600 Group faces Brexit/Trump headwinds

Machine tools maker The 600 Group said market conditions remain unpredictable and consumer confidence has been hit by European worries and concerns over the election of Donald Trump.

600 Group said it had had to implement a price increase since November 1 on all products

Whilst the Heckmondwike-based group saw some benefit from the weakness of the pound after the Brexit vote, sterling’s collapse increased input costs for the UK which are predominately dollar based.Trading in the European market proved to be difficult, with revenue falling 4 per cent in the six months to October 1. Executive chairman Paul Dupee said: “Since Brexit, enquiries have improved by approximately 40 per cent led by the UK, Middle East and Northern Europe, but conversion to orders remains weak and patchy.”The weakness of sterling following Brexit has increased input costs and, in line with most of its competitors, 600 said it had had to implement a price increase since November 1 on all products.“Market conditions generally remain unpredictable and although current enquiry levels are at a relatively high level, customer confidence to commit to purchase is, we believe, still affected by the uncertainties of Europe and policies which have been suggested will be implemented by the new US President,” said Mr Dupee. “Underlying order activity is currently giving us less than two month’s visibility and therefore trading results are subject to uncertainty and potential monthly volatility.”600 said that despite the uncertain and challenging market conditions, it had delivered “acceptable“ half year results. The group said its order book has improved and is 30 per cent up on last year with high demand for new quotes.“The anticipated infrastructure spending programmes outlined in both the UK and the US should improve the market for capital goods, and the products we supply in particular, and the medium term market outlook therefore appears to be brighter,” said Mr Dupee.“The actions taken to reduce overheads and become more efficient have yielded better margins.” 600 said it has continued to invest in facilities and new product developments to strengthen the group’s brands in niche markets worldwide.The firm said pre-tax profits fell 13 per cent to £1.4m in the six months to October 1. However underlying pre-tax profits, from continuing operations and before special items, were flat at £760,000.Revenue was down less than 1 per cent at £23.2m in a difficult trading environment. Earnings are being retained to help grow the business, so no interim dividend was paid.Revenue in the US business fell 5 per cent, or 19 per cent at constant currency rates, against a backdrop of a market declining by 17 per cent.Quotation activity was high, rising 15 to 20 per cent, but the actual placing of orders was hit by the uncertainty created by Brexit and the election of Mr Trump. The group reported a pick up in order activity since the US election.Analyst David Buxton at FinnCap said: "The group’s half-year results are showing the first signs of an operating turnaround starting to bear fruit, particularly in Laser Marking."The increase in the level of enquiries and order book improvement bodes well for the second half, although order visibility remains limited. Nevertheless, enquiry levels are building momentum. As such, management have stated increased confidence in achieving full-year forecasts. The shares have substantial upside from the current levels."

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