Results to 1 April 2000

600 Group PLC 19 June 2000 THE 600 GROUP PLC PRELIMINARY RESULTS FOR THE PERIOD TO 1 APRIL 2000 CHAIRMAN'S STATEMENT During the year, increased international market penetration and tight financial control generated a profitable performance and strengthened our net funds position, despite the current cyclical downturn in the international machine tool industry. Results As anticipated in my interim statement, the UK and North American markets showed limited signs of recovery towards the end of the year, following a very depressed first half. However, strong growth in our laser and UK factored businesses, together with full year results from our recent French and German acquisitions, only partially offset the reductions in activity in our North American and UK lathe based operations, where the effect of reduced market demand was compounded by substantial supply chain destocking and the weak euro. Australia and South Africa continued to struggle against very difficult market conditions. The resulting turnover from continuing operations reduced from £111m to £97m. Further action was taken during the year to reduce costs in response to these market conditions, including redundancies costing £0.6m (1999: £0.5m). As indicated in our trading update of 2 June 2000, the Group generated a profit before tax of £6.2m (1999: £4.1m), including a pension credit of £5.1m (1999: £0.5m). Earnings per share were 9.7p (1999: 5.8p) and net funds increased to £15.5m (1999: £7.3m). Dividend The board recommends a final dividend of 4.0 pence per share, giving a maintained full year dividend of 5.5 pence per share. The board intends to continue a progressive but prudent distribution policy, having due regard to the Group's long-term earnings trend, strategic development and availability of cash resources. Strategy The Group has continued to focus on its core metal cutting and laser machine tool businesses. All companies introduced new products, coupled with additional programmes aimed at increasing market share. Our financial resources and increased international selling organisation are allowing us to pursue acquisition and partnership opportunities to improve our market penetration and accelerate our product development programmes. People Both Chris Schauer and Brian Knightley will retire from the board after the Annual General Meeting. Their contribution to the Group has been significant over many years and I should like to record the thanks of the board and our very best wishes for their future endeavours. On behalf of the board, I should like to record our appreciation of the continued efforts of all our employees, which have resulted in the further development of the Group in a difficult trading environment. Outlook The UK and USA markets are unlikely to experience significant recoveries until well into the coming year, whilst the principal continental European markets are expected to continue to show a slow but erratic growth trend. With the resources currently devoted to our extensive product and market share development programmes, I am confident that we shall continue to maximise the opportunities that will arise as the major international markets consolidate and recover. Michael Wright Chairman 19 June 2000 Enquiries: Tony Sweeten, Group Chief Executive John Fussey, Group Finance Director Telephone: 020 7796 4133 on Monday 19 June 2000 Thereafter on 0113 277 6100 GROUP CHIEF EXECUTIVE'S REVIEW OF OPERATIONS Last year we faced an exceptional coincidence of difficulties in all our major international markets. Our response to this was positive. We strengthened our competitive position through continued investment in new higher-technology products and by further reductions in operating costs, headcount and inventory. We also realised our strategic goal of becoming a focused machine tool group through further rationalisation of our operations in the UK and overseas. Market trends The breadth of our product range and our international marketing network normally afford us some protection from machine tool business cycles. Last year we faced an exceptional set of circumstances in all our major markets. In the US, demand for metal cutting machine tools fell by some 40% over the year as a whole, with a sharp downturn in the first half only partially offset by recovery in the latter part of the year. UK demand fell by 30%, with the weak euro creating much uncertainty in the manufacturing sector and restraining capital investment. The markets of continental Europe were more resilient, showing only a marginal decline year-on-year, though the progressive weakening of the euro against sterling presented a considerable challenge to our UK exporting companies. Strategic development We continued to pursue the clear strategy outlined in previous years: 1. Increasing our focus on our core machine tool activities, with the closure of our Leeds steel stockholding business and the rationalisation of our international businesses. 2. Maintaining our market leadership through innovation, with major product introductions during the year in our lathes and laser businesses. 3. Reducing our cost base across the Group, including a 23% reduction in total manpower over the past two years, despite our acquisitions of Parat, Guitton and Metal Muncher. Even under the difficult conditions we encountered last year, constant innovation and cost reduction have enabled us to compete effectively and to outperform our markets. UNITED KINGDOM OPERATIONS 600 Lathes operates Europe's largest volume lathe factory, manufacturing machines under the market leading Colchester and Harrison brands. The business continued its impressive programme of new product launches. Colchester introduced a new 'lights out' Tornado lathe, designed for unmanned operation, and the new Combi K slant bed electronic lathe, an extremely versatile machine making it ideal for our sub-contractor customers. The Harrison Alpha Plus S range of computer-assisted lathes, launched last year, has enjoyed excellent market reaction and has grown to be our most important range of lathes. The range was expanded this year with the addition of the new Alpha 800 model, which is generating additional sales in new markets. 600 Centre, our UK marketing operation for imported machine tools, achieved increases in its share of all key product segments. The business benefited from its specialist focus on high technology products in strongly growing market sectors. In particular, it enjoyed good sales growth in wirecut electro-discharge machines, CNC grinding machines and Fanuc Robodrills. Crawford Collets, our manufacturer of high precision collets and work holding systems, is a market leader in its field. New plant was installed this year to enhance its established reputation for premium quality products and to manufacture new lines that have been developed to meet the growing market for computer-assisted lathes. Gamet Bearings is our manufacturer of super high precision taper roller bearings for machine tools and similar applications and has continued to increase its market penetration, especially in the Far East. Gamet continues to be at the forefront of product development, introducing a new range of high speed coated bearings in response to customers' demands for ever increasing speed. Pratt Burnerd International has a worldwide reputation for its chucking systems and advanced electric turrets. The company has embraced new technology in its Radio Frequency Gripmeter, an important piece of modern safety equipment to test the gripping force of a machine tool chuck while it is rotating. Growth opportunities have been identified this year with the introduction of a range of larger chucks for use in new market sectors. Electrox is increasingly becoming a world force in the manufacture of laser systems and laser markers, increasing its share of this growing market for high technology products through a combination of innovative new product development, strong marketing and strategic selling initiatives. Sales to the Far East and North America have increased substantially and the introduction during the year of new products, such as the economy Scriba E and the ruggedised Scriba Duo II twin head marker, will provide further opportunities for continued growth. Profile 600 uses an Electrox laser in its Lazerblade profile cutting machine. With its fully integrated design, the Lazerblade range offers the best value for money of any machine in its class and it is already gaining an excellent reputation in the field. Sales have been growing in the UK and the USA and significant further growth is planned in all markets. Product development has widened the appeal of the original machine with the introduction of new higher power versions, together with new automation systems and cutting technology developments that have considerably increased its capability. 600 Machinery International is our international trading company that provides the Group with a presence in the Middle East, China, Africa and South America. The company had another good year with major shipments to Egypt and increased sales of Group products into all its territories. OVERSEAS OPERATIONS Parat, our German distribution business, had a good year with sales of Harrison Alpha machines holding up well, despite the weakness of the euro, and specialist mould making machinery from Fidia in Italy selling exceptionally well into the German automotive industry - a new market for the 600 Group. 600 France, our new subsidiary purchased as Guitton in February 1999, has been restructured as planned to focus on growing machine tool sales in France. Our first-ever stand at the French Machines Outils exhibition in Paris earlier this year was a great success and gave us the opportunity to launch our new company as well as the latest Harrison and Bridgeport machines. Clausing Industrial is our North American operation with both manufacturing and distribution activities. The company manufactures drilling and sawing machines and our recent acquisition of Metal Muncher has strengthened this activity. It also imports and distributes a wide range of machine tools from around the world as well as our own Colchester lathes. Sales held up well despite the difficult US market with some sectors, such as conventional Colchester lathe sales, growing strongly. After an extensive period of test marketing, we successfully introduced the Stingray range of machining centres into the USA and, despite a weak market for CNC machines, sales are starting to develop strongly. Sales of our higher-technology products and value-added systems generated another robust performance in Canada. 600 International is our Prague office with responsibility for co-ordinating our sales activity in Central and Eastern Europe. This is a small but important growth area for the 600 Group and one in which we have considerable experience and connections. 600 International is continuing to develop our distribution network in these markets. 600 Machine Tools is the new name for 600 Machinery Australia and reflects its new strategy and business focus. It continues to do good business with the Harrison Alpha range and is complementing this with steady progress with Fanuc and Supermax machines imported from Japan and Taiwan respectively. 600SA, our operation in South Africa, had a difficult year against the background of deep market recession and a substantial fall in the rand. Despite retrenchments and a flexible marketing approach, sales of all products have been depressed. PROSPECTS The second half of last year brought the expected improvement over the first half, as we began to see the start of a cyclical upturn in both the USA and UK. This upturn is widely expected to continue, although current general economic uncertainties mean that the exact rates of recovery are difficult to predict. We expect continued market growth in the Far East and in continental Europe. Distributor de-stocking is now virtually complete and, therefore, sales of lathes and associated accessories will soon start to revert to actual end-user consumption rates. Throughout the coming year, we anticipate further growth from our higher- technology products and this growth will accelerate as the underlying markets improve. Our investment in product development during the last 12 months will start to bring rewards during the second half of the year, as additional new products are introduced. In many cases these products will be addressing new markets, providing real incremental growth opportunities. During the past year we have improved our market presence in continental Europe and we now have several major initiatives to substantially increase our presence in the USA over the next few months. I believe that this co-ordinated programme of product development and increased international market presence will ensure the continued profitable development of the Group. Tony Sweeten Group Chief Executive 19 June 2000 AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT Period Period ended ended 1 April 3 April 2000 1999 £000 £000 Turnover - Continuing operations 97,176 110,994 - Discontinued operations 1,507 5,854 ------- ------- 98,683 116,848 Cost of sales (72,881) (85,891) ------- ------- Gross profit 25,802 30,957 Net operating expenses (19,598) (25,547) Operating profit - Continuing operations 6,039 6,052 - Discontinued operations 165 (642) ------- ------- 6,204 5,410 Provision for loss on discontinued operations - (1,597) ------- ------- Profit on ordinary activities before interest 6,204 3,813 Net interest receivable and similar charges 21 249 ------- ------- Profit on ordinary activities before taxation 6,225 4,062 - including pension credit of £5,097,000 (1999: £466,000) Taxation (674) (715) ------- ------- Profit for the financial period 5,551 3,347 Dividends - Equity (3,083) (3,084) - Non-equity (132) (93) ------- ------- (3,215) (3,177) ------- ------- Retained profit for the financial period transferred to reserves 2,336 170 ======= ======= Earnings per share - basic 9.7p 5.8p Earnings per share - diluted 9.7p 5.8p AUDITED CONSOLIDATED BALANCE SHEET At 1 At 3 April April 2000 1999 £000 £000 Fixed assets Intangible assets - goodwill 3,392 3,042 Tangible assets 20,254 25,349 Investments 84 84 ------- ------- 23,730 28,475 ------- ------- Current assets Stocks 27,154 31,564 Debtors: - falling due within one year 23,216 26,615 - falling due after one year 19,703 14,690 ------- ------- 42,919 41,305 Investments 3,197 3,586 Cash at bank and in hand 24,897 19,158 ------- ------- 98,167 95,613 Current liabilities Creditors: amounts falling due within one year: - short-term borrowings (5,505) (3,363) - other creditors (21,054) (22,517) ------- ------- (26,559) (25,880) ------- ------- Net current assets 71,608 69,733 ------- ------- Total assets less current 95,338 98,208 liabilities Creditors: amounts falling due after more than one year: - loans and other borrowings (7,133) (12,068) - other creditors (750) (670) ------- ------- (7,883) (12,738) ------- ------- Provisions for liabilities and charges (403) (676) ------- ------- Net assets 87,052 84,794 ------- ------- Capital and reserves Called up share capital 16,512 16,509 Share premium account 13,510 13,505 Revaluation reserve 2,385 2,885 Profit and loss account 54,645 51,895 ------- ------- Shareholders' funds (including non- equity) 87,052 84,794 ------- ------- AUDITED GROUP CASH FLOW STATEMENT Period ended Period ended 1 April 2000 3 April 1999 £000 £000 £000 £000 Net cash inflow from operating activities 8,911 10,012 Returns on investments and servicing of finance Interest received 1,209 1,520 Interest paid (1,018) (1,041) Interest element of finance lease rental payments (180) (233) Preference dividends paid (132) (93) ------- ------- Returns on investments and servicing of finance (121) 153 Taxation paid (1,439) (2,480) Capital expenditure Purchase of tangible fixed assets (1,034) (2,943) Net receipt from sale of tangible fixed assets 3,741 335 ------- ------- Capital expenditure 2,707 (2,608) Acquisitions and disposals Acquisitions (570) (4,098) Net overdraft acquired with businesses - (59) ------- ------- Acquisitions and disposals (570) (4,157) Equity dividends paid (1,401) (4,762) ------- ------- Net cash inflow/(outflow) before use of liquid resources and financing 8,087 (3,842) Management of liquid resources Purchase of term deposits (6,640) (458) Reduction of current assets- investments 389 199 ------- ------- Management of liquid resources (6,251) (259) Financing Issue of ordinary share capital 8 37 New bank loans - 4,799 Repayment of bank loans (1,345) (744) Capital element of finance lease rental payments (813) (815) ------- ------- Net cash (outflow)/inflow for financing (2,150) 3,277 (Decrease) in cash in the period (314) (824) ======= ======= Liquid resources are defined as term deposits and amounts held as current assets-investments. NOTES 1. The financial information set out below does not constitute the company's statutory accounts for the period ended 1 April 2000 or the period ended 3 April 1999 but is derived from those accounts. Statutory accounts for 1999 have been delivered to the registrar of companies, whereas those for 2000 will be delivered following the company's Annual General Meeting. The auditor has reported on the 1999 accounts; its report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 2. The annual report will be posted to all shareholders in due course and will be available on request from the Secretary, The 600 Group PLC, 600 House, Landmark Court, Revie Road, Leeds LS11 8JT. 3. The final dividend of 4.0p per share, if approved by shareholders at the Annual General Meeting, will be paid on 11 September 2000 to shareholders on the register at 11 August 2000.

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