SIXH.L Regulatory News (SIXH)

22 Jun 2006 07:01

600 Group PLC22 June 2006 22 June 2006 THE 600 GROUP PLC PRELIMINARY RESULTS FOR THE PERIOD TO 1 APRIL 2006 HIGHLIGHTS - Order intake up 15% and strong order book for delivery in second half 2006/7 - Revenue up 6% to £71m - Underlying profit before tax £0.2m compared with loss of £0.3m last year - Strategic review now being implemented, resulting in £1.9m restructuring charge in the year - Resulting loss before tax £1.7m compared to £0.1m profit before tax last year - Net cash inflow from operating activities of £2.1m - Strong balance sheet maintained incorporating net funds of £5.8m CHAIRMAN'S STATEMENT Our continuing focus on organic growth during the year resulted in significantnew product launches, increased sales and marketing activity and improvingsupply chain performance. These developments, coupled with improvements in ourmarkets, generated growth in both order intake and revenue. We continued toinvest the benefits of this growth into the further development of our coreproduct and market segments. Market conditions Our UK and North American markets improved steadily during the year, recoveringfrom the downturn experienced during the second half of last year. OtherEuropean markets showed more limited growth, whereas those in the Far Eastcontinued to be very buoyant. Results The results for this year have been prepared under the new InternationalFinancial Reporting Standards (IFRS) for the first time. Therefore, they includerestated data for the results published for the previous year under UK GAAP. The Group's underlying order intake increased by 15% with increases in all ourmajor geographic areas. Our outstanding order book also increased significantly,but is still below the optimal level for most of our business units. A notableachievement was the receipt of major contracts worth £5.1m from the aerospaceindustry for delivery in the second half of the current year. Revenue increased by 6% to £71m with the most significant increases coming fromour North American businesses. Increased expenditure on sales and marketing throughout the Group led tounderlying net operating expenses (before restructuring and disposal of surplusassets) increasing by £0.9m. Total net operating expenses includingrestructuring and disposal of surplus assets increased by £2.8m. During the year, we commenced the implementation of a strategic reviewthroughout the Group. This included the extension of our global sourcingprogramme and the refocusing of our French operation. The costs of thisrestructuring were £1.9m, predominantly non-cash. Although underlying profit before tax improved from a loss of £0.3m to a profitof £0.2m, the loss before tax was £1.7m compared with a profit of £0.1m lastyear. Net funds decreased by £0.8m from £6.6m to £5.8m. Net cash inflow from operatingactivities was £2.1m, net cash outflow from investing activities was £0.6m anddividends absorbed £2.3m. Dividend As I stated in our last Annual Report and Accounts, with the introduction of thenew accounting standards, dividend payments will now be related directly to ouroperating results. The board does not yet consider that the results allow thepayment of a dividend. People Andrew Dick joined the board as Group Managing Director from the start of theyear, succeeding Tony Sweeten as Group Chief Executive from 1 January 2006. I ampleased to confirm that Tony has agreed to stay on the board as a non-executivedirector, providing the board with the benefit of his extensive experience ofthe international machine tool market. On behalf of the board, I should like to record our continued appreciation ofthe efforts of all our employees during the year. Outlook Capacity utilisation levels in western markets continued to show the improvingtrend seen last year, indicating continued longer-term growth in demand formachine tools. However, as I have highlighted in previous statements, short-termexpenditure levels in the machine tool market are determined by the impact ofeconomic and political events on customer confidence levels and therefore tendto be very erratic. We will continue to focus increasingly on organic growth, concentrating ourefforts on the expansion of our core machine tool and laser marking businesses. With our improved strategic focus and strengthened management teams, I amconfident that we are now in a robust position to maintain the improvingperformance trends seen during the second half of last year. Michael Wright Chairman 22 June 2006 Enquiries:The 600 Group PLCAndrew Dick, Group Chief ExecutiveJohn Fussey, Group Finance Director Telephone: 0113 277 6100 Hudson SandlerNick Lyon Telephone: 020 7796 4133 GROUP CHIEF EXECUTIVE'S REVIEW OF OPERATIONS Our key objective is to capture a greater share of the growth opportunities thatexist in the large and growing markets for machine tools and laser marking byfocusing more closely on the needs of customers in our core areas of operation.The Group's robust finances, strong brands, good design capabilities and productdevelopment skills provide us with a solid platform from which to achieve thisobjective. Market background The global market for machine tools enjoyed its fourth successive year ofgrowth, but it was driven principally by the rapid expansion of manufacturing inChina and other low-cost economies, primarily in Asia. The migration ofinternational procurement programmes to these territories has had a continuingimpact on our industry and on our addressable markets. Among our major markets, the US demonstrated reasonably solid growth during theyear and the UK continued to recover from the poor second half of last year,despite the effect of the closure of Rover's Longbridge plant. Demand in Germanyalso began to improve during the final quarter for the first time in severalyears while the major countries of Eastern Europe remained relatively buoyant. South Africa continued to make good progress during the year as its communitiesbenefited from substantial infrastructure investment. Australia and New Zealandremained flat. Strategic review Following my appointment as Group Chief Executive on 1 January 2006, we embarkedon a major strategic review designed to clarify our objectives for the remainderof this decade. It is clear that we have some very strong brands, that our coreskills lie in the design and development of machine tools and laser markers andthat we have significant scope for improvement in both marketing and customerservice. Our strategic growth platform in machine tools is based around a central coreactivity supplying stand-alone, medium-tech CNC machines under our ownColchester and Harrison brands. This core is supported by two furtherbusinesses, one focused on conventional machines, centred around the Clausingbrand and the other concentrating on higher-tech, high quality machine tools,sold together with a total manufacturing solution, centred around our agenciesfor Fuji, Toyoda Mitsui, Fanuc and Fidia machines. Our strategic growth platform in laser marking is focused on fully exploitingthe potential of the new Electrox product portfolio, concentrating our marketingefforts on key industrial sectors for laser marking and on low to mediumcomplexity work handling systems. We have also identified a number of areas where there is significant potentialto reduce our costs. Although the Group has long experience of working withstrategic partners such as Fanuc, we have not been at the forefront ofdeveloping satisfactory sourcing arrangements with low-cost overseas suppliers.We are already working closely with our existing Chinese partner on lathemanufacturing and we have also recently opened a representative office in Chinato create a more professional framework for the development of additionalsourcing partnerships, notably for our North American operations. Review of operations Machine tools The UK machine tool businesses had a difficult year as a result of the loss ofconfidence and overcapacity among suppliers to the UK automotive sector. Also,supply shortfalls from our Chinese manufacturing partner constrained our abilityto fulfil orders at 600 Lathes, especially during the first half of the year. Our new product development programme continued with the successful launches ofthe new Harrison Alpha XS and XT ranges and the 5-axis T8MSY flagship member ofthe Colchester Tornado family. Improving demand in the final quarter enabled us to end the year on a positivenote with an exceptionally strong order book, including a £4.4m order placed byAirbus UK with 600 Centre for four Mitsui Seiki machining centres coupled to aFastems materials handling system and a £0.7m order from BAe Systems for twoMitsui Seiki machining centres. Both of these orders are for delivery in thesecond half of the current year. Our USA business also suffered some impact from shortages of imported productbut benefited from the generally robust market and saw an upturn in order levelstowards the end of the year. We expect to achieve margin improvements byrationalising our USA manufacturing operations and outsourcing the production ofsaws, drills and drill presses. Although we made progress in Canada, orderlevels did not fully reflect the high levels of market activity and enquiriesthat we received. We have recruited a new president for our North Americanoperations who will be charged with reorganising and re-energising our sellingfunction and distributor base to ensure that we realise the full potential ofthese markets. Our business in Germany began to see an upturn in its order book during thesecond half while our distributors in Central and Eastern Europe continued toperform well. Increased sales were achieved particularly of Tornado and Alphalathes and new distribution channels were opened in the Russian Federation andBaltic States. Performance in Australasia was unsatisfactory and action is being taken toresolve the situation. Laser marking During the year we undertook an increased programme of new product development.This included the completion of the Cobra V series of markers and theintroduction of the Razor CO2 product. Most importantly, we introduced the newScorpion fibre lasers that offer significant advantages to our customers inextended product life, lower maintenance costs and increased flexibility,reliability and efficiency. This was coupled with the development of a newMaxBox workstation designed to make the Scorpion range accessible to low volumefirst-time users. Customer reaction to these innovative products has beenextremely positive and we achieved particularly strong sales in the UK duringthe second half. The expansion and improvement of our product range places Electrox among theindustry leaders in this sector and in the current year we aim to capitalise onthis strong position through the recruitment of additional sales personnel andan increase in marketing and selling activity, particularly in the USA. Machine tool accessories In the UK, the Pratt Burnerd business, specialising in work-holding systems, wasaffected by the general flatness of the domestic market and the disappointingvolume of lathes despatched by 600 Lathes, though there was an encouragingpick-up in orders in the final quarter. Pratt Burnerd America continued todevelop well, achieving significant growth in sales of the Crawford Colletsrange to USA customers. Gamet Bearings, which produces super high precision taper roller bearings formachine tools and similar applications, maintained a satisfactory order bookwith gains in sales to emerging markets, particularly in the Far East, more thanoffsetting reductions in business from the Western economies. South Africa Our diversified South African business has had to overcome the loss of itsimportant agency for Timberjack forestry equipment in April 2005 resulting fromTimberjack's takeover by John Deere. Although the introduction of the newTerex-Fuchs forestry range proceeded more slowly than planned, valuable newagencies were secured for Usimeca waste compactors and Altec aerial platforms.The Fassi truck-mounted crane business continued to enjoy excellent growth. Witha strong portfolio of high quality agencies across a range of sectors, thebusiness is now well placed to make progress as South Africa continues to investsubstantially in its nationwide infrastructure. As reported in last year's Annual Report, we sold 25.1% of the business to aSouth African individual at the beginning of the year. This not onlystrengthened our management team but has also significantly improved our BlackEconomic Empowerment rating, enabling us to maximise our business fromgovernment and local authority controlled organisations. Outlook The fundamentals for the Group are sound. We have clear objectives and effectiveplatforms for growth in our two core businesses. Our strengths include goodproduct ranges, allied with strong design and development skills, recognised andrespected brands and robust finances. As our current global market shares aresmall, the markets in which we operate offer substantial opportunities and theeconomic prospects in most of our core territories appear reasonablyencouraging. With product development continuing to progress well, our futuregrowth plans will be built on the development and effective marketing of newproducts that meet our customers' requirements and on achieving high levels ofquality, dependability and service. Andrew J Dick Group Chief Executive 22 June 2006 AUDITED CONSOLIDATED INCOME STATEMENT 52-week period ended 1 April 2006 52-week period ended 2 April 2005 Before Restructuring Total Before Disposal Total restructuring (see note 3) disposal of of surplus surplus fixed fixed assets assets £000 £000 £000 £000 £000 £000 Revenue 70,993 - 70,993 67,210 - 67,210Cost of sales (51,924) (387) (52,311) (48,815) - (48,815)Gross profit 19,069 (387) 18,682 18,395 - 18,395Net operating expenses (20,479) (1,489) (21,968) (19,599) 392 (19,207)Operating loss before financing (1,410) (1,876) (3,286) (1,204) 392 (812)income and expenseFinancial income 10,141 - 10,141 9,575 - 9,575Financial expense (8,574) - (8,574) (8,702) - (8,702)Profit/(loss) before tax 157 (1,876) (1,719) (331) 392 61Income tax charge (429) - (429) (107) - (107)Loss for the period (272) (1,876) (2,148) (438) 392 (46) Attributable to:Equity holders of the parent (320) (1,876) (2,196) (438) 392 (46)Minority interest 48 - 48 - - -Loss for the period (272) (1,876) (2,148) (438) 392 (46) Basic earnings per share (3.9)p (0.1)pDiluted earnings per share (3.9)p (0.1)p AUDITED CONSOLIDATED BALANCE SHEET At 1 April At 2 April 2006 2005 £000 £000Non-current assetsProperty, plant and equipment 14,203 11,916Intangible assets 2,072 2,960Investments 84 84Employee benefits 7,400 -Deferred tax assets 303 676 24,062 15,636Current assetsInventories 21,147 23,213Trade and other receivables 15,740 15,785Investments - 580Cash and cash equivalents 7,657 7,751 44,544 47,329 Total assets 68,606 62,965 Non-current liabilitiesEmployee benefits (2,281) (6,484)Deferred tax liabilities (3,003) - (5,284) (6,484)Current liabilitiesTrade and other payables (14,633) (14,231)Income tax payable (134) (200)Provisions (388) (423)Loans and other borrowings (1,809) (1,714) (16,964) (16,568) Total liabilities (22,248) (23,052) Net assets 46,358 39,913Shareholders' equityCalled-up share capital 14,212 14,212Share premium account 13,680 13,680Revaluation reserve 3,397 -Capital redemption reserve 2,500 2,500Translation reserve 843 (17)Retained earnings 11,333 9,538Total equity attributable to equity holders of the parent 45,965 39,913Minority interest 393 -Total equity 46,358 39,913 AUDITED CONSOLIDATED CASH FLOW STATEMENT 52-week period 52-week period ended 1 April ended 2 April 2006 2005 £000 £000Cash flows from operating activitiesLoss for the period (2,148) (46)Adjustments for:Amortisation of development expenditure 67 -Depreciation 1,640 1,808Impairment of goodwill 1,254 -Net financial income (1,567) (873)Profit on disposal of plant and equipment (26) (430)Equity share option expense 31 38Income tax expense 429 107Operating cash flow before changes in working capital and provisions (320) 604Decrease in trade and other receivables 838 604Decrease/(increase) in inventories 2,903 (2,905)(Decrease)/increase in trade and other payables (42) 1,614(Increase)/decrease in employee benefits (1,006) 88Cash generated from the operations 2,373 5Interest paid (170) (184)Income tax (paid)/repaid (66) 44Net cash flows from operating activities 2,137 (135) Cash flows from investing activitiesInterest received 199 368Proceeds from sale of plant and equipment 168 506Purchase of plant and equipment (520) (641)Development expenditure capitalised (402) (218)Net cash flows from investing activities (555) 15 Cash flows from financing activitiesProceeds from the issue of ordinary shares - 11(Repayment)/proceeds from external borrowing (305) 772Equity dividends paid (2,274) (3,127)Reduction in current asset investments 580 582Net cash flows from financing activities (1,999) (1,762) Net decrease in cash and cash equivalents (417) (1,882)Cash and cash equivalents at the beginning of the period 7,127 9,010Effect of exchange rate fluctuations on cash held 8 (1)Cash and cash equivalents at the end of the period 6,718 7,127 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 "the Group"). The results for 2006 are for the 52-week period ended 1 April 2006. Theresults for 2005 are for the 52-week period ended 2 April 2005. The Group financial statements have been prepared and approved by the directorsin accordance with International Financial Reporting Standards as adopted by theEU (IFRS). These results represent the first annual financial statements the Group hasprepared in accordance with its accounting policies under IFRS and thecomparatives for 2005 have been restated from UK GAAP to comply with IFRS. Forthe purpose of the accounts, the date of transition to IFRS is 3 April 2004. The rules for first time adoption of IFRS are set out in IFRS 1 "First timeadoption of international financial reporting standards". In general, a companyis required to determine its IFRS accounting policies and apply theseretrospectively to determine its opening balance sheet under IFRS. The standardallows a number of exceptions to this general principle to assist companies asthey change to reporting under IFRS. The Group has taken advantage of thefollowing exemptions: • business combinations that took place prior to the date of transition have not been restated • at the date of transition, previous UK GAAP valuations have been used as deemed cost for properties • all cumulative actuarial gains and losses on defined benefit schemes have been recognised in equity at the date of transition • all cumulative translation differences that existed at the date of transition are assumed to be zero. 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 52-week period ended period ended 1 April 2006 2 April 2005 £000 £000 Foreign exchange translation differences 893 (17)Net actuarial gains on employee benefit schemes 9,244 7,561Revaluation of properties 3,397 -Deferred taxation on above items (3,010) 543Net income recognised directly in equity 10,524 8,087Loss for the period (2,148) (46)Total recognised income and expense for the period 8,376 8,041 Attributable to:Equity holders of the parent 8,295 8,041Minority interest 81 -Total recognised income and expense for the period 8,376 8,041 3. Net operating expenses 2006 2005 £000 £000Net operating expenses:Administration expenses before: 14,823 14,159- profit on disposal of surplus fixed assets - (392)- reorganisation 235 -- goodwill impairment 1,254 -Total net administration expenses 16,312 13,767Distribution costs 6,154 5,920Other operating income (498) (480)Total net operating expenses 21,968 19,207 Total restructuring costs consist of the reorganisation and goodwill impairmentamounts shown above, plus a £387,000 stock provision charged through cost ofsales in the income statement. They relate mainly to the refocusing of theGroup's French operation and the extension of its global sourcing programme aspart of the strategic review. Profit on sale of fixed assets of £430,000 in the prior period includes £392,000relating to the sale of surplus plant and machinery. This has been disclosed asa separate item on the face of the income statement, leaving £38,000 as profiton sale of other fixed assets. 4. Financial income and expense 2006 2005 £000 £000Interest income 199 328Expected return on defined benefit pension scheme assets 9,942 9,247Financial income 10,141 9,575 Interest expense (170) (184)Interest on defined benefit pension scheme obligations (8,404) (8,518)Financial expense (8,574) (8,702) 5. Cash and cash equivalents 2006 2005 £000 £000Cash at bank 7,406 6,225Short-term deposits 251 1,526Cash and cash equivalents per balance sheet 7,657 7,751Bank overdrafts (939) (624)Cash and cash equivalents per cash flow statement 6,718 7,127 6. Reconciliation of net cash flow to net funds 2006 2005 £000 £000Decrease in cash and cash equivalents (417) (1,882)Reduction in current asset investments (580) (582)Decrease/(increase) in debt and finance leases 305 (772)Decrease in net funds from cash flows (692) (3,236)New finance leases - (53)Decrease in net funds (692) (3,289)Net funds at beginning of period 6,617 9,902Exchange effects on net funds (77) 4Net funds at end of period 5,848 6,617 7. Statutory accounts The financial information set out above does not constitute the company'sstatutory accounts for the period ended 1 April 2006 or the period ended 2 April2005 but is derived from those accounts. Statutory accounts for 2005 have beendelivered to the registrar of companies, whereas those for 2006 will bedelivered following the company's Annual General Meeting. The auditors havereported on the 2005 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