600 Group reaps the rewards of debt cut plan as revenues rise

In a pre-close trading update, the Heckmondwike-based group said group revenues for the year to March 30 showed double digit growth.

The group said higher growth in the second half followed an increase in market share in the US, where the company sells drills, saws and grinding machines brought in from its supply base in Taiwan.

Chief executive Nigel Rogers said: “Market conditions have been relatively difficult, but we have very good distribution and very high service levels.

“Machine tool market statistics were quite subdued in the second half, but our own sales were growing.”

The group also benefited from improvements in customer lead times and inventory availability in Europe.

Over the year, 600 was able to invest in design and development following the completion of its disposals programme during the second half.

Coupled with the proceeds of the share issue in September 2012, the group has also used the funds to refurbish its Heckmondwike site.

The group has redesigned and improved a number of its tools including the Tornado turning centre which is assembled in Heckmondwike.

Mr Rogers said the benefits of the investments are clear and are contributing to customer confidence.

The group plans to showcase its new products and better facilities at various distributor events over the coming weeks.

Mr Rogers said the group has reduced debts and the debt reduction plan is on target.

He said this would provide a “robust platform” to deliver future growth opportunities.

He added that preliminary results for the year to March 30 are expected to meet current market expectations.

These will be announced on Wednesday, June 26 alongside an update on trading prospects for the coming year.

Analyst David Buxton, at FinnCap, said: “The trading update confirms the turnaround.

“The group has announced an encouraging pre-close update for the year to March, with progress on a number of levels since the change in management, disposals and placing.

“Overall results are expected to meet expectations, which is a positive result in the face of more challenging market conditions in the second half.

“The shares are valued on a P/E rating of 6.5x for 2014, which we consider is extremely attractive for a recovery story, with strong management propelling an internally driven turnaround.”

Under the leadership of Mr Rogers, the former Stadium Group chief executive, 600 has been restructuring and streamlining.

It sold its Heckmondwike freehold site to a privately-owned company, raising £1.1m to repay bank debt and provide extra working capital.

Its machine tools and precision engineering businesses stayed at the same site in a newly-refurbished leasehold factory and office complex.

Mr Rogers’ other moves have included selling its South African waste handling machinery business, cutting jobs at its Heckmondwike factory, moving the head office from Leeds to Heckmondwike and quitting Polish manufacturing.

The Polish factory was only bought in late 2010, from weapons group Bumar, for 1m euros.

Last September 600 announced hefty annual losses because of the restructuring and the cost of quitting Polish manufacturing.

The company reported annual losses of almost £15m last year, compared with £2.9m profits a year earlier.