10 Aug 2012 12:00
10 August 2012
600 Group Plc announces result of strategic review of European operations
The Board of 600 Group Plc ("the Group" or "the Company"), the AIM listed global supplier of machine tools and laser marking equipment, today announces the outcome of a strategic review of the operations of its machine tools and precision engineered components business in the UK and Europe ("MTUK").
Closure of manufacturing subsidiary in Poland ("FMT")
Since its inception in November 2010, FMT has not met the anticipated level of output, and has presented operational challenges as a result of escalating costs in the material supply chain and employment. As a result, FMT has incurred significant trading losses and absorbed working capital from Group resources.
Following the appointment of Nigel Rogers as Chief Executive in March 2012, the Group board commenced a strategic review of the operations of MTUK, which has now concluded that it is unlikely that the required improvements in the operational performance of FMT can be achieved within an acceptable timescale. The Group board has decided to withdraw the provision of ongoing financial support to FMT, and consequently the directors of FMT have determined that they will initiate insolvency proceedings for FMT in Poland.
The cessation of operations at FMT will be dealt with in the Group financial statements for the year ended 31 March 2013. The Group board does not anticipate significant cash costs arising as a result of the closure.
MTUK will revert to a distribution model similar to that adopted successfully in our other overseas operations, which currently generate more than 60% of worldwide revenues using well proven suppliers. Management are confident that this will lead to significant improvements in the service offered to key customers and distribution partners across Europe, and optimise the use of Group resources.
Nigel Rogers, Chief Executive, said,
"The strategic review has clearly identified areas where we need to rationalise our operations and reduce costs in order to improve the performance of the Group. This will protect the brand heritage, and maintain the reputation that the Group has for quality and reliability.
We have listened carefully to the considered views of our key distributors across Europe over the last few weeks, and customer demand for our products remains strong. Our priority now is to improve lead times and delivery performance so as to drive increased revenues."
Restructuring of MTUK and Head Office costs
The strategic review has also identified a need to restructure the MTUK and Group cost base. An initial outlay of approximately £0.2m is expected to generate annual cost savings of £0.6m. In addition, Group head office functions will relocate from Leeds to Heckmondwike, releasing the freehold office building in Leeds with a current net book value of £0.4m for disposal in due course. These restructuring costs, and the associated savings, will be accounted for in the Group results for the year ending 31 March 2013.
Reduction in Company net bank debt
Since March 2012 the net bank borrowings of the Company have reduced by approximately £1.9m to approximately £3.3m, largely as a result of the recently announced divestment of non-core assets.
We are working with our bankers and other debenture holders to review our existing facilities in the light of these divestments and the outcome of the strategic review, all of whom continue to provide ongoing financial support to the Company.
We are confident that the implementation of the strategic review will result in significant improvements in the trading performance and future prospects of MTUK and the Group, and will provide a further update in due course.
More information on the group can be viewed at: www.600group.com
Enquiries:
The 600 Group PLC 01924 415 000
Nigel Rogers, Chief Executive
Neil Carrick, Finance Director
Cadogan PR Limited 0207 930 7006
Alex Walters/ Lavinia Fiamma 07771 713608
finnCap 020 7220 0500
Ed Frisby / Ben Thompson (corporate finance)
Tony Quirke / Victoria Bates (sales & broking)
Notes for editors:
600 Group Plc is listed on AIM (AIM: SIXH) and has core activities in machine tools, precision engineered components and laser marking equipment.
MTUK compromises the manufacture and distribution of conventional and CNC lathes sold under the brand names Colchester and Harrison, workholding equipment branded Pratt Burnerd, and Gamet bearings. Conventional lathes are manufactured to Group designs by established vendor partners, and until now, at the group site in Tarnow, Poland acquired in November 2010 ("FMT"). CNC lathes branded Tornado are manufactured at the group site in Heckmondwike, West Yorkshire. Chucks and bearings are also made in the UK, at the same site, and at Colchester, Essex, respectively.
By contrast, the Group's machine tool businesses in North America and Australia, which generate more than half of revenues worldwide, are set up using a distribution model. Machine tools for these businesses are built according to Group design by vendor partners, mainly located in Asia. Facilities for the adaptation of standard machines, the fitting of accessories, and the provision of spares and maintenance services are located in the home markets of these operations, in closer proximity to customers.
600 Group Plc also provides high precision laser marking equipment under the brand name Electrox. Electrox operates from a freehold site in Letchworth and has direct sales presence in the UK and North America and a worldwide network of distribution partners.
Previous Group operations in South Africa, which were identified as non-core to activities in machine tools, precision engineered components and laser marking, have recently been divested. The sale to Eqstra Holdings Limited for net cash proceeds of £1.54m was announced on 13 July 2012.
The Group also announced the sale of surplus freehold property at Shepshed, Leicestershire for net cash proceeds of £1.2m on 3 July 2012.