The 600 Group hit by fragile trading conditions

Demand for machine tools has been very weak in the UK and Europe

The Heckmondwike-based group said pre-tax profits fell from £3.7m to £1m in the year to April 2. Underlying pre-tax profit fell from £2m to £1.5m, based on continuing operations and before special items.

Executive chairman Paul Dupee said market conditions were challenging in the machine tools sector throughout the year.

"Despite the necessary actions to reduce costs, expand markets in Asia and the improved trading levels achieved in the USA there was a weaker than expected performance in the UK and Europe," he said.

600 said that only 13 per cent of group sales were to EU countries and itthe group is firmly focused on developing new markets outside of Europe, particularly in South East Asia.

Speaking about Brexit, Mr Dupee said: "Although it is very early to speculate on the effect that the UK leaving the EU may have in the coming year, we would ask shareholders to consider a number of important factors which we believe reduce the risks for the group associated with this new trading environment.

"Over 60 per cent of the group's activity is currently conducted in the USA and these businesses are the main profit drivers of the group. Furthermore, the dollar income we receive gives us a natural hedge against the majority of our purchases which are in dollars."

He said the US and Australian machine tool businesses matched last year's performance.

"We consider that to be quite an achievement considering the difficult state of the markets," said Mr Dupee.

"However, business conditions in the UK and Europe were very fragile and we took the necessary steps to restructure our activities and reduce our cost base accordingly."

The UK and European markets were challenged by weak economic growth and depressed commodity prices.

Analyst David Buxton at FinnCap said: "Full year results were marginally higher than our forecasts despite some challenging market conditions. Trading is currently on track to achieve our 2017 expectations.

"Considerable change has occurred over the past year, which should reposition the group to manufacture more effectively, with a focus now on rejuvenating sales growth.

With a price target of 13p, the shares are trading at a deep discount and offer an attractive valuation."