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600 Group's loss in 'worst' recession
BRITAIN'S biggest machine tool maker 600 Group reported an £8m annual loss yesterday and described the current recession as the worst in living memory.
Chief executive David Norman said he had lived through recessions in the past, but this was the worst he had ever seen.
"The uncertainty in the financial sector has certainly exacerbated this recession," he said. "Any hint of a downturn and people panic because of global supply chains."
Asked when he saw a recovery taking place, he said the only areas where the Heckmondwike-based group is seeing any signs of encouragement are the UK and US where demand for spare parts has increased.
"My view is we are bouncing along the bottom," he said. "We might see some improvement when the destocking process concludes, which is likely to be from October onwards."
He added that sales of conventional machines, which don't have computer controls and are therefore lower ticket items, are holding up better. These machines tend to go to universities, schools and technical colleges and are performing well thanks to government educational budgets.
600 said there would be further job losses to come, but they will be in "tens rather than hundreds".
The main area of cost saving will be establishment costs as the group will no longer need to heat and provide electricity to disused buildings.
The company plans to close one more small building in the US next year, but then no more are planned.
In the first phase of its turnaround strategy the group closed 12 sites and cut 210 jobs out of 700, leaving the company with less than 500 staff going forward.
In the second phase, which will produce annualised savings of 5m following a one-off cost of 2.5m, the group will lose 'tens' of staff rather than 'hundreds'.
Earlier this year the group announced plans to reduce costs by cutting 110 jobs, including 70 in the UK. Of these, 45 were lost in Yorkshire, split between its Heckmondwike and Halifax plants.
These were in addition to 115 job losses announced last year.
600 has also restructured the business to improve efficiency and reduce costly duplication. This included consolidating sales, marketing and distribution for UK machine tool products in West Yorkshire.
The group's shares fell 2.75p to close at 16.25p.
Analysts at Altium Securities said the results were marginally below expectations.
The group reported a pre-tax loss of 8m, compared to a pre-tax profit in 2008. The group said sales fell by two per cent to 76.2m in the 52 weeks to March 28, while losses from continuing operations amounted to 7.6m, down from a profit of 2m a year ago.
Costs in relation to closed operations and restructuring widened to 6.1m from 200,000 a year ago.
Altium said that due to the continuation of challenging conditions, it had lowered its 2010 profit forecast to a loss of 1.2m from a 500,000 profit. But it maintained the hold recommendation on the shares and said: "We think management's firm actions should allow the business to move back into profitability by the second half.
"Our updated estimates reflect the more challenging environment."
Mr Norman, who was brought up in Huddersfield, said: "I see my prime responsibility to create a secure future for the majority of the workforce. To keep things going as they were was not an alternative."
The firm is also shrinking all US operations into one facility in Michigan, closing its South African machine tool plant, closing a factory in Germany and coordinating all European sales and marketing from one site.
BEGINNING LIFE WITH A NAME AND NUMBER
600 Group is named after its early head office address at 600 Commercial Road in East London.
The company, which has grown over the years into one of the UK's leading metal recovery and engineering businesses, became a public company in 1947.
600, now based in Heckmondwike, specialises in the manufacture and distribution of state-of-the-art machine tools and ancillary products.
Its brands include Harrison and Colchester Lathes, Richmond Machining Centres, Electrox Laser Marking Systems and Clausing mills, drills, saws, grinders and fabrication centres.
Its accessory products include Pratt Burnerd chucking systems, Crawford Collets and Gamet Bearings.
The group has been going for 150 years and is now the largest machine tool PLC quoted on the London stock market.
Last year 600 Group rejected a takeover approach by Precision Technologies Group.
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