivalents at the end of the period | 3,297 | 5,331 |
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 2008 are for the 52-week period ended 29 March 2008. The results for 2007 are for the 52-week period ended 31 March 2007.
The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU (IFRS).
In the current financial year, the Group has adopted IFRS 7 "Financial Instruments: Disclosures" for the first time. As IFRS 7 is a disclosure standard, there is no impact of that change in accounting policy on the financial results presented for the year ended 31 March 2007. Full details of the change will be disclosed in our annual report for the year ended 29 March 2008.
The Group has adopted IFRIC 14 in its financial statements and has restated the prior year. As a result of applying IFRIC 14, the pension surplus of £27.0m at 29 March 2008 is not recognised as an asset, because the Group does not have an unconditional right to the use of this surplus. In accordance with IFRIC 14, an initial adjustment of £5.2m has been made to retained earnings at 1 April 2006.
The preparation of financial statements in conformity with 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.
2. Other Operating Income / Operating Expenses
| 2008 | 2007 | |
| £000 | £000 | |
| Other Operating Income | 884 | 385 |
| Operating Expenses : | ||
| Administration expenses | 16,412 | 15,714 |
| Distribution costs | 6,806 | 5,777 |
| Total operating expenses | 23,218 | 21,491 |
Included within Other Operating Income is £391,000 of profit on disposal on surplus land.
Administration expenses include one-off charges of £300,000 associated with the EMO exhibition in Germany, £200,000 relating to bid defence costs and £100,000 relating to the introduction of a new management incentive scheme.
3. Financial income and expense
| 2008 £000 | 2007 £000 | |
| Interest income | 71 | 157 |
| Expected return on defined benefit pension scheme assets | 11,235 | 10,216 |
| Financial income | 11,306 | 10,373 |
| Interest expense | (289) | (271) |
| Interest on defined benefit pension scheme obligations | (8,753) | (8,290) |
| Financial expense | (9,042) | (8,561) |
4. Cash and cash equivalents
| 2008 £000 | 2007 £000 | |||
| Cash at bank | 3,111 | 6,762 | ||
| Short-term deposits | 186 | 182 | ||
| Cash and cash equivalents per balance sheet | 3,297 | 6,944 | ||
| Bank overdrafts | - | (1,613) | ||
| Cash and cash equivalents per cash flow statement | 3,297 | 5,331 | ||
5. Reconciliation of net cash flow to net funds
| 2008 | 2007 | ||
| £000 | £000 | ||
| Decrease in cash and cash equivalents | (2,184) | (1,378) | |
| Decrease/ (increase) in debt and finance leases | 833 | (151) | |
| Decrease in net funds from cash flows | (1,351) | (1,529) | |
| Net funds at beginning of period | 4,397 | 5,848 | |
| Exchange effects on net funds | 120 | 78 | |
| Net funds at end of period | 3,166 | 4,397 |
6. Statutory accounts
The financial information set out above does not constitute the group's statutory accounts for the period ended 29 March 2008 or the period ended 31 March 2007 but is derived from those accounts. Statutory accounts for 2007 have been delivered to the registrar of companies, whereas those for 2008 will be delivered following the company's Annual General Meeting. The 2008 statutory accounts have not been finalised but this preliminary announcement has been prepared by the Directors based on the results and position which they expect will be reflected in the statutory accounts. The auditors have reported on the 2007 accounts; their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
7. 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, 600 House, Landmark Court, Revie Road, Leeds LS11 8JT.