Final Results

600 Group PLC 20 June 2002 20 June 2002 THE 600 GROUP PLC PRELIMINARY RESULTS FOR THE PERIOD TO 30 MARCH 2002 CHAIRMAN'S STATEMENT Despite experiencing an unprecedented world-wide downturn in machine tool demand, the Group continued its extensive product development programme, coupled with tight cash control. As a result, we finished the year with our best-ever product range and a very strong balance sheet. Market conditions The period was dominated by dramatic falls in our major markets, all of which, for the first time for many years, were in recession at the same time. The USA market continued to decline, showing a year-on-year reduction of some 40% and finishing the year with order intake levels 70% below their 1998 peak. The early signs of recovery in the UK were severely reversed and sales in the year finished 16% down. Year-end sales were 60% below their 1997 peak, with 70% of this reduction occurring in the last twelve months. Order intake in continental European markets was generally depressed throughout the year. Results None of our businesses was immune from these exceptionally adverse conditions. Despite success in increasing share in key markets, only our German company and bearings operation showed increases in turnover. However, towards the end of the year, some sectors were starting to show signs of revival. Turnover in the period was down from Â£98.0m to Â£80.5m. Action continued to be taken to reduce both costs and assets in response to this trading environment. Headcount was reduced by 26% during the year and, consequently, underlying overhead spend in the second half was 25% below the previous year's level. Profit before tax (and transfer of goodwill previously written off) reduced from Â£6.9m to Â£2.7m, reflecting a reduction in gross profit from Â£25.9m to Â£19.3m, reorganisation costs up from Â£0.2m to Â£1m and net cost savings of Â£3.2m. Profit after tax reflects the adoption of FRS 19 "Deferred Tax". The impact of this new accounting policy was to reduce reported profit after tax for the period by Â£1.6m. Net funds reduced by Â£6.4m to Â£11.5m. The repayment and cancellation of the preference shares accounted for Â£2.7m of this reduction and the total dividend payment absorbed another Â£3.1m. A further Â£0.6m was spent on the acquisition of the Gamet bearings business in France. Dividend The board recommends a final dividend of 4.0p, maintaining the full year dividend of 5.5p. People 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 very difficult trading environment and during a period of extensive reorganisation. Outlook Evidence is emerging of increasing manufacturing output and improving confidence in our major markets. Provided that these trends continue into the coming year, investment levels should start to recover during the second half. With our current world-wide product and market development programmes, coupled with our strong balance sheet, I am confident that we shall maximise the benefits from the opportunities that will arise as the major international markets recover. Michael Wright Chairman 20 June 2002 Enquiries: Tony Sweeten, Group Chief Executive John Fussey, Group Finance Director Telephone: 020 7796 4133 on Thursday 20 June 2002 thereafter on 0113 277 6100 Nick Lyon, Hudson Sandler Telephone: 020 7796 4133 GROUP CHIEF EXECUTIVE'S REVIEW OF OPERATIONS This was an exceptionally difficult year for the machine tool industry world-wide, with declining confidence in most of our markets, exacerbated by the events of September 11. Demand for machine tools weakened and the competitive position of both our UK manufacturing operations and our UK customers was affected by the continued strength of Sterling against the Euro. The sharp downturn in the information, communications and technology sector had a particularly serious impact on our lasers business. Against this background, we pursued a series of initiatives to reduce costs, lowering our headcount by 26% and accelerating our international procurement programmes. At the same time, we maintained our focus on product development to ensure that we have the best possible range of machines available to our customers as their confidence recovers. Strategic development Despite the harsh business climate of the last 12 months, our strategic objectives have remained clear and consistent: maintaining our focus on machine tools, with strong global brands and a reputation for quality and value; sustaining our market leadership through innovation; reducing our cost base; geographic expansion, especially into Eastern Europe and the Far East and maintaining a strong cash balance. Market trends UK demand declined by some 60% between the end of 1997 and the end of 2001. Although there was some evidence of recovery in the first quarter of calendar 2001, this faltered in the second quarter and the market remained in decline almost to the end of our financial year. Leading indicators of business confidence are now beginning to improve and both anecdotal evidence within the trade and our own experience at the MACH 2002 exhibition in Birmingham suggest that the machine tool market has now stabilised. In Continental Europe, the run of consistent growth in the major markets ended with a downturn beginning in the second quarter of 2001. This particularly affected Germany, which is the largest single market. US industrial output has fallen for 18 consecutive months, making this the longest downturn since 1932. Total machine tool consumption has declined by more than 70% over the last three years. Here, however, leading indicators are more positive and we are already seeing some evidence of a pick-up in orders. MACH 2002 This major biennial exhibition is the UK's premier machine tool event and was held at the NEC in Birmingham between 29 April and 3 May. We took over 1,000 enquiries and, encouragingly, since we do not normally anticipate making direct sales at trade shows, took over Â£1 million of orders, of which more than half were for laser products. We also reconfirmed our strength in innovation by winning two prestigious International Machine Tool Awards during the show, for the new Pratt Burnerd programmable power chuck and the 'lights out' package for 600 Lathes' Tornado range. UNITED KINGDOM OPERATIONS 600 Lathes manufactures a wide range of machines under the market-leading Colchester and Harrison brands. In response to the difficult market conditions, we accelerated both our product development and international procurement programmes, resulting in a substantial reduction in the workforce together with an extensive restructuring of the business. As a result of these actions, we entered the current year with an excellent product range and a much reduced cost base. The new 3 axis Colchester Tornado 220M and 120M, along with the Harrison Alpha 330U and 330T, move us into a larger market sector and all models have been very well received. 600 Centre, our UK marketing operation for imported machine tools, had another good year, maintaining its strong relationships with existing principals, including Fanuc, Mitsui Seiki and Bridgeport and securing distribution agreements for new ranges of Danobat cylindrical grinders and CNC lathes. It also introduced our new range of Richmond vertical machining centres into the UK market. These machines offer substantial technical advantages over all competing products and have had a very encouraging reception. Crawford Collets. The company has extended its product offering with the introduction of new ranges of collets and high quality tooling. Gamet Bearings, manufacturing super high precision taper roller bearings for machine tools and similar applications, benefited from the acquisition of the bearings business of Gamet Precision in France in April 2001. The consolidation of design and manufacturing in Colchester was achieved quickly and with minimal disruption and resulted in a doubling of UK export sales. New ranges of ISO metric and imperial ranges of super precision taper roller bearings were successfully introduced, resulting in further increases in market penetration, particularly in the Far East. Pratt Burnerd International, the leading producer of chucking systems and advanced electric turrets, maintained its extensive product development programme. The new programmable power chuck, launched at MACH 2002, generated high levels of customer interest as well as winning a major industry award. New ranges of cylinders and self-contained pneumatic chucks were also introduced. These include products tailored specifically for the North American market. This outstanding new product programme provides PBI with a strong platform for growth as demand recovers. Electrox, our manufacturer of laser systems and markers, was seriously affected by the downturn in the telecom and IT sectors, particularly in the USA. Action was taken to address this challenge both by reducing headcount and other overheads and by accelerating new product development. This has resulted in the introduction of the new Cobra range of low cost markers, which is already selling exceptionally well, as well as improvements to the established Scriba marker range. Electrox also developed a new higher power laser as the platform for the launch in the current year of an upgraded Lazerblade Plus profile cutting machine. This generated significant levels of interest at MACH 2002. 600 Machinery International, our international trading company, was affected by the uncertain global economic climate, particularly after September 11, which meant that a number of expected contracts have not yet been concluded. The current year will see a particular focus on the regeneration of business in the Middle East, where there is evidence of improving customer interest. 600 Finance, our strategic alliance with Close Asset Finance, continued to develop unique, innovative and flexible financing packages to facilitate sales, especially to our smaller UK customers. OVERSEAS OPERATIONS Parat, our German distribution business, achieved good sales of imported Fidia products from Italy, though the strength of Sterling restrained demand for the Harrison lathe range. Prospects for the current year are enhanced by the launch of new Fidia milling centres and sales of the new range of Harrison lathes and other Group products. 600 France significantly improved its performance, following our actions to reduce overheads and establish a more cost-effective dealership network. The business is now stabilised with a very low cost structure and significant potential to develop the sale of Group products. Clausing Industrial, our North American manufacturing and distribution business, continued to develop strong sales of standard lathes to the school and vocational education sector despite the generally depressed market. Cost levels were adjusted to reflect the harsh trading conditions. Colchester CNC, established last year as a specialist distributor of our higher-technology ranges in the USA, also suffered from falling demand. Significant overhead cost reductions were achieved and stocks progressively reduced during the year. Improvements were also made to the dealership network. This has established a strong platform for the current year, in which sales are expected to benefit from the recent launch of the Richmond range of vertical machining centres and the introduction of the new Colchester 220M lathe. 600 Machine Tools in Canada opened new offices in Quebec and Windsor which have already begun to generate additional sales. The company has also made a successful entry into the educational market. 600 International, our Prague office with responsibility for co-ordinating Group sales and procurement in Central and Eastern Europe, had a good year, with increased turnover of lathes into Eastern Europe and the launch of the Lazerblade product into the Czech Republic. 600 Machine Tools in Australia achieved an improvement in sales of Group products within a declining market and plans to extend its nationwide representation in the current year. 600SA, our operation in South Africa, improved its performance through further rationalisation and restructuring initiatives. The weakness of the Rand remains a constraint on sales of imported products, but the company is benefiting from strong demand for forestry equipment and locally manufactured lines, including truck cranes, aerial platforms and waste compactors. These are selling well in neighbouring countries, such as Zimbabwe and Botswana, as well as in South Africa. OUTLOOK The actions that we have taken to develop our best-ever range of products and to reduce costs throughout the business mean that we are well positioned to achieve incremental sales at improved margins in the current year. There are early signs of an improvement in both the US and UK economies and, as a result, most forecasts suggest that world-wide demand for our type of products will improve during the year, with recovery gaining momentum during the second half. Therefore, I am confident that we shall deliver an improving underlying performance during the coming year. Tony Sweeten Group Chief Executive 20 June 2002 AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT Period ended 30 Period ended March 2002 31March 2001 As restated* Â£000 Â£000 Turnover - continuing operations 80,451 97,950 Cost of sales (61,190) (72,064) Gross profit 19,261 25,886 Net operating expenses (16,894) (19,501) Operating profit - continuing operations 2,367 6,385 Transfer of goodwill previously written off to reserves - (216) Profit on ordinary activities before interest and taxation 2,367 6,169 Net interest receivable and similar income 299 526 Profit on ordinary activities before taxation 2,666 6,695 Taxation (1,210) (2,958) Profit for the financial period 1,456 3,737 Dividends (3,144) (3,215) Retained (loss)/ profit for the financial period (1,688) 522 Goodwill included in the profit and loss account previously written off - 216 Net effect on reserves (1,688) 738 Earnings per share - basic 2.5p 6.4p Earnings per share - diluted 2.5p 6.4p * Restated for the impact of FRS 19 "Deferred Taxation" AUDITED CONSOLIDATED BALANCE SHEET At 30 March 2002 At 31 March 2001 As restated* Â£000 Â£000 Fixed assets Intangible assets - goodwill 3,236 3,282 Tangible assets 16,215 17,576 Investments 84 84 19,535 20,942 Current assets Stocks 26,037 27,898 Debtors: - falling due within one year 18,061 20,708 - falling due after one year 30,951 24,979 49,012 45,687 Investments 1,990 2,570 Cash at bank and in hand 17,685 28,179 94,724 104,334 Current liabilities Creditors: amounts falling due within one year: - short-term borrowings (7,504) (6,827) - other creditors (17,807) (21,130) (25,311) (27,957) Net current assets 69,413 76,377 Total assets less current liabilities 88,948 97,319 Creditors: amounts falling due after more than one year: - loans and other borrowings (653) (6,027) - other creditors (1,131) (962) (1,784) (6,989) Provisions for liabilities and charges (7,519) (5,971) Net assets 79,645 84,359 Capital and reserves Called up share capital 14,020 16,512 Share premium account 13,517 13,510 Revaluation reserve 1,709 1,762 Capital redemption reserve 2,500 - Profit and loss account 47,899 52,575 Shareholders' funds (including non-equity) 79,645 84,359 * Restated for the impact of FRS 19 "Deferred Taxation" AUDITED CONSOLIDATED CASH FLOW STATEMENT Period ended Period ended 30 March 2002 31 March 2001 Â£000 Â£000 Â£000 Â£000 Net cash inflow from operating activities 362 6,095 Returns on investments and servicing of finance Interest received 1,366 1,625 Interest paid (1,140) (1,050) Interest element of finance lease rental payments (60) (110) Preference dividends paid (60) (132) Returns on investments and servicing of finance 106 333 Taxation repaid/(paid) 202 (789) Capital expenditure Purchase of tangible fixed assets (1,143) (1,532) Net receipt from sale of tangible fixed assets 116 2,443 Capital expenditure (1,027) 911 Acquisitions and disposals - acquisitions (597) - Equity dividends paid (3,083) (3,083) Net cash (outflow)/ inflow before use of liquid resources and (4,037) 3,467 financing Management of liquid resources Withdrawal of term deposits 13,501 7,307 Reduction of current assets - investments 580 627 Management of liquid resources 14,081 7,934 Financing Issue of ordinary share capital 15 - Repayment of preference shares (including premium) (2,738) - New bank loans - 1,055 Repayment of bank loans (6,048) (1,087) Capital element of finance lease rental payments (629) (691) Net cash outflow from financing (9,400) (723) Increase in cash in the period 644 10,678 Cash, for the purpose of the cash flow statement, comprises cash in hand and deposits repayable on demand, less overdrafts payable on demand. Liquid resources are defined as term deposits and amounts held as current assets-investments. NOTES 1. The financial information set out above does not constitute the company's statutory accounts for the period ended 30 March 2002 or the period ended 31 March 2001 but is derived from those accounts. Statutory accounts for 2001 have been delivered to the registrar of companies, whereas those for 2002 will be delivered following the company's Annual General Meeting. The auditors have reported on the 2001 accounts; their 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 9 September 2002 to shareholders on the register at 11 August 2002. This information is provided by RNS The company news service from the London Stock Exchange

Companies

600 Group (SIXH)

Full Archive

UK 100

Latest directors dealings

All directors dealings today