600 Group defies Brexit uncertainty

Paul Dupee (left) at the opening of 600's new European Technology Centre near Halifax earlier this year
Paul Dupee (left) at the opening of 600's new European Technology Centre near Halifax earlier this year
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Machine tool maker 600 Group has announced a jump in both sales and profits despite macro-economic and political uncertainties in the UK and the US.

The Elland-based firm warned that these uncertainties may still create some short term disruption as it announced a 28 per cent leap in underlying pre-tax profits to £1.3m in the six months to September 28. Revenue rose 13 per cent to £28m.

When asked about the uncertainties facing the group, finance director Neil Carrick said: "We've got Brexit in the UK which is not helping. The UK business is actually doing very well. We've changed our way to market so we're going to direct selling rather than through distribution in the UK.

"We moved our premises at the beginning of the year to Elland, so it's a very professional outlook when people come now. It's a customer experience. It's like a car showroom rather than an old manufacturing site, so that's helped significantly. The move to Elland in February has been a big boost. The business is a lot more streamlined."

In the US, he said the uncertainty has been caused by concerns over trade wars.

"It stops people making big capital spends. It slows things down. We're not losing business, it's just slowing trading down a little bit," he said.

In terms of worries over tariffs caused by Brexit, Mr Carrick said that only got 7 or 8 per cent of 600's business goes into mainland Europe.

"So it's not massive in respect of potential tariff issues, although we are looking to try and expand in Germany, which is our biggest market, both for lasers and machine tools," he said.

"Generally it's just the same effect here where it's just putting people off from making that decision. It's an excuse not to make the decision until they know what's happening and which way we're going."

The group has declared an interim dividend of 0.25p per share, payable in January.

"The underlying business is good. These issues, in the short term, may cause us some more pain, but we're generally very happy with the underlying business," said Mr Carrick.

"We've de-risked the business significantly. Getting rid of the pension scheme and actually getting that cash in, in this period has been a big boost. That has released and taken off the shackles so that's reduced significantly the liabilities there.

"We've restructured the UK business and de-risked that, so we're not really doing our own manufacturing in the UK. We're outsourcing that so there's less cap-ex requirement."

The group's executive chairman Paul Dupee said the six-month period saw progress in its strategy. In May, it received the £4m post tax pension scheme surplus refund to the company and in June it bought Control Micro Systems (CMS).

Mr Carrick said: "CMS has bedded down very well. We're really pleased with it. It's everything we hoped it would be.

"They weren't really marketing themselves and we've got very wide sales and marketing capabilities from our existing laser business so that's one of the benefits we see coming from that, but they're very strong on engineering.

"They're right at the top end of the scale. They're doing pharmaceutical, medical and robotics. They're very capable so that helps us get into the top end of the market which is obviously slightly less competitive and better margin."

Analyst Eric Burns at WH Ireland said: "Against the backdrop of some pretty tough overseas markets, today’s interims show good progress in revenue and profitability, albeit this was driven by a knockout performance by both the UK operations and CMS, acquired in June.

"On a purely organic basis, and stripping out exceptionals relating to settlement of the pension scheme, the performance was broadly flat. The UK performance was aided no doubt by substantial self-help measures in streamlining the business and the move to a newly kitted out facility in Elland, West Yorkshire."