Restructured 600 Group looks at aerospace as area to grow

The machine tool maker yesterday reported a strong recovery from the recession, as underlying operating profits hit £1.2m in the year to the start of April, from £1.1m losses a year earlier.

The group, which recently changed its headquarters from Heckmondwike to Leeds, reported revenues up 11 per cent at £50.6m.

Chief executive David Norman, who has steered the group through a tough two years which included factory closures and redundancies, said he is looking forward to growing 600 Group.

“What we would like to see is a buy-and-build strategy and I think that is what our shareholders would like us to do,” he said.

“Aerospace companies would be an area that’s interesting to us.

“Size is a restriction and I think we’re undervalued. A £50m turnover PLC is going to be rated lower than a £100m one, and for that reason within two to three years our desire is to get north of that level.

“I’m hopeful now we’re showing reasonable a profit the equity markets will be supportive.”

Shares in 600 Group closed up 1p at 30.5p yesterday, valuing it at £19.5m.

600 Group also revealed its chairman Martin Temple, who was appointed in September 2007, is not seeking re-election at its annual shareholder meeting.

He will be replaced by United States investor Paul Dupee, the managing partner of Haddeo Partners, which holds 25.3 per cent of the group’s shares.

Mr Temple said after completing its turnaround, 600 is now “considerably stronger... and well-placed to proceed to the next stage of its development”.

Mr Norman added: “Martin has been a steady hand at the helm and shown strong leadership during the difficult period we had.”

600 Group said it has reduced operating expenses by £15.8m over the past two years, and Mr Norman said the turnaround phase is largely over.

The engineer recently switched its listing from the main market to the Alternative Investment Market, and Mr Norman said this should make 600 “faster on our feet and enable us to move quickly on investment”.

Late last year the company bought a machine tool manufacturing facility in Tarnow, Poland, for 1m euros. In April it raised £1.76m through a share placing to increase production. Mr Norman said the integration of this site is going well.

The Polish acquisition allowed 600 to take much more of its manufacturing in-house. It now makes roughly 50 per cent of its own products, compared with the five per cent level it had fallen to before the restructuring.

“I was concerned that we were a distributor selling to distributors,” he said. “This was not a great business model from a working capital or margin point of view.”

The group’s four divisions span machine tools, precision engineered components, laser marking and mechanical handling and waste management.

Analyst David Buxton at house brokers Finncap said: “The move of some production to Poland gives plenty of ongoing scope to reduce input costs and the capacity to scale up machine tool output. The group has the ambition to make bolt-on as well as strategic acquisitions. The shares appear attractive at these levels.”

Name marks company’s origins

600 Group gets its name from the company’s early head office address at 600 Commercial Road in East London.

600 Group formed its first machine tool company in 1932 and became the UK’s leading lathe manufacturer through the acquisition of Colchester Lathes in 1954 and TS Harrison in 1971. It became a public company in 1947.

600 Group specialises in the manufacture and distribution of state-of-the-art machine tools and ancillary products.

The group’s operations span machine tools, precision engineered components, laser marking systems and mechanical handling and waste management equipment.

It sells into more than 180 countries worldwide.