DIVERSIFIED engineer The 600 Group is raising £2.5m through a loan from its biggest shareholder to expand the group through acquisitions as it completes the final stage of its turnaround.
The Heckmondwike-based company has had a tough two years following a slump in demand during the recession.
In the year to April 3, the group made an overall pre-tax loss from continuing operations of 8.7m, down from a loss of 8m the previous year.
Annual losses before various costs halved from 2.2m to 1.1m.
But 600 chief executive David Norman said the group saw an improvement in the second half which has continued into this year.
The group made an operating profit of 600,000 in the second half, compared with the operating loss of 2.5m it showed the year before.
"We expect to make a profit for the full year this year," said Mr Norman.
"We were back in the black in the second half and the restructuring is now more or less complete."
Shareholders will be asked to vote on the loan of 2.5m, or 2m after expenses, at a general meeting on August 27 at the company's headquarters in Heckmondwike between Leeds and Huddersfield.
This is necessary because major shareholder Haddeo Partners and its affiliates would have a potential 38 per cent stake in the group if the loan gets approved.
This would take it above the 30 per cent threshold which means a mandatory offer must be made.
But Haddeo has no intention of taking over the company so a waiver has been granted by the Takeover Panel as long as shareholders approve the deal.
Mr Norman said he thought shareholders would be supportive of the fundraising.
He expressed disappointment that the shares fell 1.5p, or 8.3 per cent, to 16.5p last night, but said there was a lot for investors to digest.
600 is Haddeo's first investment following its decision to buy a 28.2 per cent stake in the company in March.
Haddeo's is formed of a partnership between United States investor Paul Dupee and Rupert Hambro, part of the Hambro banking dynasty.
Haddeo is keen to develop 600 through acquisitions, which are likely to be UK-based and will enhance the group's diversification beyond machine tools into areas such as precision engineered components, laser marking, mechanical handling and waste management.
Unlike serial Yorkshire investor Peter Gyllenhammar, Haddeo is expected to look beyond the region for acquisitions.
The plan is that as the group returns to profit and the share price picks up, 600 will raise future funds through rights issues or placements which would in turn dilute Haddeo's stake in the company.
In the first three months of the new calendar year, covering April, May and June, order intake rose by 31 per cent.
The group's order book is currently 16 per cent higher than this time last year.
Mr Norman said the Oxford Economics Group is predicting a significant upturn in the machine tools market in 2011.
It is predicting a five per cent fall in 2010, a 25 per cent market increase in 2011 and a 23 per cent increase in 2012.
The group's annual sales fell from 76.2m to 45.4m as it ditched some of its low-margin business.
In addition the global machine tools market collapsed in 2009 – it was down by 43 per cent worldwide.
The restructuring is now almost complete. Over the past 18 months the group has reduced the number of its locations from 29 to 12.
Mr Norman said the "vast majority" of job losses have already taken place.
The group now employs around 400 staff, down from a peak of 700 around two years ago.
At the year end net borrowings were 4.3m, up from 1.5m the previous year.
Name started long way south
600 gets its name from the company's early head office address at 600 Commercial Road in East London.
The company, which has grown over the years into one of the UK's leading metal recovery and engineering businesses, became a public company in 1947.
600 Group, which is now based in Heckmondwike in West Yorkshire, specialises in the manufacture and distribution of state-of-the-art machine tools and ancillary products.
Its brands include Colchester-Harrison, Pratt Burnerd International, Crawford Collets and Gamet Bearings.
The group has been going for over 150 years and is now the largest machine tool PLC quoted on the London stock exchange.
Two years ago the company rejected a takeover approach by Precision Technologies Group.