Final Results

RNS Number : 5691K

600 Group PLC

26 June 2014

 

26 June 2014

The 600 Group PLC

 Full Year Results for the year ended 29 March 2014

The 600 Group PLC, the AIM listed machine tools and laser marking company (AIM: SIXH), today announces its full year results for the year ended 29 March 2014.   This is the first full year of normalised trading following the implementation of a strategic review during 2012.  Whilst market conditions began to improve in the second half, they were less favourable in the early part of the financial year than had been anticipated by most industry commentators, and growth has been dependent upon increases in market share. Order intake increased by 13.7% during the year and the Board considers prospects for further organic growth to be positive. 

CORPORATE AND OPERATIONAL HIGHLIGHTS

·    Increased market share in US and Europe despite challenging trading environment

·    Further improved service to key distribution and end-user customers

·    Delivered substantial improvements in operating margin through increased efficiency and throughput

·    Undertook significant product re-engineering and launch of new product ranges

·    Achieved growth in order intake and new business wins

·    Proposal at forthcoming AGM to restore distributable reserves

·    Strategic acquisitions under evaluation

FINANCIAL HIGHLIGHTS

·    Group profit before tax* £1.97m (2013: £0.51m)

·    Underlying earnings per share* of 1.90p (2013: 0.59p)

·    Revenues of £41.71m (2013: £41.79m)

·    Order intake increased by 13.7% to £42.47m (2013: £37.37m)

·    Gross margin* increased by 150 basis points to 33.2% (2013: 31.7%)

·    Group net operating margin* increased to 5.6% (2013: 2.3%)

·    Group net indebtedness of £5.31m (2013: £5.41m), gearing 23.5% (2013: 25.0%)

*Denotes from continuing activities, before pension credit interest, amortisation of shareholder loan costs, special items and share based payment costs

Commenting today, Paul Dupee, Chairman of The 600 Group PLC said:

"The further strengthening of our market position and product offering in each of our key business segments has delivered much improved underlying earnings.  Order intake has demonstrated increased momentum with quarter on quarter growth throughout the year, and current order intake is ahead of the corresponding period last year.

The board considers the prospects for further organic growth to be positive, whilst also evaluating opportunities to accelerate the development of group activities through carefully selected acquisitions."

SUMMARY OF FINANCIAL RESULTS	FY14 £m	FY13^ £m
Revenues	41.71	41.79
Operating profit*	2.35	0.97
Bank and other interest	(0.38)	(0.46)
Profit before taxation*	1.97	0.51
Non-bank finance income (net)	0.69	0.50
Special/discontinued items (net)	(0.19)	0.40
Profit before taxation	2.47	1.41
Taxation (charge)/credit	(0.62)	0.65
Total profit for the year	1.85	2.06
Earnings per share Underlying basis*                           Total for the year	1.90p 2.19p	0.59p 2.75p

*Denotes from continuing activities, before pension credit interest, amortisation of shareholder loan costs, special items and share based payment costs

^ Prior year figures have been restated to reflect changes in accounting for interest on pension surplus under IAS 19(revised) 'Employee Benefits (2011)'and related deferred tax movements.

More Information on the group can be viewed at: www.600group.com

Enquiries:
The 600 Group PLC	Tel: [phone]
Nigel Rogers, Chief Executive
Neil Carrick, Finance Director
Cadogan PR Limited	Tel: [phone]
Alex Walters	Tel: [phone]
FinnCap
Julian Blunt / Ben Thompson	Tel: [phone]
Spark Advisory Partners
Miriam Greenwood / Sean Wyndham-Quin	Tel: [phone]

Chairman's statement

I am pleased to report much improved underlying earnings for the year ended 29 March 2014, further strengthening of our market position and product offering in each of our key business segments, and progress towards the implementation of a programme of accelerating growth of the Group's businesses by acquisition.

Strategy

Management aims to develop the Group's key strengths in machine tools and precision engineered components, and laser marking equipment.  In each of these activities, Group businesses have strong products and brands, significant market share, diverse geographical spread, efficient manufacturing and supply chains, and reliable distribution partners.

Financial Overview

Revenue from continuing operations was virtually unchanged at £41.71m (2013: £41.79m).  Current year revenue would have increased by 0.7% to £42.18m at constant rates of exchange prevailing in the previous financial year.

Net operating profit from continuing operations (before special items and share based payment charge) increased by 141% to £2.35m (2013: £0.97m).

The charge for taxation in the year was £0.62m, representing an effective tax rate of 25% of profit before taxation.  In the prior year, a net credit of £1.75m was recognised, arising on the recognition of deferred taxation recoverable in the US.

After taking account of interest, pensions, taxation, discontinued activities, special items and share based payment charge, the Group profit for the financial year was £1.85m (2013: £2.06m).

Underlying earnings (from continuing operations before special items, share based payment charge, pensions interest and shareholder loan amortisation) amounted to 1.90 pence per share (2013: 0.59p) and total earnings were 2.19 pence per share (2013: 2.75p).

At the end of the financial year, group net indebtedness stood at £5.31m (2013: £5.41m), and gearing was 23.5% (2013: 25.0%).  The group had financial headroom on existing borrowing facilities of £2.72m and was in full compliance with all financial covenants.

Dividends

The board currently consider that the retention of earnings for redeployment in the business continues to be the most appropriate use of available financial resources in the short term, and accordingly do not recommend the payment of any dividend in respect of the current financial year.

A resolution will be put to shareholders at the forthcoming Annual General Meeting to apply to the Courts for a reorganisation of the Group's capital structure to facilitate the distribution of a proportion of profits should these circumstances alter in future.

Corporate Activity

On 11 September 2013, we announced that the Company had received an approach from Qingdao D&D Investment Group Co. Ltd ("D&D") that may or may not lead to a cash offer being made for the Company.  The board engaged in extensive discussions with the management and principal shareholder of D&D to determine whether D&D were in a position to either confirm such an offer at a level likely to be acceptable to shareholders, or complete the purchase of all or part of the business and assets of the Group at an acceptable price.

On 12 February 2014, a further announcement was made confirming that D&D had failed to make progress and accordingly the directors of the Company had terminated these discussions.  Throughout this process, every care was taken to avoid management from becoming distracted from the effective operation of Group businesses.  Much of the negotiation and due diligence process was managed in house, and accordingly abortive deal costs were contained to an aggregate of £0.13m which are dealt with under Special Items during the year.

Inevitably, Group senior management resource which would otherwise have been engaged in the identification and negotiation of suitable acquisition opportunities was redeployed to manage the possible sale process throughout the second half of the financial year.  This important activity recommenced on termination of discussions with D&D.

Corporate Social Responsibility

Maintaining the highest ethical and professional standards and accepting social responsibility is fundamental to the way we operate throughout The 600 Group PLC. We strive to run our businesses with honesty, integrity and transparency at all levels.

The development of our people is a core value throughout the Group and we see it as our duty to be a responsible employer. We are committed to the creation of training opportunities to support our employees in reaching their full potential.  The Group operates a global policy on equality and we are committed to providing a working environment with a culture of respect towards the diversity of our people. We are committed to offering equal opportunities to all people without discrimination as to race, sex, nationality, ethnic or national origin, language, age, marital status, sexual orientation, religion or disability. 

A comprehensive health and safety policy is in place to ensure a safe working environment at all times. The health and safety policy also demonstrates our additional responsibility to customers, suppliers and contractors and we maintain communication of the policy at all levels throughout the Company. We encourage two-way and open lines of communication throughout the Group and are committed to continuous dialogue with local and global stakeholders to create trust, opportunity and long term sustainable value.

On behalf of the Board I would like to thank all our employees for their ongoing support, commitment and dedication to The 600 Group.

Current trading and outlook

Group order intake for the financial year was 13.7% ahead of the prior year, and has demonstrated increased momentum with quarter on quarter growth throughout the year.  Trading and order intake in the first quarter of the current financial year are ahead of the corresponding period last year.

Market conditions are expected to continue to improve, with industry forecasts anticipating worldwide growth in machine tool consumption of 7%, led by North America (9%) and Europe (13%).  The Australian market is also forecasting a sharp recovery from the low level of industrial investment experienced in 2013.

Accordingly, the board considers the prospects for further organic growth to be positive, whilst also evaluating opportunities to accelerate the development of group activities through carefully selected acquisitions.

Paul Dupee

Chairman

26 June 2014

Financial Summary

Results

Revenue and order intake

Revenue from continuing operations decreased by 0.2% to £41.71m (2013: £41.79m).  There was an underlying increase in revenue of 0.7%, which was offset by the effect of translation into Sterling of revenues generated by Group operations in North America and Australia at less favourable rates of exchange than those prevailing in the previous financial year.

Order intake during the year amounted to £42.27m at a book-to-bill ratio of 101.8%.  This was a marked improvement on the previous financial year, in which order intake was £37.37m at a book-to-bill ratio of 89.4%. The year-end order book stood at £7.02m, slightly ahead of the corresponding figure of £6.87m last year.

Costs and margins (before special items)

Gross margins increased by 150 basis points to 33.2% (2013: 31.7%), primarily as a result of management initiatives to reduce direct costs through modifications to product specification, renegotiation of sources of supply, and greater throughput of products against a relatively fixed production cost base.

Group operating expenses reduced by almost 6% to £11.64m (2013: £12.36m), as a result of the full year effect of reductions achieved during the implementation of the strategic review in 2012 including the savings in the second half of the year from the site compression in Heckmondwike. Additional savings were made in the second half of the year in the Australian operation in response to market conditions.

Operating margins in the Machine Tools segment of the business increased from 6.1% to 8.7%, and in Laser Marking from 3.0% to 5.6%.  Unallocated group costs were 2.5% of group revenue (2013: 3.3%), and hence the overall Group margin increased from 2.3% to 5.6% of revenue.

Machine tools and precision engineered components

Group companies design and develop metal cutting machine tools sold under the brand names Colchester and Harrison and design and manufacture precision engineering components under the brand names Pratt Burnerd and Gamet.  These are sold worldwide, with direct sales operations in North America ("Clausing"), Europe, and Australia and a network of distributors in all other key end-user markets.  Clausing is a customer service led distribution business and, in addition to branded Group products, carries a broad range of other machine tools, spares and accessories to serve the North American market.

The financial results of these activitiesbefore special items were as follows:

	2014 £ 000	2013 £ 000	2012 £ 000
Revenues	34,431	34,906	31,114
Operating profit	3,005	2,145	1,468
Operating margin	8.7%	6.1%	4.7%

Revenues reduced by 1.4% to £34.43m, although at constant rates of exchange the underlying activity level was only down 0.2%.  Revenues in local currency in North American operations reduced by 5.7%, but profit margins increased due to improved product mix and reduced buying prices from third party suppliers.

European revenues increased by 21.4% as product availability, lead times and customer service all returned to normalised levels.  There has been a marked increase in distributor confidence and signs of renewed vigour in marketing efforts to support our products.  The site compression project at Heckmondwike was completed in September 2013, and has delivered substantial overhead cost savings on occupancy, energy and other related expenses.  These actions have contributed to a significant improvement in efficiency and operating margin.

Revenue in local currency contracted by more than 33.8% in Australia, where market conditions were especially challenging due to political uncertainty, austerity measures, and major fluctuations in currency and interest rates.  During the second half of the year, our staff accepted a need for short time working in order to weather these conditions, and the business secured a break even result for the year.  Conditions improved during the final quarter, and Australia was able to return to normal working with effect from the start of the new financial year.

During the year, product development programmes were completed on the new EL range of Tornado CNC machines, and also the Pratt Burnerd Gripfast chuck, with both products manufactured at Heckmondwike.  In North America, a range of drill products has been introduced that have been sourced locally, and have met with significant success.  There are further development plans anticipated in the current financial year including the updating of the conventional range of centre lathes along with saws and mills sourced in North America.

Our Australian operation also made new inroads into developing markets in South East Asia, and aim to build on their success this year.

Laser marking

Electrox designs, develops and manufactures equipment for the permanent marking of a wide variety of materials using lasers from its operations at Letchworth Garden City.  These can be sold as a custom product for integration into automated production lines, or already fitted into a range of standard and custom workstations built at our own facility.  This equipment is then sold by direct sales operations in the UK and North America, and through an established network of distributor partners throughout Europe and beyond. 

Results for the financial year before special items were as follows:

	2014 £ 000	2013 £ 000	2012 £ 000
Revenues	7,572	7,013	6,651
Operating profit	421	213	316
Operating margin	5.6%	3.0%	4.8%

Revenues increased by 8.0% to £7.57m including a 19.2% increase in the second half compared with the first.  This coincided with the launch in September 2013 of new products, including the latest range of EMS workstations, which have been very well received.   These offer greater flexibility, ergonomics and production efficiency for the end user, whilst facilitating shorter delivery lead times and reduced inventory commitment for our distributor network.

The launch was supported by increased marketing activity including an updated website, greater presence at key trade shows, and recruitment of additional sales resource.

Further product improvements were achieved as a consequence of redesign, utilising updated componentry and advanced manufacturing techniques.  These changes ensure that our products are easier to build, and are based around standardised modular assemblies across the core range.  In the current year, we aim to extend this activity to update the FLEXYZ and Dial Index products at the higher end of the range.

Operating margins increased to 5.6% of revenues, as the benefits of these activities began to flow.  It remains our belief that there are further operational gearing opportunities in the business as we strive to fill ample available production capacity.

Development expenditure

During the financial year the Group incurred aggregate expenditure on the development of new products and software of £0.57m, of which £0.06m was expensed as incurred, and £0.51m was capitalised and will be amortised over the estimated economic life of the associated products.  The corresponding amounts in the previous financial year were £nil of revenue expense, and £0.53m of capitalised costs.

The amortisation charge to income in the current year in respect of development expenditure previously capitalised was £0.03m (2013: £0.09m).

Profit before taxation

Group operating profit before special items and share based payment costs amounted to £2.35m; an increase of 141% on the corresponding figure last year of £0.97m.

Net financial income was £0.31m (2013: £0.04m) comprising net financial expense in respect of bank and other borrowings of £0.39m (2013: £0.47m) and net financial income relating to pensions and the amortisation of shareholder loan costs of £0.69m (2013: £0.50m). 

Profit before taxation, special items and share based payment cost was £2.66m (£2013: £1.01m).

Special items and share based based payment cost

During the financial year the Company incurred expenditure which was, in the opinion of the directors, non-recurring in nature.  This amounted to £0.13m, which related to the professional costs associated with the possible bid approach.

In the previous financial year, the Company incurred special items resulting in a net credit of £0.80m before taxation, comprising costs relating to re-organisation, redundancy and inventory impairments of £1.60m and a credit in respect of pensions curtailment gain amounting to £2.40m.

Share based payment charges do not represent a cash cost to the Company and amounted to £0.06m (2013 £0.10m)

Taxation

The current year charge for taxation amounted to £0.62m representing 25% of the profit before taxation.  In the prior year, the credit for taxation of £1.50m (before special items) comprised a normalised charge of approximately 34% of profit before taxation, and a credit of £1.75m relating to the recognition for the first time of deferred taxation in respect of prior years' losses and timing differences in North America.

The company incurred significant trading and capital losses in prior years in the UK and accordingly has no liability for taxation in the UK. In North America prior tax losses have now been utilised and the current year Group charge is principally in respect of taxation of profits in North America. Taxation will be payable going forward on profits in North America and tax continues to be paid in Australia on profits made there.

Net profit and earnings per share

The total profit attributable to equity holders of the parent for the current financial year amounted to £1.85m (2013: £2.06m).

Underlying earnings from continuing operations before pension and equity adjustments, special items and share based payment charge and US deferred tax prior years credit were 1.90 pence per share (2013: 0.59 pence).

Total earnings amounted to 2.19 pence per share (2013: 2.75 pence).

Financial position and utilisation of resources

Cash flow

Cash generated from operations before working capital movements was £2.71m (2013: £1.10m). The working capital movement included a £1.14m reduction in the level of stockholding as a result of better controls across all operating businesses. Trade and other payables decreased by £1.24m as trading terms with creditors returned to normal levels.

£0.37m was paid during the period in relation to settlement of an onerous lease exited following the 2012 Strategic Review, with a further £0.15m to be paid in FY15. The net cash ouflow from working capital and provision movements was £0.73m (2013: outflow of £2.82m).

Taxation paid of £0.50m during the year all related to the US operations where previous losses have now all been utilised.

Plant and equipment purchases during the year amounted to £0.55m against the depreciation charge of £0.47m.

Development expenditure on the laser marking new products and software of £0.51m was capitalised during the year but will begin full amortisation in the next financial year following completion of the projects.

Net borrowings

Group net debt at 29 March 2014 stood at £5.31m (2013: £5.41m) comprising net bank and finance lease indebtedness of £3.02m (2013: £3.25m) and the amount outstanding on shareholder loans of £2.50m net of unamortised costs of £0.21m in the current financial year, and £0.34m in the prior year.

Headroom on bank facilities was £2.72m at the year-end (2013: £3.20m) and all financial covenants had been met in full.

In May 2014, the Group's primary UK banking facilities were increased and extended, resulting in aggregate facilities worldwide of £6.75m, the majority of which is committed until no earlier than May 2017.

Shareholder loans amounting to £2.50m are due to be refinanced in August 2015, either through extension for a further period, repayment from other cash resources within the Group, or exercise of associated share warrants at a price of 20 pence per share expiring in August 2015.

Aggregate borrowings comprised a multiple of approximately 1.68 times the EBITDA for the year (2013: 3.21 times) and gearing amounted to 23.5% of aggregate net assets (2013: 25.0%), or 53.3% (2013: 54.7%) after excluding the net surplus on the UK pension fund.

Going concern

In accordance with FRC guidelines, the Board has assessed the Group's funding and liquidity position. The Directors confirm that, after having made appropriate enquiries, they have a reasonable expectation that the Group and the Company have adequate resources to continue operations for the foreseeable future.  Accordingly, the directors continue to adopt the going concern basis in preparation of the financial statements.

Retirement Benefits

The accounting surplus on the UK final salary scheme is arrived at on a best estimate basis and included on the Group Statement of Financial Position as the scheme rules allow the requirements on surplus recognition within IFRIC 14 to be applied. The accounting surplus at 29 March 2014 was £19.90m (2013: £19.46m).  In accordance with the current legislation on taxation of pension surplus returns to a company, deferred taxation has been provided for on the pension entries at 35% as opposed to the normal 20% rate.

In October 2013 the Company reached agreement with the Trustee of the scheme regarding the funding position on a more prudent Technical Provisions basis as at 31 March 2013 which indicated a funding deficit of £25.4m at that date, and estimated a deficit on a full buy-out basis of £51.1m.

It was further agreed that the Technical Provisions deficit would be resolved by an outperformance of the investment returns on the scheme assets of 1% above the return on UK gilts, and that no cash contributions would be required until the next funding valuation due as at 31 March 2016.

At 29 March 2014, the subsequent performance of the scheme assets and changes in the underlying market conditions in respect of the fund liabilities indicate that the deficit on a Technical Provisions basis had reduced to £14.7m and on a buy-out basis to £35.5m.

The directors and the Trustee work together on a collaborative basis to continue to monitor investment performance and market conditions closely, to mitigate the risk of mis-matching assets and liabilities to a tactically appropriate level, and to pursue opportunities to secure a full or partial buy-out of UK pension liabilities when conditions permit.

The US retiree health scheme and pension fund deficits reduced during the year due to changes in actuarial assumptions to £0.91m (2013: £1.36m.)

Neil Carrick

DIRECTOR

26 June 2014

Consolidated statement of comprehensive income

for the 52-week period ended 29 March 2014                                                                                                                                                                                                                                                                                                                                                                                

                                                                                                                                                                                                 Asrestated*           

                                                                               Before                                            After                     Before                                              After

                                                                               Special items^ Special items^  Special items^   Special items^      Special items^      Special items^

                                                                               & share-based    & share-based    & share-based   & share-based  & share based  & share-based                                                                                              payments          payments          payments           payments              payments             payments     

                                                                                    52 weeks           52 weeks             52 weeks              52 weeks            52 weeks            52 weeks

                                                                                         ended                 ended                   ended                    ended                   ended                  ended

                                                                                     29 March            29 March              29 March               30 March              30 March             30 March

                                                                                             2014                    2014                      2014                      2013                      2013                     2013

                                                                                             £'000                   £'000                     £'000                     £'000                      £'000                    £'000

Continuing                                                                                                                                                            

Revenue                                                                          41,707                           -                  41,707                   41,788                             -                  41,788

Cost of sales                                                                  (27,850)                           -               (27,850)                 (28,538)                     (600)                (29,138)

Gross profit                                                                   13,857                           -                  13,857                   13,250                      (600)                  12,650

Other operating income                                                         134                           -                       134                          79                             -                         79

Net operating expenses                                                (11,643)                     (185)               (11,828)                (12,356)                     1,298               (11,058)

                                                                                     _______________________________________________________________________________________________________________________________                                                                           

Operating profit/loss                                                      2,348                    (185)                   2,163                       973                        698                    1,671

Bank and other interest                                                             7                           -                           7                           7                            -                           7

Interest on pension surplus                                                  827                           -                        827                       618                            -                       618

Final income                                                                          834                           -                        834                       625                            -                       625

Bank and other interest                                                      (388)                           -                     (388)                     (469)                           -                    (469)

Amortisation of shareholder loan expenses                      (134)                           -                     (134)                     (117)                           -                    (117)

Final expense                                                                     (522)                           -                     (522)                     (586)                           -                    (586)

Profit/(loss) before tax                                                  2,660                    (185)                    2,475                    1,012                       698                    1,710

Income tax (change)/credit                                                 (623)                          -                     (623)                    1,496                      (850)                      646

Profit/(loss) for the period from continuing             2,037                    (185)                   1,852                    2,508                      (152)                    2,356

operations                            

Post tax loss of discontinued operations                                   -                           -                           -                     (295)                           -                      (295)

Total profit/(loss) for the financial year

attributable to Equity holders of the parent                         2,037                    (185)                   1,852                    2,213                     (152)                     2,061

^Special items comprise costs incurred on the abortive acquisition of the Group during the year.  Prior year special items related to exceptional costs and credits relating to reorganisation, redundancy, inventory and intangibles impairments, property disposals, refinancing and pension scheme closure.

*Comparative figures have been restated to reflect changes in accounting for interest on pension surplus under IAS 19(revised)Employee Benefits and related deferred tax movements.

Basic earnings/(loss) per share    -continuing             2.41p               (0.22)p                   2.19p                   3.34p                   (0.20)p                     3.14p

                                                             -discontinued                 -                          -                           -                (0.39)p                             -                   (0.39)p

                                                             -Total                       2.41p               (0.22)p                   2.19p                   2.95p                   (0.20)p                     2.75p

Diluted earnings/(loss) per share -continuing             2.37p                (0.22)p                   2.15p                   3.27p                  (0.20)p                     3.07p

                                                             -discontinued                 -                          -                           -                (0.38)p                            -                   (0.38)p

                                                             -Total                      2.37p                (0.22)p                   2.15p                   2.89p                  (0.20)p                     2.69p

Consolidated statement of comprehensive income for the 52-week period ended 29 March 2014
		52-week	Restated 52-week
		period ended	period ended
		29 March	30 March
		2014	2013
		£000	£000
Profit/(loss) for the period		1,852	2,061
Other comprehensive income/(expense) Items that will not be reclassified to the Income Statement:
Remeasurement of the net defined benefit assets		(229)	4,291
Impact of changes to defined benefit asset limit		-	12,940
Impact of transfer to assets held for sale		-	(616)
Deferred taxation		139	(5,730)
Total items that will not be reclassified to the Income Statement:		(90)	10,885
Items that are or may in the future be reclassified to the Income Statement:
Foreign exchange translation differences		2	-
Total items that are or may in the future be reclassified to the Income Statement:		2	-
Other comprehensive income/(expense) for the period, net of income tax		(88)	10,885
Total comprehensive income/(expense) for the period		1,764	12,946
Attributable to:
Equity holders of the Parent Company		1,764	12,946
Total recognised (expense)/income		1,764	12,946

Consolidated statement of financial position                                                                                                             As at 29 March 2014
		As at	As at
		29 March	30 March
		2014	2013
		£000	£000
Non-current assets
Property, plant and equipment		4,348	4,500
Intangible assets		1,780	1,297
Deferred tax assets		2,723	3,120
Employee benefits		19,019	18,105
		27,870	27,022
Current assets
Inventories		8,505	10,273
Trade and other receivables		6,209	6,183
Cash and cash equivalents		1,149	1,025
		15,863	17,481
Total assets		43,733	44,503
Non-current liabilities
Loans and other borrowings		(2,475)	(5,100)
Deferred tax liabilities		(7,737)	(7,597)
		(10,212)	(12,697)
Current liabilities
Trade and other payables		(6,425)	(6,973)
Income tax payable		(140)	(535)
Provisions		(429)	(1,309)
Loans and other borrowings		(3,982)	(1,332)
		(10,976)	(10,149)
Total liabilities		(21,188)	(22,846)
Net assets		22,545	21,657
Shareholders' equity
Called-up share capital		14,581	14,579
Share premium account		16,885	16,858
Revaluation reserve		862	909
Capital redemption reserve		2,500	2,500
Equity reserve		180	173
Translation reserve		938	1,860
Retained earnings		(13,401)	(15,222)
Total equity		22,545	21,657

Consolidated statement of changes in equity As at 29 March 2014
	Ordinary	Share		Capital
	share	premium	Revaluation	redemption	Translation	Equity		Retained	Total
	capital	account	reserve	reserve[1]	reserve	reserve		Earnings	Equity
	£000	£000	£000	£000	£000	£000		£000	£000
At 31 March 2012	14,375	15,645	1,080	2,500	1,487	167		(28,267)	6,987
At 1 April 2012	14,375	15,645	1,080	2,500	1,487	167		(28,267)	6,987
Profit for the period (restated)	-	-	-	-	-	-		2,061	2,061
Other comprehensive income:
Foreign currency translation	-	-	26	-	373	-		-	399
Net actuarial losses on employee benefit schemes (restated)	-	-	-	-	-	-		4,291	4,291
Impact of assets disposed of	-	-	(197)	-	-	-		(616)	(813)
Impact of changes to defined benefit asset limit	-	-	-	-	-	-		12,940	12,940
Deferred tax (restated)	-	-	-	-	-	-		(5,730)	(5,730)
Total comprehensive income	-	-	(171)	-	373	-		12,946	13,148
Transactions with owners:
Share capital subscribed for	204	1,213	-	-	-	-		-	1,417
Shareholder loan issue with convertible warrants	-	-	-	-	-	6		-	6
Credit for share-based payments	-	-	-	-	-	-		99	99
Total transactions with owners	204	1,213	-	-	-	6		99	1,522
At 30 March 2013	14,579	16,858	909	2,500	1,860	173		(15,222)	21,657
At 31 March2013	14,579	16,858	909	2,500	1,860	173		(15,222)	21,657
Profit for the period	-	-	-	-	-	-		1,852	1,852
Other comprehensive income:
Foreign currency translation	-	-	(90)	-	(922)	-		2	(1,010)
Remeasurement of the net defined benefit assets	-	-	-	-	-	-		(229)	(229)
Revaluation of properties	-	-	43	-	-	-		-	43
Deferred tax	-	-	-	-	-	-		139	139
Total comprehensive income	-	-	(47)	-	(922)	-		1,764	795
Transactions with owners:
Share capital subscribed for	2	27	-	-	-	-		-	29
Shareholder loan issue with convertible warrants	-	-	-	-	-	7		-	7
Credit for share-based payments	-	-	-	-	-	-		57	57
Total transactions with owners	2	27	-	-	-	7		57	93
At 29 March 2014	14,581	16,885	862	2,500	938	180		(13,401)	22,545

¹   The capital redemption reserve was set up on cancellation and repayment of cumulative preference shares in 2001.

Consolidated cash flow statement For the 52-week period ended 29 March 2014
			Restated
		52-week	52-week
		period ended	period ended
		29march	30March
		2014	2013
		£000	£000
Cash flows from operating activities
Profit/(loss) for the period		1,852	2,061
Adjustments for:
Amortisation of development expenditure		28	87
Depreciation		467	627
Net financial income		(312)	(39)
Net pension credit		-	(2,429)
Other Special Items		-	1,631
Equity share option expense		57	100
Discontinued operations		-	(295)
Income tax expense		623	(646)
Operating cash flow before changes in working capital and provisions		2,715	1,097
(Increase)/decrease in trade and other receivables		(255)	346
Decrease in inventories		1,143	104
Decrease in trade and other payables		(1,243)	(2,701)
Restructuring and redundancy expenditure		(371)	(572)
Cash generated/(used) in operations		1,989	(1,726)
Interest paid		(290)	((469)
Income tax paid		(496)	(40)
Net cash flows from operating activities		1,203	(2,235)
Cash flows from investing activities
Interest received		7	7
Proceeds from sale of property, plant and equipment		42	2,710
Proceeds from sale of subsidiary undertakings		-	1,708
Purchase of property, plant and equipment		(545)	(129)
Development expenditure capitalised		(511)	(532)
Refinancing expenditure		-	(286)
Net cash flows from investing activities		(1,007)	3,478
Cash flows from financing activities
Proceeds from issue of ordinary shares		29	1,416
Net repayment of external borrowing		(72)	(1,383)
Net Finance lease expenditure		58	(173)
Net cash flows from financing activities		15	(140)
Net increase in cash and cash equivalents		211	1,103
Cash and cash equivalents at the beginning of the period		1,025	(117)
Effect of exchange rate fluctuations on cash held		(87)	39
Cash and cash equivalents at the end of the period		1,149	1,025

Notes relating to the company financial statements

Basis of preparation

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under adopted IFRS.

The application of these standards and interpretations has required change to accounting for the expected return on pension assets at a rate above that of the interest on pension obligations which has been replaced by a net figure based upon the discount rate applied to the net defined benefit asset or liability as required by the amendment to IAS 19. Comparative figures have been adjusted accordingly and the pensions financial income of £11.57m and pensions financial expense of £8.07m have been replaced by a single figure of pensions financial income of £0.62m. The net related deferred taxation of £1.01m has also been adjusted and this and the net interest of £3.5m have been shown in the restated Statement of Comprehensive  Income. Consequently the Statement of Financial Position remains unchanged.  

1. Segment information

IFRS 8 - "Operating Segments" requires operating segments to be identified on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.  The chief operating decision maker has been identified as the Executive Directors.  The Executive Directors review the Group's internal reporting in order to assess performance and allocate resources.

Following restructuring undertaken the two business streams of Machine Tools and Precision Engineered Equipment have been aggregated as they are operationally managed and reported internally to the Executive Directors as a single Division. The Executive Directors consider there to be two continuing operating segments being Machine Tools and Precision Engineered Components and Laser Marking. 

The executive directors assess the performance of the operating segments based on a measure of operating profit/(loss).  This measurement basis excludes the effects of Special Items from the operating segments. Head Office and unallocated represent central functions and costs.

The following is an analysis of the Group's revenue and results by reportable segment:

	Continuing
52 Weeks ended 29 March 2014	Machine Tools & Precision Engineered Components	Laser Marking	Head Office & unallocated	Total continuing	Discontinued	Total
Segmental analysis of revenue	£000	£000	£000	£000	£000	£000
Revenue from external customers	34,431	7,276	-	41,707	-	41,707
Inter-segment revenue	-	296	-	296	-	296
Total segment revenue	34,431	7,572	-	42,003	-	42,003
Less: inter-segment revenue	-	(296)	-	(296)	-	(296)
Total revenue	34,431	7,276	-	41,707	-	41,707
Segmental analysis of operating Profit/(loss) before Special Items	3,005	421	(1,078)	2,348	-	2,348
Special Items	-	-	(185)	(185)	-	(185)
Group profit from operations	3,005	421	(1,263)	2,163	-	2,163
Other segmental information:
Reportable segment assets	37,454	6,153	126	43,733
Reportable segment liabilities	(13,007)	(1,522)	(6,659)	(21,188)
Fixed asset additions	412	643	-	1,055
Depreciation and amortisation	308	159	28	495

Notes relating to the company financial statements

1. Segment information (CONTINUED)

	Continuing
52-weeks ended 30 March 2013	Machine Tools & Precision Engineered Components	Laser Marking	Head Office & unallocated	Total	Discontinued	Total
Segmental analysis of revenue	£000	£000	£000	£000	£000	£000
Revenue from external customers	34,906	6,882	-	41,788	3,658	45,446
Inter-segment revenue	-	131	-	131	323	454
Total segment revenue	34,906	7,013	-	41,919	3,981	45,900
Less: inter-segment revenue	-	(131)	-	(131)	(323)	(454)
Total revenue	34,906	6,882	-	41,788	3,658	45,446
Segmental analysis of operating Profit/(loss) before special Items	2,145	213	(1,385)	973	(500)	473
Special Items	(1,391)	7	2,082	698	-	698
Group (Loss)/profit from operations	754	220	697	1,671	(500)	1,171
Other segmental information:
Reportable segment assets	18,006	4,374	22,123	44,503
Reportable segment liabilities	(7,166)	(1,187)	(14,493)	(22,846)
Fixed asset additions	72	589	-	661
Depreciation and amortisation	491	195	28	714

Inter-segment pricing is determined on an arm's length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Geographical segmental analysis of revenue is shown by origin and destination in the following two tables:

Segmental analysis by origin	2014			2013
	£000	%	£000		%
Gross sales revenue:
UK	20,803	49.9	18,076		39.8
North America	18,703	44.8	19,994		44.0
Australasia	2,201	5.3	3,718		8.2
Continuing Revenue	41,707	100.0	41,788		92.0
Discontinued	-	-	3,658		8.0
Total Revenue	41,707	100.0	45,446		100.0

Notes relating to the company financial statements

1. Segment information (CONTINUED)

Segmental analysis by destination:	2014			2013
	£000	%	£000		%
Gross sales revenue:
UK	8,223	19.7	6,581		14.5
Other European	6,486	15.6	6,662		14.7
North America	22,360	53.6	22,691		49.9
Africa	315	0.8	79		0.2
Australasia	2,057	4.9	3,765		8.3
Central America	112	0.3	142		0.3
Middle East	914	2.2	729		1.6
Far East	1,240	2.9	1,139		2.5
Continuing Revenue	41,707	100.0	41,788		92.0
Discontinued	-	-	3,658		8.0
	41,707	100.0	45,446		100.0

There are no customers that represent 10% or more of the Group's revenues.

2. SPECIAL ITEMS And Share-BASED PAYMENTS

In order for users of the financial statements to better understand the underlying performance of the Group the Board have separately disclosed transactions which by virtue of their size or incidence, are considered to be one off in nature. In addition the charge for share based payments has also been separately identified.

Special items include abortive transaction costs,gains and losses on the sale of properties and assets, exceptional costs relating to reorganisation, redundancy and restructuring, legal disputes and inventory,asset and intangibles impairments.

	2014	2013
	£000	£000
Cost of sales
Inventory impairments	-	246
Redundancies	-	354
Operating costs
Abortive transaction costs	128	-
Refinancing	-	295
Reorganisation and restructuring costs	-	760
Property disposals	-	(23)
Pension curtailment credit	-	(2,429)
Restructuring costs	128	(797)
Share-based payments	57	99

During the year the Group incurred costs with regard to the abortive acquisition of the Group by Qinddao D&D Investment Group Co. Ltd. Costs were also incurred with regard to the granting of share options.

In prior years, reorganisation and restructuring costs related to legal disputes and costs incurred in the UK with regard to site closures.

Notes relating to the company financial statements

The property disposals related to the disposal of the three UK sites at Shepshed, Batley and Heckmondwike.

Inventory impairments related to a review of the recoverability of stock following these closures.

The pensions curtailment gain arose on the change to actuarial assumptions as a result of the closure to the UK final scheme to future accrual at the end of March 2013.

Refinancing costs related to the costs of the share placing and bank facility restructuring in September 2012.

3. Financial income and expense

	2014	Restated 2013
	£000	£000
Interest income	7	7
Interest on pensions surplus	827	618
Financial income	834	625
Bank overdraft and loan interest	(169)	(185)
Shareholder loan interest	(200)	(200)
Other loan interest	-	(23)
Other finance charges	(1)	-
Finance charges on finance leases	(18)	(61)
Amortisation of shareholder loan expenses	(134)	(117)
Financial expense	(522)	(586)

4. Taxation

		Restated
	2014	2013
	£000	£000
Current tax:
Corporation tax at 23% (2013: 24%):
- current period	-	-
Overseas taxation:
- current period	(62)	(499)
Total current tax charge	(62)	(499)
Deferred taxation:
- current period	(400)	(569)
- prior period	(161)	1,714
Total deferred taxation charge	(561)	1,145
Taxation charged to the income statement	(623)	646

Notes relating to the company financial statements

4. Taxation (CONTINUED)

Tax reconciliation

The tax charge assessed for the period is lower than the standard rate of corporation tax in the UK of 23% (2013: 24%).The differences are explained below:         

                                                                                                                                                                                                 Restated      

	2014			2013
	£000	%	£000		%
Profit before tax	2,475		1,710
Profit before tax multiplied by the standard rate of corporation tax
in the UK of 23% (2013: 24%)	583	23.6	410		24.0
Effects of:
- expenses not deductible	138	5.6	109		6.4
- overseas tax rates	48	1.9	182		10.6
- pension fund surplus taxed at higher rate	100	4.0	340		19.9
- property disposals	-	-	(656)		(38.4)
- deferred tax prior period adjustment	161	6.5	(1,714)		(100.2)
- unrecognised losses utilised/tax not recognised on losses	(520)	(21.0)	725		42.4
- impact of rate change	113	4.6	(42)		(2.4)
Taxation charged/(credited) to the income statement	623	25.2	(646)		(37.7)

Following the enactment of legislation in the UK to reduce the corporation tax rate from 24% to 23% from 1 April 2013, the effective tax rate this year includes the impact on the income statement of calculating the UK deferred tax balances at the lower UK corporation tax rate. The impact of this rate change is a £113,000 increase in the tax charge in the income statement. The March 2013 Budget announced that the rate will further reduce to 20% by 2015 in addition to the planned reduction to 21% by 2014 previously announced in December 2012.

5. Earnings per share

The calculation of the basic earnings per share of 2.19p (2013: 2.75p) is based on the earnings for the financial period attributable to the Parent Company's shareholders of a profit of £1,852,000 (2013: £2,061,000) and on the weighted average number of shares in issue during the period of 84,430,346 (2013: 74,997,407). At 29 March 2014, there were 4,500,000 (2013: 4,500,000) potentially dilutive shares on option with a weighted average effect of 1,553,045 (2013: 1,615,068) shares giving a diluted profit per share of 2.15p(2013 2.69p)

	2014	2013
Weighted average number of shares
Issued shares at start of period	84,256,091	63,926,253
Effect of shares issued in the year	174,255	11,071,154
Weighted average number of shares at end of period	84,430,346	74,997,407

	£000		£000
Total post tax earnings		1,852		2,061
Discontinued Operations		-		295
Special Items and Share Based Payment Costs		185		152
Pensions Interest		(827)		(618)
Amortisation of Shareholder loan expenses		134		117
Associated Taxation		258		188
Prior year US deferred tax - first time recognition of  losses		-		(1,753)
Underlying Earnings		1,602		442
Underlying EPS		1.90p		0.59p

Notes relating to the company financial statements

6. Cash and cash equivalents

	2014	2013
	£000	£000
Cash at bank	1,049	925
Short-term deposits	100	100
Cash and cash equivalents per statement of financial position and per cash flow statement	1,149	1,025

7. RECONCILIATION OF NET CASH FLOW TO NET DEBT

	2014	2013
	£000	£000
Increase in cash and cash equivalents	211	1,103
Decrease in debt and finance leases	14	1,556
Decrease in net debt from cash flows	225	2,659
Net debt at beginning of period	(5,407)	(7,994)
Shareholder loan adjustment	(126)	(111)
Exchange effects on net funds	-	39
Net debt at end of period	(5,308)	(5,407)

8. Analysis of net DEBT

	At				At
	30 March	Exchange			29 March
	2013	movement	Other	Cash flows	2014
	£000	£000	£000	£000	£000
Cash at bank and in hand	925	(87)	-	211	1,049
Term deposits (included within cash and cash equivalents on the balance sheet)	100	-	-	-	100
	1,025	(87)	-	211	1,149
Debt due within one year	(1,208)	63	(2,500)	(236)	(3,881)
Debt due after one year	(2,808)	-	2,500	308	-
Shareholder loan	(2,163)	-	(126)	-	(2,289)
Finance leases	(253)	24	-	(58)	(287)
Total	(5,407)	-	(126)	225	(5,308)

Statutory Accounts

The Financial information set out in this preliminary announcement does not constitute the company's Consolidated Financial Statements for the financial years ended 29 March 2014 or 30 March 2013 but are derived from those Financial Statements.Statutory Financial Statements for 2013 have been delivered to the Registrar of Companies and those for 2014 will be delivered following the company's AGM. The Auditors KPMG LLP have reported on those financial statements.Their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006 in respect of the Financial Statements for 2014 or 2013.

The Statutory accounts are available on the Company's web site and will be posted to shareholders who have requested a copy and thereafter by request to the company's registered office.

 

END

 

 

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