No need to fear Brexit, says 600 Group

The announcement follows a 10 per cent fall in the Heckmondwike-based group’s share price over the past month. The group’s shares rose nearly 8 per cent to 8.75p following the update.

Commenting on the impact of Brexit, 600’s executive chairman Paul Dupee said: “Although it is very early to speculate on the effect that leaving the EU may have in the coming years, 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.

“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 that over 15 per cent of the group’s revenue is derived from the supply of spares parts and services and this is not dependent on achieving new sales but simply servicing its existing client base.

“Lastly, the growth of our global industrial laser systems business is largely driven by legislative changes and the requirement for traceability both of which are increasing worldwide irrespective of the situation in the UK,” he added.

Analyst David Buxton at FinnCap said: “It is difficult at this early stage to speculate about the impact of Brexit. However, 600 points out that the group generates 60 per cent of its revenues from the US, which is the main profit driver for the group.

“Dollar revenues are a natural hedge against the majority of purchases which are in dollars. Only 13 per cent of the group’s revenues last year came from the EU. Given the growth of areas such as SE Asia, the proportion of sales in Europe is expected to decline any any case. 15 per cent of revenues are spares and parts for the existing client base, while the growth in industrial lasers will be largely driven by legislative change. No change to trading forecasts, with net debt now expected to be £2.0m lower by the end of March 2017 at £9.4m.

“We believe the announcement should be taken positively and that the shares offer good value at these levels.”

600 also announced the sale for cash of its Letchworth Garden City long leasehold property for its book value of £2.0m net of selling expenses.

“Following the integration of the two industrial laser system businesses TYKMA and Electrox, manufacturing activity has been centered in the new purpose built facility in Ohio, USA and consequently the existing UK site has become too large for the European sales support and service operation which is moving to a new leased site in Letchworth,” said Mr Dupee.

The net proceeds after costs will be applied in reduction of the group’s UK senior bank facility.