25 Nov 2008 07:00
25 November 2008
THE 600 GROUP PLC ("600 Group", the "Company" or the "Group")
INTERIM RESULTS FOR THE 26 WEEKS TO 27 SEPTEMBER 2008
CHAIRMAN'S STATEMENT
Market Conditions
In the first half of the current financial year, our Continental European and South African markets experienced reasonable growth. However, the UK and North American markets are showing continued weakness, reflecting the current economic and financial difficulties in those markets. Order intake activity in the first half of the year continued at a similar overall level to last year although our outstanding order book is lower than at this point last year and we expect a further contraction in global markets.
Results
Overall sales for the half year increased by 10% to £45m (2007: £41m). After adjustment for the benefit of a major aerospace contract undertaken during the first half, underlying sales were marginally lower year on year. Gross profit margins over the period reduced to 29% (2007: 31%) although these were impacted by the effect of the aerospace contract. Excluding this contract, the gross profit margin would have been at the same level as the prior half year. Other operating income included the benefit of £0.3m in respect of the sale and leaseback of our Colchester and Halifax properties. Net operating expenses increased by £0.6m, as compared to the first half of 2007, as a result of our investment in product design and development at that time. Operating profit for the period, before exceptional costs of £1.2m, was £0.1m (2007: £0.6m).
The exceptional costs related to the Group's previously announced programme of 70 redundancies (£0.9m) and the closure of our sales operations in the Czech Republic, Singapore and Malaysia (£0.3m). Sales activity in these areas has been transferred to other 600 Group facilities.
The Group's operating loss after exceptional items but before net financial income and tax was £1.1m (2007: operating profit of £0.6m). It was anticipated in the 2008 Annual Report that net financial income would reduce significantly due to the UK Pension Scheme moving to de-risk its assets. As a consequence net financial income in the half year reduced to £0.1m (2007: £1.1m).
This has resulted in a loss before tax of £1.0m (2007: profit before tax of £1.6m). Costs of £0.4m relating to the closure of the Canadian operation were incurred in the period. The basic and diluted earnings per share for continuing operations was (1.7)p (2007: 1.9p) and (0.8)p (2007: (0.3)p) for discontinued operations.
As anticipated in our 2008 AGM Statement, net cash balances reduced during the year to date, in part due to supply chain issues that resulted in an increased inventory of machines and components sourced from the Far East. This issue has subsequently been addressed and controls in this area have been tightened. As at 27 September 2008, the net cash balance was £1.1m.
Strategy Update
Our strategy remains to develop 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 technologies business. We recognise that the demand for our products is being impacted by the current global financial and economic conditions. As a consequence, we are increasing our focus on short term operational and working capital improvements.
Following the appointment of David Norman as Group Chief Executive, a detailed review of the Group's operations has been performed and actions arising from the initial findings of this review are being implemented. A further redundancy programme in our UK and North American operations has commenced that will reduce the Group's workforce by approximately 45 employees at a cost of £1.1m. In the UK we have closed our head office in Leeds and transferred the function to our main manufacturing plant in West Yorkshire. In North America we have closed four sales offices at a cost of £0.2m and consolidated our sales and marketing activities for that market in our distribution facility in Michigan.
An update on the progress of the implementation of further actions arising from this review will be provided at the beginning of next year.
Dividend
We have previously stated that future dividend payments will be directly related to our results. The Board does not consider it is appropriate to pay a dividend at the present time.
People
On 7 August 2008, the Company announced the appointment of David Norman as Group Chief Executive. David has extensive experience of managing international manufacturing operations and the Board believes that his appointment will greatly assist in the implementation of the Company's strategy and in the maximisation of shareholder value.
Principal Risks and Uncertainties
The principal risks and uncertainties remain as outlined in our 2008 Annual Report.
Related Party Transactions
No related party transactions took place in the first half that would materially affect the financial position of the Group. Related party transactions for the year ended 29 March 2008 are as described in our 2008 Annual Report.
Outlook
Whilst the Company is not dependent upon any particular territory or market, it is not fully insulated from the global economic uncertainties that are impacting demand within the whole of the engineering industry. Subsequent to the half year-end the Group has experienced a reduction in the volume of orders for its machine tools although, as commented above, we entered the period with a similar level of orders to last year. We will continue to implement the Company's strategy in all its major markets whilst at the same time undertaking the actions identified to improve our operational efficiencies, supply chain and customer service.
Enquiries:
| The 600 Group PLC | Telephone: 01924 415000 |
| David Norman, Group Chief Executive | |
| Martyn Wakeman, Group Finance Director | |
| Altium Capital Limited | Telephone: 020 7484 4040 |
| Ben Thorne | |
| Tim Richardson | |
| Hudson Sandler | Telephone: 020 7796 4133 |
| Nick Lyon | |
| Wendy Baker |
Notes to Editors:
The 600 Group PLC is an international group, manufacturing and marketing machine tools, machine tool accessories, lasers and other engineering products.
The Group operates from some 20 locations worldwide and sells its products around the world. Its international marketing and distribution network handles both Group products and those of other manufacturers.
Website: www.600group.com
Consolidated income statement (unaudited)
| 26 weeks to 27.09.08 £000 | 26 weeks to 29.09.07 £'000 | 52 weeks to 29.03.08 £000 | |
| Revenue | 44,565 | 40,507 | 78,878 |
| Cost of sales | (31,663) | (27,921) | (55,196) |
| Gross profit | 12,902 | 12,586 | 23,682 |
| Other operating income | 433 | 637 | 884 |
| Net operating expenses | (13,266) | (12,668) | (23,218) |
|
| |||
| Operating profit before exceptional items | 69 | 555 | 1,348 |
| Exceptional items (note 3) | (1,200) | - | - |
| Operating (loss)/profit | (1,131) | 555 | 1,348 |
| Financial income | 5,343 | 5,589 | 11,306 |
| Financial expense | (5,195) | (4,518) | (9,042) |
| (Loss)/profit before tax | (983) | 1,626 | 3,612 |
| Income tax charge (note 4) | (9) | (480) | (1,034) |
| (Loss)/profit for the period from continuing operations | (992) | 1,146 | 2,578 |
| Post tax loss of discontinued business | (364) | (181) | (2,332) |
| Total (loss)/profit for the financial period | (1,356) | 965 | 246 |
| Attributable to: | |||
| Equity holders of the parent | (1,429) | 930 | 129 |
| Minority interest | 73 | 35 | 117 |
| (Loss)/profit for the period | (1,356) | 965 | 246 |
| Earnings per share - basic and diluted (note 5) | |||
| - continuing operations | (1.7p) | 1.9p | 4.3p |
| - total | (2.5p) | 1.6p | 0.2p |
Consolidated statement of recognised income and expense (unaudited)
| 26 weeks to 27.09.08 £000 | 26 weeks to 29.09.07 £'000 | 52 weeks to 29.03.08 £000 | |
| Foreign exchange translation differences | 285 | 377 | 307 |
| Net actuarial (losses)/gains on employee benefit schemes | (390) | (620) | 8,841 |
| Impact of changes to defined benefit asset limit | (280) | (610) | (11,430) |
| Deferred tax on above items | - | 449 | 780 |
| Net expense recognised directly in equity | (385) | (404) | (1,502) |
| (Loss)/profit for the period | (1,356) | 965 | 246 |
| Total recognised income and expense for the period | (1,741) | 561 | (1,256) |
| Attributable to: | |||
| Equity holders of the parent | (1,847) | 522 | (1,330) |
| Minority interest | 106 | 39 | 74 |
| Total recognised (expense)/income for the period | (1,741) | 561 | (1,256) |
Summarised consolidated balance sheet (unaudited)
| At 27.09.08 £000 | At 29.03.08 £000 | At 29.09.07 £000 | |
| Non-current assets | |||
| Property, plant and equipment | 11,041 | 12,603 | 12,784 |
| Intangible assets | 3,067 | 3,018 | 2,704 |
| Deferred tax assets | 1,605 | 1,605 | 316 |
| 15,713 | 17,226 | 15,804 | |
| Current assets | |||
| Inventory | 26,137 | 24,421 | 25,557 |
| Trade and other receivables | 18,972 | 19,015 | 18,873 |
| Cash and cash equivalents | 2,370 | 3,297 | 5,989 |
| 47,479 | 46,733 | 50,419 | |
| Total assets | 63,192 | 63,959 | 66,223 |
| Non-current liabilities | |||
| Employee benefits | (3,256) | (2,965) | (2,844) |
| Deferred tax liability | (1,479) | (1,479) | (851) |
| (4,735) | (4,444) | (3,695) | |
| Current liabilities | |||
| Trade and other payables | (19,839) | (20,561) | (18,199) |
| Income tax payable | (92) | (100) | (93) |
| Provisions | (285) | (370) | (490) |
| Loans and other borrowings | (1,296) | (131) | (3,606) |
| (21,512) | (21,162) | (22,388) | |
| Total liabilities | (26,247) | (25,606) | (26,083) |
| Net assets | 36,945 | 38,353 | 40,140 |
| Shareholders' equity | |||
| Called-up share capital | 14,308 | 14,308 | 14,307 |
| Share premium account | 13,766 | 13,766 | 13,765 |
| Revaluation reserve | 2,045 | 2,765 | 3,166 |
| Capital redemption reserve | 2,500 | 2,500 | 2,500 |
| Translation reserve | 356 | 113 | 141 |
| Retained earnings | 3,443 | 4,480 | 5,875 |
| Total equity attributable to equity holders of the parent | 36,418 | 37,932 | 39,754 |
| Minority interest | 527 | 421 | 386 |
| Total equity | 36,945 | 38,353 | 40,140 |
Summarised consolidated cash flow statement (unaudited)
| 26 weeks to 27.09.08 £000 | 26 weeks to 29.09.07 £000 | 52 weeks to 29.03.08 £000 | |
| Cash flows from operating activities | |||
| (Loss)/profit for the period | (1,356) | 965 | 246 |
| Adjustments for: | |||
| Amortisation of development expenditure | 250 | 87 | 286 |
| Depreciation | 505 | 532 | 1,033 |
| Net financial income | (148) | (1,071) | (2,264) |
| Profit on disposal of plant and equipment | (329) | (391) | (173) |
| Equity share option expense | 55 | 43 | 70 |
| Income tax expense | 9 | 480 | 81 |
| Operating (loss)/profit before changes in working capital and provisions | (1,014) | 645 | (721) |
| Decrease in trade and other receivables | 396 | 781 | 699 |
| Increase in inventories | (1,180) | (3,188) | (2,506) |
| (Decrease)/increase in trade and other payables | (1,341) | (91) | 1,885 |
| (Increase)/decrease in employee benefits | (327) | 41 | 151 |
| Cash generated from the operations | (3,466) | (1,812) | (492) |
| Interest paid | (245) | (165) | (491) |
| Income tax (paid)/received | (15) | 11 | 92 |
| Net cash from operating activities | (3,726) | (1,966) | (891) |
| Cash flows from investing activities | |||
| Interest received | 393 | 41 | 106 |
| Proceeds from sale of plant and equipment | 2,032 | 704 | 810 |
| Purchase of plant and equipment | (579) | (486) | (1,715) |
| Development expenditure capitalised | (274) | (371) | (876) |
| Disposal of discontinued operation | - | - | 1,175 |
| Net cash from investing activities | 1,572 | (112) | (500) |
| Cash flows from financing activities | |||
| Proceeds from the issue of ordinary shares | - | 38 | 40 |
| Proceeds/(repayment) of external borrowing | 2 | 871 | (833) |
| Net cash from financing activities | 2 | 909 | (793) |
| Net decrease in cash and cash equivalents | (2,152) | (1,169) | (2,184) |
| Cash and cash equivalents at beginning of period | 3,297 | 5,331 | 5,331 |
| Effect of exchange rate fluctuations on cash held | 58 | 35 | 150 |
| Cash and cash equivalents at end of the period | 1,203 | 4,197 | 3,297 |
Notes to the financial information
1. Basis of preparation
The 600 Group PLC (the "Company") 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 Consolidated Interim Financial Statements of the Company for the 26-week period ended 27 September 2008 comprise the Company and its subsidiaries (together referred to as the "Group").
This half-yearly financial report is the condensed consolidated financial information of the Group for the 26 weeks ended 27 September 2008. It has been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority and the requirements of IAS 34 Interim Financial Reporting as adopted by the European Union.
The half-yearly financial report 2008/09 was approved by the Board of Directors on 12 November 2008.
The half-yearly financial report 2008/09 does not constitute financial statements as defined in section 240 of the Companies Act 1985 and does not include all of the information and disclosures required for full annual financial statements. It should be read in conjunction with the Annual report and financial statements for the 52-week period ended 29 March 2008, copies of which can be obtained from the Company's registered office or website.
The financial information contained in this half-yearly report in respect of the 52 weeks ended 29 March 2008 has been extracted from the Annual report and financial statements 2008 which have been filed with the Registrar of Companies. The auditors report on these financial statements was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.
The half-yearly results for the current and comparative period are neither audited nor reviewed by the Company's auditors.
2. Significant accounting policies
The condensed consolidated financial statements in this half-yearly financial report for the 26 weeks ended 27 September 2008 have been prepared using accounting policies and methods of computation consistent with those set out in The 600 Group PLC's Annual report and financial statements for the 52-week period ended 29 March 2008.
In preparing the condensed financial statements, management are required to make accounting assumptions and estimates. The assumptions and estimation methods were consistent with those applied to the Annual report and financial statements for the 52-week period ended 29 March 2008.
3. Segment analysis
Geographical Segments
| 26 weeks to 27.09.08 £000 | 26 weeks to 29.09.07 £'000 | 52 weeks to 29.03.08 £000 | |
| Revenue based on geographical origin | |||
| United Kingdom | 23,956 | 23,491 | 46,490 |
| Other European Countries | 6,268 | 4,303 | 8,521 |
| North America | 8,235 | 6,899 | 17,102 |
| Africa and Australasia | 9,553 | 10,041 | 13,996 |
| Inter-segment revenue | (3,447) | (4,227) | (7,231) |
| Revenue from continuing operations | 44,565 | 40,507 | 78,878 |
| Revenue from discontinued operations | - | - | 2,971 |
| Revenue generated in the period | 44,565 | 40,507 | 81,849 |
| 26 weeks to 27.09.08 £000 | 26 weeks to 29.09.07 £'000 | 52 weeks to 29.03.08 £000 | |
| Revenue based on geographical destination | |||
| United Kingdom | 12,607 | 10,171 | 21,375 |
| Other European Countries | 10,961 | 9,453 | 18,457 |
| North America | 10,118 | 12,129 | 23,898 |
| Africa and Australasia | 9,857 | 7,343 | 14,890 |
| Central America | 58 | - | 281 |
| Middle East | 57 | - | 370 |
| Far East | 907 | 1,411 | 2,578 |
| Revenue generated in the period | 44,565 | 40,507 | 81,849 |
| 26 weeks to 27.09.08 £000 | 26 weeks to 29.09.07 £'000 | 52 weeks to 29.03.08 £000 | |
| Operating profit | |||
| United Kingdom | (962) | 360 | 456 |
| Other European Countries | (73) | (121) | (407) |
| North America | (371) | 161 | 969 |
| Africa and Australasia | 275 | 155 | 330 |
| Operating (loss)/profit from continuing operations | (1,131) | 555 | 1,348 |
| Operating loss from discontinued operations | (364) | (181) | (3,285) |
| Operating (loss)/profit in the period | (1,495) | 374 | (1,937) |
Exceptional items of £1.2m (2007: £nil) were incurred in the first half of the year. As explained in the Chairman's Statement £0.9m relates to redundancy costs and £0.3m to the closure of overseas sales operations.
4. Taxation
The charge for corporation tax comprises UK taxation £nil (2007: £nil), overseas taxation charge of £9,000 (2007: charge £6,000) and deferred taxation charge of £nil (2007: charge £474,000).
5. Earnings per share
The basic earnings per share of (2.5p) (2007: 1.6p) is based on the loss for the period of £1,429,000 (2007: profit £930,000) and the weighted average number of shares outstanding of 57,220,418 (2007: 57,183,559). In determining the diluted earnings per share of (2.5p) (2007: 1.6p), the earnings for the period attributable to shareholders was divided by the weighted average number of shares in the period plus 800,197 of potentially dilutive shares on option.
6. Interim report
Copies of the interim report will be sent to all shareholders and will be available to members of the public from the Company's registered office at 600 House, Landmark Court, Revie Road, Leeds, LS11 8JT. The 600 Group PLC is registered in England and Wales No. 196730.
7. Responsibility Statement
We confirm that to the best of our knowledge:
the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
the interim management report includes a fair review of the information required by:
DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
M J Temple, Chairman
D Norman, Group Chief Executive
M G D Wakeman, Group Finance Director
J A Kitchen, Non-Executive Director
S Rutherford, Non-Executive Director