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Drop in demand sees 600 Group in the red
MACHINE tool firm 600 Group yesterday added to the gloom in the engineering sector by warning of an annual loss as sales tumble 16 per cent on a year ago.
The West Yorkshire company, the UK's biggest machine tool maker, plans to reduce costs by cutting 110 jobs, including 70 in the UK. Of these, 45 will be lost in Yorkshire, split between its Heckmondwike and Halifax plants.
In a trading update covering the four months to the end of January, the group said tumbling demand as customers scale back capital spending has hit revenues in the UK and North America.
As a result, it expects to report an operating loss for the full year.
The cuts come on top of 115 job losses announced last year. The group will employ fewer than 500 staff once the latest are completed.
600 is also restructuring the business to improve efficiency and reduce costly duplication. This includes consolidating sales, marketing and distribution for UK machine tool products in West Yorkshire.
Chief executive David 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.
The restructuring should help save it more than 5m a year, but will incur a one-off 1.9m charge. 600 expects restructuring to be completed in six months and savings emerge in the next financial year.
"It was always intended to reorganise in some way but we have probably had to go a bit deeper than previously anticipated particularly in terms of numbers," said Mr Norman.
Sales to educational establishments – its lathes are used in college training courses across the UK – are "holding up well". The group's spares and servicing business is also fighting back, as customers choose to repair equipment rather than invest in new machinery.
600 is mainly reliant on relatively small subcontractors, and therefore does not see as violent a slump when big manufacturers take drastic action to scale back production.
But despite this, the slowdown is bleeding through.
Its laser marking business had been in line to supply Honda's Swindon plant, which would lead to its systems being rolled out across the car giant's factories.
However, a recent decision by Honda to shut the Swindon plant for four months from the end of January meant this order was deferred.
Mr Norman said he hopes deferred capital spend will bounce back in April and beyond, as companies set new budgets. However, he does not predict recovery until at least October 2010.
"When you go through a period of adjustment there tends to be a period where orders do deteriorate," he said.
"Once that period of adjustment has been then usually there's an underlying level of demand.
"I'm confident we will ride it out because we are taking very firm, decisive action. It leaves us with a good, forward-facing structure."
And, as its rivals come under increasing pressure, Mr Norman hopes to snap up some bar-gains.
"We can look for value opportunities in the market," he said. "We will keep our eyes and ears open for any potential acquisitions."
Analysts at house broker Altium Securities agreed: "While the news on trading is disappointing, we think that management's response is appropriate in the circumstances and will ensure that 600 Group emerges from the downturn much leaner and fitter and able to take advantage of market share opportunities."
Taken from the address
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.
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