SIXH.L Regulatory News (SIXH)

21 Jun 2007 07:01

600 Group PLC21 June 2007 21 June 2007 THE 600 GROUP PLC PRELIMINARY RESULTS FOR THE PERIOD TO 31 March 2007 HIGHLIGHTS - The impact of the strategic review undertaken last year is reflected in the significant improvement in the results for the year - Strong order book for delivery in 2007/8 - Sales Revenue up 11% from £71m to £79m - Operating profit before net financing income and tax of £0.6m compared to a loss of £3.3m in the previous year - Profit before tax of £2.4m compared with loss of £1.7m last year - Costs incurred of £0.3m from discontinued business - Strong balance sheet maintained including net funds of £4.4m CHAIRMAN'S STATEMENT We have continued the implementation of our strategic review and this has beenreflected in a further improvement in our performance during the second half ofthe year. New product launches, increased sales and marketing coverage and animproved supply chain performance have further contributed to the positiveprogress made by the Group. Market conditions Our UK, North American and South African markets continued to improve during theyear. As in the previous year both our European and the Far Eastern marketsshowed more limited growth. Results Order intake activity across the Group has continued at an encouraging levelduring the period. Improvements in the performance of our supply chain haveresulted in an increase in revenue and the level of our outstanding order bookhas been maintained as the benefits of the investment in sales and marketing arebeing realised. Sales revenue increased by 11% to £79m with the most significant increasescoming from our United Kingdom businesses. The underlying level of net operating expenses increased by £1.8m following thecontinued investment in sales, marketing and distribution throughout the Group. The operating profit before net finance income and tax of £0.6m has improvedfrom a loss of £3.3m last year. Net finance income, principally due to theimpact of the Group's pension scheme, increased to £1.8m from £1.6m last yearresulting in the profit before tax improving to £2.4m compared to a loss of£1.7m last year. We continued to implement our strategic review during the year and incurredcosts of £0.3m in relation to discontinued businesses. Net funds decreased by £1.4m from £5.8m to £4.4m. Net cash outflow fromoperating activities was £0.9m and net cash outflow from investing activities,principally capital and development expenditure, was £0.8m. Dividend As I stated in our last Annual Report and Accounts dividend payments will now berelated directly to our operating results. Although we have made good progressduring the year the board does not yet consider that the results allow thepayment of a dividend. People In December 2006 John Fussey retired as Group Finance Director and left theCompany after 13 years service to the Group and I should like to record ourthanks for his contribution during this period and our best wishes for thefuture. He was succeeded by Martyn Wakeman who joined the Board at the beginningof October 2006. In April 2007 the Board appointed Martin Temple CBE as a non-executive directorand he will succeed me as non-executive Chairman of the Group when I retire as adirector at the end of July this year. Tony Sweeten will also retire as adirector at the same time, but will continue to be available to assist the Boardin a consultancy capacity until 31 December 2008. On behalf of the board, I should like to record our continued appreciation ofthe efforts of all our employees during the year. Outlook The growth in demand for machine tools and laser marking is forecast to continueand, in the absence of any changes in our main markets, the medium term outlookfor the Group will be dependent upon the implementation of our strategic plansand further improvements in our machine tool supply chain. Following the improvements we made to our machine tool selling organisations inthe UK and North America we have strengthened our sales and marketing team incontinental Europe. Our laser marking business has benefited from the increasedinvestment in new product development and the new USA sales team is having apositive impact. As a result, I am confident that the Group will continue to maintain the growthand improvement in performance trends seen during the last year. Michael Wright Chairman 21 June 2007 Enquiries:The 600 Group PLCAndrew Dick, Group Chief ExecutiveMartyn Wakeman, Group Finance Director Telephone: 0113 277 6100 Hudson SandlerNick Lyon Telephone: 020 7796 4133 GROUP CHIEF EXECUTIVE'S REVIEW OF OPERATIONS Our key objective remains the capture of a greater share of the growthopportunities that exist in the large and growing markets for machine tools andlaser marking. We will do this by focusing more closely on the needs of ourcustomers in our core areas of operation. By increasing the volume of machinesand services through our existing and developing distribution networks we willcontinue to improve our profitability. The Group's strong financial position,global brands and good design and product development capabilities, provide uswith a solid platform from which to achieve this objective. Market background The global market for machine tools enjoyed another year of expansion, its fifthin succession. In particular, growth in the sector continues to be predominantlydriven by the rapid increase of manufacturing in China and other low-costeconomies, primarily in the Far East. During the year we have seen furthermigration of international procurement programmes to these territories, whichhas had a continuing impact on our industry and addressable markets. The global market for laser marking continues to grow at a rate of between 5%and 10% per annum, driven by the greater need for traceability,anti-counterfeiting measures and the use of more environmentally friendlymarking processes. Among our major markets the UK and USA have generally continued the positivetrends seen at the end of last year. The UK machine tool market, whilecontinuing the overall trend of outsourcing to lower cost countries, hasbenefited from a favourable investment climate. The USA has grown strongly overthe last three years and we envisage that this growth will continue albeit at aslower and more inconsistent rate than we have experienced recently. Inparticular, we believe our new product ranges and strengthened distributionnetwork will contribute to increased sales. The Western European market was morerobust last year and we anticipate good levels of activity through into 2008.Germany saw an improvement in activity towards the end of the year as thebenefits of a broader customer base were realised. The major countries inEastern Europe continue to experience steady growth. South Africa has once againseen substantial growth as the country continues to invest in infrastructurenationwide, partly in preparation for the 2010 World Cup. Strategic development The strategic review undertaken in 2006 clarified the Group's objectives for theremainder of the decade. It confirmed that the Group has robust finances, verystrong brands and that one of our key strengths lies in the design anddevelopment of machine tools and laser marking systems. It also highlighted thatwe had significant scope for improvement in both marketing and customer service.Our major target markets remain the UK, Central and Eastern Europe and NorthAmerica for both machine tools and laser markers. We will not, however, neglectopportunities available to us in other parts of the world. During the course of this year we have put the building blocks in place todevelop our core strengths so that we are well placed to grow our business inthe global market. We have significantly strengthened our teams in terms ofsales and marketing, quality and customer service. In October 2006 we merged our Colchester and Harrison brands of CNC lathes. Ithad been apparent for some time that there was duplication of costs in themarketing of these brands and that they were often competing for the samecustomer. Under the new Colchester Harrison brand we have the opportunity todevelop a wide range of high quality, competitive CNC machine tools. Theintroduction of the new brand has been well received by our customers and thetransition has proceeded smoothly. We continue to broaden and deepen our relationships with China and many of ourmachine tools are now manufactured there under our full control. Additionally,we believe that there will be significant opportunities for us to sell ourpartner's Chinese machine tools through our world-wide distribution network. Review of operations United Kingdom Machine tools Our UK machine tools business, based at our main sales and distribution centrein Loughborough, has been transformed into one of the UK's leading providers. Weare now offering a much wider but more clearly focused range of brandedproducts. As already mentioned, we have merged our Colchester and Harrison brands so thatwe can now offer customers a range of products clearly branded ColchesterHarrison, promoted by a single sales force and with a significant reduction instock duplication. Thus our Tornado, Alpha and Storm ranges are now sold througha single distribution channel allowing Colchester Harrison to be seen as acredible supplier of CNC machines throughout the UK and indeed world-wide. 600 Solutions offers customers access to a high quality range of machine toolsand turnkey solutions including Fanuc, Fuji and Toyoda-Mitsui. Since the yearend and in line with broadening our income streams and improving our after salesoffering to our customers, we announced (1 May 2007) the acquisition of the UKparts and service business of Toyoda-Mitsui for a cash consideration of£390,000. The Group can now provide a total support package to customers ofToyoda-Mitsui's machine tools. Also in respect of Toyoda-Mitsui we successfullycompleted the installation of an advanced manufacturing cell for Airbus UK. Ourstrong relationship with Fuji has resulted in 600 Group becoming its distributorthroughout most of Europe with the sales and support being spearheaded from theUK. To further increase our market share preparations are now underway for us tostart the marketing of machine tools from our Chinese partner through a focused600 DMTG Division with the brand name Dalian. Within our lathes manufacturing facility at Heckmondwike we have continued tofocus on improving our quality and customer service. The supply situation fromour Chinese partner improves both in terms of the quality and volume ofmachines. We do still have significant backlogs of orders across certain machineranges but we anticipate that this situation will be addressed during the courseof this year. Laser marking The past year has been one of excellent development for Electrox, our Letchworthbased laser marking manufacturing business. During the year we successfullylaunched our in-house developed 'Raptor' range of laser markers. Theseessentially harness the efficiency and reliability of the newly developed fibrelaser together with many of the necessary attributes of the more traditionallaser sources. Major progress has been made on the development of our new electronics platformas well as on the fully redesigned and upgraded software package. We believethat our product platform is now industry leading in the laser marking area.Further new products are on course for development this year which will keep usat the forefront of the technology. In the UK market itself we have seen exceptional growth albeit from a low base.From the UK we have also established a series of independent distributorsthroughout Europe and we have seen early signs of success there. Overall unit sales volumes grew by 30% last year but this will not be fullyreflected in turnover as both costs and prices continue to decline. Germany During the latter part of the year we strengthened our management team and thishas started to have a positive impact on our operations. Germany is our secondlargest addressable market behind the United States and it is important that weimprove our position here in order to capture a greater share of the market andalso to give us added credibility as we challenge for further business in thegrowing markets of Central and Eastern Europe. During the year we have been laying the foundations for increasing the sales ofour core Colchester Harrison brands in addition to planning the roll-out of thedistribution of machine tools on behalf of our Chinese partner DMTG. As in theUK, we are creating a separate business under the 600 DMTG banner with theDalian brand name. Furthermore, we have started our marketing effort for theFuji brand of high quality production lathes. The world's largest machine tool exhibition 'EMO' takes place in Hanover inSeptember of this year and will serve as both the showcase for our productcapabilities and launch a major initiative to increase business in this andsurrounding markets. North America Machine tools In North America, which is our largest addressable market, we have been workinghard to develop aggressively an appropriate product strategy by sourcing our ownbranded CNC machines both from the UK and the Far East. In parallel we have beenbuilding our distributor network to ensure maximum coverage throughout the USAand Canada. We continue to invest in the conventional, i.e. non CNC machine toolmarket, through the exploitation of our Clausing brand and we are improving thecompetitiveness of our brands in this area through additional sourcing from theFar East. Although the market is declining slightly it continues to remainattractive for the Group. Following the year-end we announced (2 April 2007) the sale of our regionaldistributor, Erickson Machine Tools, to its management for a consideration equalto the net assets of the business. We then entered into an agreement with thatbusiness to distribute our full range of machine tools in the states of Iowa andNebraska. This disposal is in line with our strategy of focusing on the nationaldistribution of machine tools across the whole of North America. In Canada we have had major success within the automotive market acting asselling agent for Fuji machines. Overall, within North America the market has been buoyant over the last year. Wehave seen some cooling off during recent months but believe that our new productranges together with strengthened distribution will allow us to continue to growsuccessfully during the coming year. Laser marking We believe that North America offers us the greatest opportunity to grow ourlaser marking business. Accordingly we have invested significantly during thesecond half of the year to establish a wholly owned, professional regional salesnetwork supported by high quality applications and service engineers.Additionally, we have established a number of industry focused representativesto support us in those areas where we do not have our own regional sales office.The organisation structure was largely complete by the end of the financial yearand early indications from the beginning of this year are especiallyencouraging. South Africa Our diversified South African business has a strong portfolio of high qualityagencies across a broad range of sectors, which enables it to continue tobenefit from the country's significant investment in infrastructure. Many of theproducts that the company distributes, such as the Fassi truck-mounted crane,the Usimeca waste compactors and Altec aerial platforms for power supplies, arelinked to these infrastructure projects. We continue to see significant growth opportunities in this market and believethat our South African business with its network of distribution agencies iswell placed to capitalise on these opportunities. Australia/New Zealand The Australian market remains challenging and with its proximity to Asia themanufacturing environment is tough. Our product portfolio gives us only limitedaccess to the booming extraction industries. To ensure the best use of ourresources we have switched our New Zealand operation to a third-partydistributor who has good coverage of the market. Through upgrading our productportfolio and more aggressive marketing we believe there are still opportunitiesto grow this business. Machine Tool Accessories Pratt Burnerd International, our market-leading producer of workholding systems,made good progress during the year with a strengthened working relationshipbetween the UK and USA businesses resulting in improved growth and improvedprofitability. In the UK we have made investments in the manufacturing processto ensure that we can deliver additional specialist products, especially to thegrowing US market. Pratt Burnerd America continues to develop well, aided bydemand for the Crawford Collets range of products. Gamet Bearings, which produces super high precision taper roller bearings formachine tools and similar applications, has maintained a strong order bookduring the year benefiting from sales to the emerging markets, particularlyChina and India. This is a specialist business with a high reputation in themarket and one of a limited number of companies that can supply these products.The number of orders that the Group has received reflects this and as a resultthe Group intends to make additional investment in Gamet Bearings in order tosatisfy the order book going forward. Corporate social responsibility The Group is fully aware of the social and environmental responsibilities andeach part of the business is tasked to identify opportunities in this regard.Our laser marking business reduces environmental impact as it replaces much lessecologically friendly forms of marking. During the last year we have invested to reduce our overall energy consumptionand our energy bills are now lower when compared to the previous 12 months. Oursales and service engineers are progressively switching to diesel cars. Each operation is encouraged to play a supportive role within its own localenvironment. Outlook The Group is starting to see the benefits of the investment in sales, marketingand its supply chains. We anticipate another year of good progress with solidunderlying growth although turnover will be impacted by the disposal of ourErickson business and the non-repeating of the exceptional £4.5m Airbus order. We will continue to invest in the design and development of new products as wellas identify further sourcing opportunities to expand the range of products weoffer. This enhanced product portfolio will be marketed through a distributionnetwork which we will continue to strengthen. We will ensure that these productsmeet our customers' requirements especially in terms of quality, service anddependability. Increased volumes of products leveraged through our global distribution networkwill enable the Group to drive sustainable profit increases in future. Andrew J Dick Group Chief Executive 21 June 2007 AUDITED CONSOLIDATED INCOME STATEMENT 52-week period ended 31 March 2007 52-week period ended 1 April 2006 Before Restructuring Total restructuring (see note 3) Total £000 £000 £000 £000Revenue 78,666 70,993 - 70,993Cost of sales (55,754) (51,924) (387) (52,311)Gross profit 22,912 19,069 (387) 18,682Net operating expenses (22,297) (20,479) (1,489) (21,968) Operating profit/(loss) 615 (1,410) (1,876) (3,286)before financing income and expense Financial income 10,373 10,141 - 10,141Financial expense (8,561) (8,574) - (8,574) Profit/(loss) before tax 2,427 157 (1,876) (1,719)Income tax charge (696) (429) - (429) Profit/(loss) for the period 1,731 (272) (1,876) (2,148)from continuing operationsPost tax loss of discontinued business (290) - - - Total profit /(loss) for the 1,441 (272) (1,876) (2,148)financial period Attributable to:Equity holders of the parent 1,382 (320) (1,876) (2,196) Minority interest 59 48 - 48 Profit/(loss) for the period 1,441 (272) (1,876) (2,148) Basic earnings per share 2.4p (3.9)p Diluted earnings per share 2.4p (3.9)p AUDITED CONSOLIDATED BALANCE SHEET At 31 March At 1 April 2006 2007 £000 £000Non-current assetsProperty, plant and equipment 13,034 14,203Intangible assets 2,433 2,072Investments - 84Employee benefits 15,570 7,400Deferred tax assets 315 303 31,352 24,062Current assetsInventories 22,307 21,147Trade and other receivables 19,479 15,740Cash and cash equivalents 6,944 7,657 48,730 44,544 Total assets 80,082 68,606Non-current liabilitiesEmployee benefits (2,915) (2,281)Deferred tax liabilities (5,498) (3,003) (8,413) (5,284)Current liabilitiesTrade and other payables (18,272) (14,633)Income tax payable (80) (134)Provisions (372) (388)Loans and other borrowings (2,547) (1,809) (21,271) (16,964) Total liabilities (29,684) (22,248) Net assets 50,398 46,358Shareholders' equityCalled-up share capital 14,287 14,212Share premium account 13,747 13,680Revaluation reserve 3,148 3,397Capital redemption reserve 2,500 2,500Translation reserve (172) 843Retained earnings 16,541 11,333Total equity attributable to equity holders of 50,051 45,965the parentMinority interest 347 393Total equity 50,398 46,358 AUDITED CONSOLIDATED CASH FLOW STATEMENT 52-week 52-week period period ended 1 April 2006 ended 31 March 2007 £000 £000Cash flows from operating activities Profit/(loss) for the period 1,441 (2,148) Adjustments for: Amortisation of development expenditure 120 67Depreciation 1,218 1,640Impairment of goodwill 24 1,254Net financial income (1,812) (1,567)Profit on disposal of plant and equipment 40 (26)Equity share option expense 14 31Income tax expense 696 429Operating cash flow before changes in working 1,741 (320)capital and provisions(Increase)/decrease in trade and other (4,602) 838receivables(Increase)/decrease in inventories (2,433) 2,903Increase/(decrease) in trade and other 4,650 (42)payablesDecrease/(increase) in employee benefits 30 (1,006)Cash generated from the operations (614) 2,373Interest paid (278) (170)Income tax paid (8) (66)Net cash flows from operating activities (900) 2,137 Cash flows from investing activitiesInterest received 157 199Proceeds from sale of plant and equipment 236 168Purchase of plant and equipment (680) (520)Development expenditure capitalised (548) (402)Net cash flows from investing activities (835) (555) Cash flows from financing activitiesProceeds from the issue of ordinary shares 142 -Proceeds/(repayment) from external borrowing 151 (305)Equity dividends paid - (2,274)Reduction in non current asset investments 64 -Reduction in current asset investments - 580Net cash flows from financing activities 357 (1,999) Net decrease in cash and cash equivalents (1,378) (417)Cash and cash equivalents at the beginning of 6,718 7,127the periodEffect of exchange rate fluctuations on cash (9) 8heldCash and cash equivalents at the end of the 5,331 6,718period NOTES 1. Basis of preparation The 600 Group PLC is a public limited company incorporated and domiciled inEngland and Wales. The Company's ordinary shares are traded on the London StockExchange. The Group consolidated financial statements incorporate accounts, prepared tothe Saturday nearest to the Group's accounting reference date of 31 March, ofthe Company and its subsidiary undertakings (together referred to as "theGroup"). The results for 2007 are for the 52-week period ended 31 March 2007.The results for 2006 are for the 52-week period ended 1 April 2006. The Group financial statements have been prepared and approved by the directorsin accordance with International Financial Reporting Standards as adopted by theEU (IFRS). The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparentfrom 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 theestimate is revised if the revision affects only that period, or in the periodof the revision and future periods if the revision affects both current andfuture periods. 2. Audited consolidated statement of recognised income and expense 52-week period 52-week period ended 31 March ended 1 April 2006 2007 £000 £000 Foreign exchange translation differences (1,241) 893Net actuarial gains on employee benefit 5,375 9,244schemesRevaluation of properties - 3,397Deferred taxation on above items (1,691) (3,010)Net income recognised directly in equity 2,443 10,524Profit/(loss) for the period 1,441 (2,148)Total recognised income and expense for 3,884 8,376the period Attributable to:Equity holders of the parent 3,930 8,295Minority interest (46) 81Total recognised income and expense for 3,884 8,376the period 3. Net operating expenses 2007 2006 £000 £000Net operating expenses:Administration expenses before: 16,905 14,823- reorganisation - 235- goodwill impairment - 1,254Total net administration expenses 16,905 16,312Distribution costs 5,777 6,154Other operating income (385) (498)Total net operating expenses 22,297 21,968 In 2006 the total restructuring costs consisted of the reorganisation andgoodwill impairment amounts shown above, plus a £387,000 stock provision chargedthrough cost of sales in the income statement. They relate mainly to therefocusing of the Group's French operation and the extension of its globalsourcing programme as part of the strategic review. 4. Financial income and expense 2007 2006 £000 £000Interest income 157 199Expected return on defined benefit pension scheme assets 10,216 9,942Financial income 10,373 10,141 Interest expense (271) (170)Interest on defined benefit pension scheme obligations (8,290) (8,404)Financial expense (8,561) (8,574) 5. Cash and cash equivalents 2007 2006 £000 £000Cash at bank 6,762 7,406Short-term deposits 182 251Cash and cash equivalents per balance sheet 6,944 7,657Bank overdrafts (1,613) (939)Cash and cash equivalents per cash flow statement 5,331 6,718 6. Reconciliation of net cash flow to net funds 2007 2006 £000 £000Decrease in cash and cash equivalents (1,378) (417)Reduction in current asset investments - (580)Decrease/(increase) in debt and finance leases (151) 305Decrease in net funds from cash flows (1,529) (692)Net funds at beginning of period 5,848 6,617Exchange effects on net funds 78 (77)Net funds at end of period 4,397 5,848 7. Statutory accounts The financial information set out above does not constitute the company'sstatutory accounts for the period ended 31 March 2007 or the period ended 1April 2006 but is derived from those accounts. Statutory accounts for 2006 havebeen delivered to the registrar of companies, whereas those for 2007 will bedelivered following the company's Annual General Meeting. The auditors havereported on the 2006 accounts; their report was unqualified and did not containa statement under section 237(2) or (3) of the Companies Act 1985. 8. Annual report and accounts The annual report will be posted to all shareholders in due course and will beavailable on request from the Secretary, The 600 Group PLC, 600 House, LandmarkCourt, Revie Road, Leeds LS11 8JT. This information is provided by RNS The company news service from the London Stock Exchange