TIDMSIXH
RNS Number : 6887H
600 Group PLC
19 November 2018
The 600 Group PLC
Building a platform for growth
Unaudited Interim Results for the six months ended 29 September
2018
The 600 Group PLC ("the Group"), the diversified industrial
engineering company (AIM: SIXH), today announces its unaudited
interim results for the six months ended 29 September 2018.
Financial highlights
-- Revenues increased 2% to $32.8m (FY 18 H1: $32.2m)
-- Underlying* operating profit up 20% to $1.98m (FY18 H1: $1.64m)
-- Underlying* pre-tax profit up 36% to $1.46m (FY18 H1: $1.07m)
-- Group order book up 5% provides continued good visibility
-- Interim dividend of 0.25p per share (FY18 H1: zero)
Strategic & operational highlights
-- Continued reduction in fixed overheads provides increased operational flexibility
-- $270m pension scheme liabilities buy-in de-risks balance sheet
-- Expected post-tax cash surplus of between $4m -$5m to be
repaid to the Group on final scheme wind-up
-- Investment in new people and strengthened management team with senior promotions
-- Continued new product development and customer offering improvement across both divisions
-- Enhanced direct sales and distribution resource to support organic growth
*from continuing operations, before special items.
Paul Dupee, Executive Chairman of the Group, commented:
"We are pursuing a strategy to build a global industrials
business. In the period we made further progress in de-risking the
Group, both operationally and financially, as we create a more
flexible platform from which to leverage the strength of the
Group's brands and grow the business into increasingly diversified
niche markets worldwide."
"As previously announced, the buy-out of the Group's $270m
pension liabilities will significantly de-risk the Group's balance
sheet, with the expected $4m - $5m post-tax cash surplus providing
improved financial flexibility."
"Despite certain macro-economic and political uncertainties
across our end markets, enquiry and quotation activity remains good
with revenue visibility underpinned by an improved orderbook. I am
also pleased to announce an interim dividend of 0.25p per share,
reflecting the Board's confidence in the Group's prospects and the
significant opportunity ahead."
Reconciliation of underlying profit before taxation:
26 Weeks ended 26 Weeks ended
29 September 30 September
2018 2017
$m $m
--------------- ---------------
Revenues 32.80 32.19
Cost of sales (21.00) (21.10)
--------------- ---------------
Gross profit 11.80 11.09
Net operating costs (9.82) (9.45)
--------------- ---------------
Underlying operating profit 1.98 1.64
Bank and loan note interest expense
(net) (0.52) (0.57)
--------------- ---------------
Underlying profit before tax 1.46 1.07
Other items:
--------------- ---------------
Interest on pension surplus 0.65 0.86
ProPhotonix sale - 1.26
Pensions charge (1.31) -
Other Special items 0.32 (0.40)
Amortisation of shareholder loan costs (0.14) (0.12)
--------------- ---------------
(0.46) 1.60
--------------- ---------------
Reported profit before tax 0.98 2.67
=============== ===============
Enquiries:
The 600 Group PLC Tel: 01924 415000
Paul Dupee, Executive Chairman
Neil Carrick, Finance Director
Instinctif Partners Tel: 0207 457 2020
Mark Garraway
James Gray
Spark Advisory Partners Limited (NOMAD) Tel: 020 3368 3553
Matt Davis
Miriam Greenwood
WH Ireland (Broker) Tel: 020 7220 1666
Adam Pollock
The 600 Group Plc
Executive Chairman's Statement for the six months ended 29
September 2018
Overview
I am pleased to report that we have continued to make good
progress in improving the Group's profitability and increasing
revenues during the six month period ended 29 September 2018.
In the period, the Group undertook a transformational pensions
transaction which freed the Group from the risks associated with
$270m of scheme liabilities, significantly de-risking the Group's
balance sheet and entirely securing the UK scheme for its some
2,000 pensioners and 800 deferred members through a buy-in
insurance policy with Pension Insurance Corporation Plc. Once
individual policies have been issued to all members - expected to
take several months - the buy-out will be complete and the scheme
can be wound up. Pursuant to the full wind-up and less the
statutory tax charge of 35%, the Group expects to receive a one-off
cash payment from surplus funds currently estimated to be $4m -
$5m, providing improved financial flexibility.
To underpin our strategy to grow the Group into a global
industrials business, we have continued to invest in new people as
well as strengthening our senior management team. As noted in our
announcement on 24 October 2018, Terry Allison has been appointed
to the newly created role of Chief Operating Officer for the Group
and Don Haselton to the newly created role of Manager
Director-Development. We are also pleased to announce that Zelco
Galic, an engineer with extensive operational and managerial
experience in Australia and the USA, has joined the Group as the
new Managing Director for our Australian operations, which is our
main gateway into the large South East Asian market.
To support organic growth, we have also continued to invest in
new product developments in both divisions to continue our
strategic goal of leveraging the strength of the Group's brands
into increasingly diversified niche markets worldwide.
Despite certain macro-economic and political uncertainties
across our end markets slowing customers' purchase decisions,
enquiry and quotation activity remains good with revenue visibility
underpinned by an improved orderbook, up 5% on this time last
year.
Results and dividend
Revenue was $32.8m (FY 18 H1: $32.2m) with net underlying
operating profit (excluding special items) up 20% to $1.98m (FY18
H1:$1.64m).
After taking account of interest on bank borrowings and loan
notes, the underlying Group pre-tax profit before special items was
$1.5m (FY18 H1: $1.1m) and $0.98m (FY 18 H1: $2.7m including the
ProPhotonix profit on disposal) after special items.
Special Items have been noted separately to provide a clearer
picture of the Group's underlying trading performance. In the
current period share option costs, costs for the actuarial effects
of members taking transfers from the scheme prior to the buy-in
policy purchase, the amortisation of intangible assets acquired,
amortisation of loan note expenses and the pensions credit interest
on the scheme surplus, which are all non-cash costs, are included
in special items. In addition, an historical VAT credit recovered
on pension costs has been recorded and a cost of dilapidation for
leasehold premises has also been recognised. (see note 3)
In the prior year a credit of $1.3m was included as a result of
the sale of the Group's holding in ProPhotonix Ltd at the end of
August 2017. Reorganisation and redundancy costs as a result of the
finalisation of the integration of the TYKMA and Electrox
businesses and costs incurred in restructuring the UK machine tools
business were also incurred in the prior year.
The total profit attributable to shareholders of the Group for
the financial period was $1.2m (FY18 H1: $2.4m), providing earnings
of 1.03 cents (equivalent to 0.76p) per share (FY18 H1: 2.26cents
(equivalent to 1.75p). The underlying earnings per share (excluding
the pension interest and other special items) were 1.25c
(equivalent to
0.92p) (FY18 H1: 1.02c (equivalent to 0.79p).
The Board is pleased to be able to continue to improve returns
for shareholders and has declared an interim dividend of 0.25p per
share payable on 28 December 2018, to shareholders on the register
at 30 November 2018.
Financial position
Net assets decreased in the six month period by $30.4m to
$28.3m, largely as a result of the pension asset decrease. Net
assets excluding the effect of pension schemes (and associated
taxation) increased by $0.5m to $24.9m as a result of net profit
generation and allowing for the final dividend payment which was
paid at the end of September 2018.
Stock levels fell by $0.5m from the March year end despite
support for new product launches. Trade debtors remain under
control and the level of creditors have been reduced during the
period by $2.6m. The restored dividend was paid to shareholders in
September which cost $0.74m and $0.9m was expended on capital
expenditure of which $0.5m was on the Industrial Laser software
upgrade.
Payments in respect of the restructuring of the UK machine tools
business and the closure and move of the TYKMA Electrox UK
operation into the UK machine tools business, which were in
creditors at March 2018, amounted to $0.8m during this period. As a
consequence of these cashflows net debt at the end of September
2018 was $17.1m (March 2018 $15.6m).
UK annual working capital facilities were renewed in September
2018 with HSBC to support the UK machine tool business and Bank of
America have agreed an increase to their annual working capital
facilities for Clausing and TYKMA in the USA in November.
UK pension scheme
The adjustment to the accounting valuation of the UK pension
scheme reflects the buy in of the insurance policy in July 2018 to
fully cover all the liabilities of the scheme. The insurance policy
fully removes all the future risks of life expectancy changes and
investment risk from the scheme and eliminates from the Company a
potential burden which was over ten times its market value. Given
the policy is now the primary asset of the scheme and exactly
matches all liabilities it is measured at the same value as the
liabilities, which are valued under the prescribed accounting
assumptions under IAS 19 until the individual policies are issued
to members and the scheme wound up. It should be noted that the
cost of achieving this beneficial situation is normally higher than
both the accounting basis and the more prudent trustees funding
basis reflecting the capital requirements of the insurer to meet
the inherent risks over the remaining lifetime of the members.
The change in valuation and actuarial movements of $43.5m and
the associated deferred taxation of $15.2m have been shown in the
Statement of Comprehensive Income and the resultant surplus of
$6.9m (which includes an estimate of ongoing expenses until
wind-up) shown on the Consolidated Balance sheet.
The surplus will be repaid to the Company once the individual
annuity policies have been issued to all members and the scheme
finally wound up which, after the statutory tax deduction of 35%,
is expected to be between $4m and $5m.
Operating activities
Machine tools and precision engineered components
Revenues in our UK business grew strongly at 10% compared to the
prior year and this, combined with the restructuring undertaken in
the previous financial year and the revised management team led by
Terry Allison, produced a significant improvement in the business
resulting in a 6.3% operating margin against a break-even result
for the same period last year. The Australian business also
continued its recovery with a further 11% improvement on the prior
year revenues. The USA business, however, remained flat with the
concerns of a trade war slowing down customers decision making
process.
Despite certain macro-economic and political uncertainties
across our end markets slowing customers' purchase decisions,
enquiry and quotation activity remains good and the division as a
whole is reporting order books up 3% on this time last year.
The worldwide machine tool industry was estimated by Oxford
Economics at nearly $88bn in annual sales in its Autumn 2018 report
with mid-single digit growth expected across our current markets of
operation although the UK growth may suffer depending on the
outcome of Brexit. In this context the division continues to seek
opportunities to leverage our industry-recognised brands and expand
our worldwide distribution network.
Underpinning organic growth is a focus on product development,
which has continued during the period particularly in the UK with
the newly re-branded 'Colchester Machine Tool Solutions' launching
new products that add to the higher end capabilities of the brand's
product line-up. To further improve growth, additional resource has
also been put into direct sales in the UK market and a new
distribution partnership established in Germany.
The results of the division were as follows:
FY19 H1 FY18 H1
$m $m
Revenues 23.11 21.98
Operating profit* 1.53 0.98
Operating margin* 6.6% 4.5%
*from continuing operations, before special items.
Industrial Laser systems
US sales in the period suffered from a slowing of customer
orders because of concerns over a trade war. The division's results
comparatively are also impacted by a one-off large order of $0.8m
that fell in the first half of the prior year and whilst there are
several of these types of projects currently being quoted none came
to fruition in the first half of this financial year. Quotation
activity in this division has also been good and the recent
International Manufacturing Technology Show in Chicago, where
several new products were launched, was very successful. The
division's combined order book is currently up over 10% on this
time last year providing good revenue visibility.
The use of industrial lasers for material processing has
continued to expand worldwide providing a large and growing market
opportunity with laser systems fast becoming a mainstream and
integral manufacturing process covering the areas of laser
machining, including cutting and drilling, marking, ablation and a
host of other niche applications. To harness this opportunity the
division has continued to upgrade its proprietary software to
enhance its customer offering and providing ever more
sophisticated, value-add and unique solutions to customers
requirements.
The results of this Division were as follows:
FY19 H1 FY18 H1
$m $m
Revenues 9.69 10.21
Operating profit* 1.12 1.44
Operating margin* 11.6% 14.1%
*from continuing operations, before special items.
Summary and outlook
We are pursuing a strategy to build a global industrial
business. In the period we made further progress in de-risking the
Group, both operationally and financially, as we create a more
flexible platform from which to leverage the strength of the
Group's brands and grow the business into increasingly diversified
niche markets worldwide.
As previously announced, the buy-out of the Group's $270m
pension liabilities will significantly de-risk the Group's balance
sheet, with the expected $4m - $5m post-tax cash surplus providing
improved financial flexibility.
Despite certain macro-economic and political uncertainties
across our end markets, enquiry and quotation activity remains good
with revenue visibility underpinned by an improved orderbook. I am
also pleased to announce an interim dividend of 0.25p per share,
reflecting the Board's confidence in the Group's prospects and the
significant opportunity ahead.
Paul Dupee
Executive Chairman
19 November 2018
Condensed consolidated income statement (unaudited)
For the 26 week period ended 29 September 2018 Before After Before After After
Special Special Special Special Special Special Special
Items Items Items Items Items Items Items
26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks
ended 29 ended ended ended ended ended ended
29 29 30 30 30 31
September September September September September September March
2018 2018 2018 2017 2017 2017 2018
$000 $000 $000 $000 $000 $000 $000
-------------- --------- --------- --------- --------- --------- --------- --------
Continuing
Revenue 32,797 - 32,797 32,188 - 32,188 66,014
Cost of sales (20,997) - (20,997) (21,095) - (21,095) (42,972)
Special Items
in cost of
sales - - - - - - (764)
-------------- --------- --------- --------- --------- --------- --------- --------
Gross profit 11,800 - 11,800 11,093 - 11,093 22,278
Net operating
expenses (9,818) - (9,818) (9,448) - (9,448) (18,812)
Special Items
in operating
expenses - (995) (995) - (398) (398) (1,126)
Operating
profit/(loss) 1,982 (995) 987 1,645 (398) 1,247 2,340
Profit on
ProPhotonix
disposal - - - - 1,256 1,256 1,256
--------- --------- --------- --------- --------- --------- --------
Interest on
pension
surplus - 649 649 - 862 862 1,741
--------- --------- --------- --------- --------- --------- --------
Financial
income - 649 649 - 862 862 1,741
--------- --------- --------- --------- --------- --------- --------
Bank and other
interest (523) - (523) (573) - (573) (1,182)
Special Items - (138) (138) - (118) (118) (290)
--------- --------- --------- --------- --------- --------- --------
Financial
expense (523) (138) (661) (573) (118) (691) (1,472)
Profit before
tax 1,459 (484) 975 1,072 1,602 2,674 3,865
Income tax
charge (50) 231 181 - (300) (300) (816)
-------------- --------- --------- --------- --------- --------- --------- --------
Profit for the
period
attributable
to equity
holders of
the parent 1,409 (253) 1,156 1,072 1,302 2,374 3,049
Basic EPS 1.25p (0.22)c 1.03c 1.02c 1.24c 2.26c 2.80c
Diluted EPS 1.24c (0.22)c 1.02c 1.02c 1.24c 2.26c 2.78c
Condensed consolidated statement of
comprehensive income (unaudited)
For the 26 week period ended 29 September
2018
26 weeks 26 weeks 52 weeks
Ended Ended Ended
29 September 30 September 31 March
2018 2017 2018
$000 $000 $000
--------------------------------------------- ------------- ------------- ---------
Profit for the period 1,156 2,374 3,049
Other comprehensive (expense)/income:
Items that will not be reclassified
to the Income Statement:
Release of available for sale reserve
on ProPhotonix disposal - (1,465) (1,465)
Re-measurement of the net defined benefit
asset (43,476) (9,756) (19,659)
Deferred taxation 15,217 3,415 6,852
--------------------------------------------- ------------- ------------- ---------
Total items that will not be reclassified
to the Income Statement: (28,259) (7,806) (14,272)
Items that are or may in the future
be reclassified to the Income Statement:
Foreign exchange translation differences (2,611) 3,356 4,109
--------------------------------------------- ------------- ------------- ---------
Total items that are or may be reclassified
subsequently to the Income Statement: (2,611) 3,356 4,109
--------------------------------------------- ------------- ------------- ---------
Other comprehensive (expense)/income
for the period, net of income tax (30,870) (4,450) (10,163)
Total comprehensive (expense)/income
for the period (29,714) (2,076) (7,114)
--------------------------------------------- ------------- ------------- ---------
Condensed consolidated statement
of financial position (unaudited)
As at 29 September 2018
As at As at As at
29 September 30 September 31 March
2018 2017 2018
$000 $000 $000
------------------------------------ ---------------- -------------------- ----------------------
Non-current assets
Property, plant and equipment 3,914 4,405 4,111
Goodwill 10,329 10,329 10,329
Other Intangible assets 864 364 407
Employee benefits 6,889 61,325 54,319
Deferred tax assets 4,827 5,085 5,102
------------------------------------ ---------------- -------------------- ----------------------
26,823 81,508 74,268
------------------------------------ ---------------- -------------------- ----------------------
Current assets
Inventories 19,090 18,256 19,597
Trade and other receivables 9,910 9,672 10,266
Cash and cash equivalents 754 664 1,676
------------------------------------ ---------------- -------------------- ----------------------
29,754 28,592 31,539
------------------------------------ ---------------- -------------------- ----------------------
Total assets 56,577 110,100 105,807
------------------------------------ ---------------- -------------------- ----------------------
Non-current liabilities
---------------- -------------------- ----------------------
Employee benefits (1,309) (1,385) (1,225)
Loans and other borrowings (11,381) (12,040) (12,251)
Deferred tax liability (2,489) (21,339) (19,020)
------------------------------------ ---------------- -------------------- ----------------------
(15,179) (34,764) (32,496)
------------------------------------ ---------------- -------------------- ----------------------
Current liabilities
Trade and other payables (6,371) (6,435) (9,205)
Income tax payable 62 - (291)
Provisions (302) (270) (53)
Loans and other borrowings (6,474) (4,876) (5,025)
---------------- -------------------- ----------------------
(13,085) (11,581) (14,574)
------------------------------------ ---------------- -------------------- ----------------------
Total liabilities (28,264) (46,345) (47,070)
------------------------------------ ---------------- -------------------- ----------------------
Net assets 28,313 63,755 58,737
------------------------------------ ---------------- -------------------- ----------------------
Shareholders' equity
Called-up share capital 1,746 1,746 1,746
Share premium account 2,885 2,885 2,885
Revaluation reserve 700 1,062 759
Equity reserve 201 201 201
Translation reserve (5,767) (2,861) (4,565)
Retained earnings 28,548 60,722 57,711
------------------------------------ ---------------- -------------------- ----------------------
Total equity 28,313 63,755 58,737
------------------------------------ ---------------- -------------------- ----------------------
Consolidated statement
of changes in equity
(unaudited)
As at 29 September 2018
Ordinary Share Available
share premium Revaluation for sale Translation Equity Retained
capital account reserve reserve reserve reserve Earnings Total
$000 $000 $000 $000 $000 $000 $000 $000
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
At 1 April 2017 1,629 1,484 797 1,446 (6,724) 201 65,461 64,294
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Profit for the period - - - - - 2,374 2,374
Other comprehensive
income:
Foreign currency
translation - - 265 19 3,863 - (791) 3,356
Net defined benefit
asset mvmt - - - - - - (9,756) (9,756)
ProPhotonix disposal - - - (1,465) - - - (1,465)
Deferred tax - - - - - - 3,415 3,415
Total comprehensive
income - - 265 (1,446) 3,863 - (4,758) (2,076)
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Transactions with
owners:
Share capital subscribed
for 117 1,401 - - - - - 1,518
Credit for share-based
payments - - - - - - 19 19
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Total transactions with
owners 117 1,401 - - - - 19 1,537
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
At 30 September 2017 1,746 2,885 1,062 - (2,861) 201 60,722 63,755
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Profit for the period - - - - - - 675 675
Other comprehensive
income:
Foreign currency
translation - - (303) - (1,704) - 2,760 753
Net defined benefit
asset mvmt - - - - - - (9,903) (9,903)
Deferred tax - - - - - - 3,437 3,437
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Total comprehensive
income - - (303) - (1,704) - (3,031) (5,038)
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Transactions with - - - - - - - -
owners:
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Credit for share-based
payments - - - - - - 20 20
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Total transactions with
owners - - - - - - 20 20
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
At 31 March 2018 1,746 2,885 759 - (4,565) 201 57,711 58,737
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Profit for the period - - - - - - 1,156 1,156
Other comprehensive
income:
Foreign currency
translation - - (59) - (1,202) - (1,350) (2,611)
Net defined benefit
asset mvmt - - - - - - (43,476) (43,476)
Deferred tax - - - - - - 15,217 15,217
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Total comprehensive
income - - (59) - (1,202) - (28,453) (29,714)
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Transactions with - - - - - - - -
owners:
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Dividends - - - - - - (738) (738)
Credit for share-based
payments - - - - - - 28 28
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Total transactions with
owners - - - - - - (710) (710)
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
At 29 September 2018 1,746 2,885 700 - (5,767) 201 28,548 28,313
------------------------ -------- ------- -------------- --------- ----------- ------- -------- --------
Condensed consolidated cash flow statement
(unaudited)
For the 26 week period ended 29 September
2018
26 weeks 26 weeks 52 weeks
ended ended ended
29 September 30 September 31 March
2018 2017 2018
$000 $000 $000
-------------------------------------------- --------------------- ------------- ---------
Cash flows from operating activities
Profit for the period 1,156 2,374 3,049
Adjustments for:
Amortisation of development expenditure 5 34 71
Depreciation 295 293 596
Net financial income 12 (171) (269)
Net pension charge 1,308 - -
Other special items 294 378 991
Profit on disposal of fixed assets (343) - -
ProPhotonix profit - (1,256) (1,256)
Equity share option expense 28 19 39
Income tax expense/(credit) (181) 301 816
-------------------------------------------- --------------------- ------------- ---------
Operating cash flow before changes
in working capital and provisions 2,574 1,972 4,037
(Increase) /decrease in trade and other
receivables (108) (125) (445)
(increase)/decrease in inventories 80 (1,951) (2,970)
(Decrease) in trade and other payables (2,531) (572) 1,169
Employee benefit contributions (13) (81) (143)
Restructuring and redundancy expenditure - (65) -
-------------------------------------------- --------------------- ------------- ---------
Cash generated from/(used in) operations 2 (822) 1,648
Interest paid (523) (573) (1,183)
Income tax paid (382) - -
-------------------------------------------- --------------------- ------------- ---------
Net cash flows from operating activities (903) (1,395) 465
-------------------------------------------- --------------------- ------------- ---------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 344 - 285
Proceeds from sale of ProPhotonix - 1,972 1,972
Purchase of property, plant and equipment (404) (257) (694)
Development expenditure capitalised (497) (8) (87)
Net cash from investing activities (557) 1,707 1,476
-------------------------------------------- --------------------- ------------- ---------
Cash flows from financing activities
Net proceeds from issue of ordinary
shares - 1,517 1,517
Dividends paid (736) - -
Proceeds from/(Net repayment of) external
borrowing 1,328 (2,439) (2,985)
Net finance lease expenditure (21) (38) (56)
Net cash flows from financing activities 571 (960) (1,524)
-------------------------------------------- --------------------- ------------- ---------
Net increase/(decrease) in cash and
cash equivalents (889) (648) 417
Cash and cash equivalents at the beginning
of the period 1,676 1,352 1,352
Effect of exchange rate fluctuations
on cash held (33) (40) (93)
-------------------------------------------- --------------------- ------------- ---------
Cash and cash equivalents at the end
of the period 754 664 1,676
-------------------------------------------- --------------------- ------------- ---------
Notes relating to the condensed consolidated financial
statements
For the 26-week period ended 29 September 2018
1. Basis of preparation and accounting policies
These interim consolidated financial statements have been
prepared using accounting policies based on International Financial
Reporting Standards (IFRS and IFRIC Interpretations) issued by the
International Accounting Standards Board ("IASB") as adopted for
use in the EU. They do not include all disclosures that would
otherwise be required in a complete set of financial statements and
should be read in conjunction with the 31 March 2018 Annual Report.
The financial information for the half years ended 29 September
2018 and 30 September 2017 does not constitute statutory accounts
within the meaning of Section 434 (3) of the Companies Act 2006 and
both periods are unaudited.
The annual financial statements of The 600 Group plc ('the
Group') are prepared in accordance with IFRS as adopted by the
European Union. The comparative financial information for the year
ended 31 March 2018 included within this report does not constitute
the full statutory Annual Report for that period. The statutory
Annual Report and Financial Statements for 2018 have been filed
with the Registrar of Companies. The Independent Auditors' Report
on the Annual Report and Financial Statements for the year ended 31
March 2018 was unqualified, did not draw attention to any matters
by way of emphasis and did not contain a statement under 498(2) -
(3) of the Companies Act 2006.
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 2018 annual financial statements, except for those that
relate to new standards and interpretations effective for the first
time for periods beginning on (or after) 1 April 2018, and will be
adopted in the 2019 financial statements. New standards impacting
the Group that will be adopted in the annual financial statements
for the year ended 30 March 2019, and which have given rise to
changes in the Group's accounting policies are:
-- IFRS 9 Financial Instruments; and
-- IFRS 15 Revenue from Contracts with Customers
Details of the impact of these two standards are given below.
Other new and amended standards and interpretations issued by the
IASB that will apply for the first time in the next annual
financial statements are not expected to have a material impact on
the Group.
IFRS 9 Financial Instruments
IFRS 9 has replaced IAS 39 Financial Instruments: Recognition
and Measurement, and has had an effect on the Group in the
following areas:
-- The impairment provision on financial assets measured at
amortised cost (such as trade and other receivables) have been
calculated in accordance with IFRS 9's expected credit loss model,
which differs from the incurred loss model previously required by
IAS 39. This has not resulted in a change to the impairment
provision at 1 April 2018
IFRS 15 Revenue from Contract with Customers
IFRS 15 has replaced IAS 18 Revenue and IAS 11 Construction
Contracts as well as various Interpretations previously issued by
the IFRS Interpretations Committee, noting the Group has adopted
the modified retrospective approach. There is no material impact on
any revenue stream for the Group given that machines are recorded
as revenue on dispatch and with spares and maintenance recorded at
the appropriate time as work is done.
There are a number of standards and interpretations which have
been issued by the International Accounting Standards Board that
are effective for periods beginning subsequent to 30 March 2019
(the date on which the company's next annual financial statements
will be prepared up to) that the Group has decided not to adopt
early. The most significant of these is IFRS 16 Leases (mandatorily
effective for periods beginning on or after 1 January 2019).
2. SEGMENT ANALYSIS
IFRS 8 - "Operating Segments" requires operating segments to be
identified on the basis of internal reporting about components of
the Group that are regularly reviewed by the chief operating
decision maker to allocate resources to the segments and to assess
their performance. The chief operating decision maker has been
identified as the Executive Directors. The Executive Directors
review the Group's internal reporting in order to assess
performance and allocate resources.
The Executive Directors consider there to be two continuing
operating segments being machine tools and precision engineered
Components and industrial laser systems.
The Executive Directors assess the performance of the operating
segments based on a measure of operating profit/(loss). This
measurement basis excludes the effects of Special Items from the
operating segments. Head Office and unallocated represent central
functions and costs.
The following is an analysis of the Group's revenue and results
by reportable segment:
Continuing
26 Weeks ended 29 September Machine
2018 Tools
& Precision Industrial
Engineered Laser Head Office
Components Systems & unallocated Total
Segmental analysis of
revenue $000 $000 $000 $000
------------------------------- ------------ ---------- -------------- --------
Total revenue 23,112 9,685 - 32,797
------------------------------- ------------ ---------- -------------- --------
Operating profit/(loss)
pre special items 1,527 1,121 (666) 1,982
Special items (1,003) - 8 (995)
------------------------------- ------------ ---------- -------------- --------
Operating profit/(loss) 524 1,121 (658) 987
------------------------------- ------------ ---------- -------------- --------
Other segmental information:
Reportable segment assets 38,353 9,274 8,950 56,577
Reportable segment liabilities (10,467) (5,017) (12,780) (28,264)
Intangible & Property,
plant and equipment additions 264 637 - 901
Depreciation and amortisation 153 146 1 300
------------------------------- ------------ ---------- -------------- --------
2. SEGMENT ANALYSIS (continued)
Continuing
26 Weeks ended 30 September Machine
2017 Tools
& Precision Industrial
Engineered Laser Head Office
Components Systems & unallocated Total
Segmental analysis of
revenue $000 $000 $000 $000
------------------------------- ------------ ---------- -------------- --------
Total revenue 21,981 10,207 - 32,188
------------------------------- ------------ ---------- -------------- --------
Operating profit/(loss)
pre- special items 985 1,438 (778) 1,645
Special items (144) (210) (44) (398)
Operating profit/(loss) 841 1,228 (822) 1,247
Other segmental information:
Reportable segment assets 37,094 10,510 65,128 112,732
Reportable segment liabilities (30,231) (5,071) (11,639) (46,941)
Intangible & Property,
plant and equipment additions 51 214 - 265
Depreciation and amortisation 176 126 - 302
------------------------------- ------------ ---------- -------------- --------
Continuing
52-weeks ended 31 March Machine
2018 Tools
& Precision Industrial
Engineered Laser Head Office
Components Systems & unallocated Total
Segmental analysis of
revenue $000 $000 $000 $000
Total revenue per statutory
accounts 45,222 20,792 - 66,014
------------------------------- ------------ ---------- -------------- --------------------
Operating Profit/(loss)
before special Items 2,904 2,867 (1,541) 4,230
------------------------------- ------------ ---------- -------------- --------------------
Special Items (883) (767) (240) (1,890)
Group profit/(loss) from
operations 2,021 2,100 (1,781) 2,340
------------------------------- ------------ ---------- -------------- --------------------
Other segmental information:
Reportable segment assets 40,320 9,867 55,620 105,807
Reportable segment liabilities (28,153) (5,826) (13,091) (47,070)
Intangible & Property,
plant and equipment additions 146 544 4 694
Depreciation and amortisation 362 294 - 656
3. SPECIAL ITEMS
In order for users of the financial statements to better
understand the underlying performance of the Group the Board have
separately disclosed significant costs associated with the ongoing
restructuring of the Group and associated redundancy costs incurred
in the period. In addition, the non-cash charges for share based
payments, amortisation of intangible assets acquired and
amortisation of loan note costs have been included.
29 September 30 September 31 March
2018 2017 2018
$000 $000 $000
--------------------------------------------------- ------------ ------------ --------
Items included in cost of sales - redundancy and
restructuring - - (764)
Items included in operating profit:
Pension charge (1,308) - -
Reorganisation ,restructuring and redundancy costs (39) (354) (1,036)
Profit on sale of plant and equipment 344 - -
Dilapidation costs (272) - -
Historic VAT recovery 331 - -
Share option costs (29) (19) (39)
Amortisation of intangible assets acquired (22) (25) (51)
--------------------------------------------------- ------------ ------------ --------
(995) (398) (1,126)
--------------------------------------------------- ------------ ------------ --------
Items included in financial (income)/expense:
--------------------------------------------------- ------------ ------------ --------
Pensions interest on surplus 649 862 1,741
--------------------------------------------------- ------------ ------------ --------
Amortisation of loan note expenses (138) (118) (243)
Pensions interest on deficit - - (47)
--------------------------------------------------- ------------ ------------ --------
(138) (118) (290)
--------------------------------------------------- ------------ ------------ --------
Profit on ProPhotonix sale - 1,256 1,256
--------------------------------------------------- ------------ ------------ --------
4. Financial income and expensE
29 September 30 September 31 March
2018 2017 2018
$000 $000 $000
---------------------------------- ------------ ------------ --------
Interest on Pension surplus 649 862 1,741
---------------------------------- ------------ ------------ --------
Financial income 649 862 1,741
---------------------------------- ------------ ------------ --------
Bank overdraft and loan interest (26) (127) (234)
Loan note interest (496) (441) (925)
Other finance charges - - (8)
Finance charges on finance leases (1) (5) (15)
Pensions interest on deficit - - (47)
Amortisation of loan note costs (138) (118) (243)
Financial expense (661) (691) (1,472)
---------------------------------- ------------ ------------ --------
5. Taxation
29 September 30 September 31 March
2018 2017 2018
$000 $000 $000
----------------------------------------- ------------ ------------ --------
Current tax:
Corporation tax at 19% (2017: 20%): - - -
Overseas taxation:
- current period (50) - (340)
----------------------------------------- ------------ ------------ --------
Total current tax charge (50) - (340)
----------------------------------------- ------------ ------------ --------
Deferred taxation:
- current period 231 (300) 252
- effect of rate change in USA - - (630)
- prior period - - (98)
----------------------------------------- ------------ ------------ --------
Total deferred taxation charge 231 (300) (476)
----------------------------------------- ------------ ------------ --------
Taxation charged to the income statement 181 (300) (816)
----------------------------------------- ------------ ------------ --------
6. Earnings per share
The calculation of the basic earnings per share of 1.25c (2017:
1.02c) is based on the earnings for the financial period
attributable to the Parent Company's shareholders of a profit of
$1,179,000 (2017 $2,372,000) and on the weighted average number of
shares in issue during the period of 112,973,341 (2017
104,831,330). At 29 September 2018, there were 6,650,000 (2017:
6,650,000) potentially dilutive shares on option and 43,950,000
(2017: 43,950,000) share warrants exercisable at 20p. The weighted
average effect of these as at 29 September 2018 was 1,187,462
shares (2017: 716,915) giving a diluted earnings per share of 1.03c
(2017: 2.26c).
.
29 September 30 September 31 March
2018 2017 2018
-------------------------------------- ------------ ------------ -----------
Weighted average number of shares Shares Shares Shares
Issued shares at start of period 112,973,341 104, 357,957 104,357,957
Effect of shares issued in the period - 473,373 4,544,378
-------------------------------------- ------------ ------------ -----------
Weighted average number of shares
at end of period 112,973,341 104,831,330 108,902,335
-------------------------------------- ------------ ------------ -----------
Weighted average number of 6,650,000
potentially dilutive shares 1,187,462 716,915 790,601
-------------------------------------- ------------ ------------ -----------
Total Weighted average diluted shares 114,160,803 105,548,245 109,692,936
-------------------------------------- ------------ ------------ -----------
29 September 30 September 31 March
2018 2017 2018
$000 $000 $000
------------------------------------------- ------------ ------------ --------
Underlying earnings
Total post tax earnings 1,156 2,374 3,049
Share option costs 29 20 39
Pensions Interest on surplus/deficit (649) (862) (1,694)
Amortisation of Shareholder loan expenses 138 118 243
Pensions charge 1,308 - -
Amortisation of intangible assets acquired 22 25 51
Other special items (364) 353 1,800
Profit on sale of ProPhotonix - (1,256) (1,256)
Associated taxation on special items (231) 300 1,252
------------------------------------------- ------------ ------------ --------
Underlying earnings after tax 1,409 1,072 3,484
------------------------------------------- ------------ ------------ --------
Underlying Earnings Per Share 1.25c 1.02c 3.20c
7. RECONCILIATION OF NET CASH FLOW TO NET DEBT
29 September 30 September 31 March
2018 2017 2018
$000 $000 $000
------------------------------------------------- ------------ ------------ --------
Increase/(decrease) in cash and cash equivalents (889) (648) 417
(decrease)/Increase in debt and finance leases (1,307) 2,477 3,041
------------------------------------------------- ------------ ------------ --------
(decrease)/Increase in net debt from cash flows (2,196) 1,829 3,458
Net debt at beginning of period (15,600) (17,090) (17,090)
Loan costs amortisation and adjustments (138) (118) (243)
Exchange effects on net funds 833 (873) (1,725)
------------------------------------------------- ------------ ------------ --------
Net debt at end of period (17,101) (16,252) (15,600)
------------------------------------------------- ------------ ------------ --------
8. Analysis of net DEBT
At Exchange/ At
31 March Reserve 29 September
2018 movement Other Cash flows 2018
$000 $000 $000 $000 $000
---------------------------------- -------- --------- ----- ---------- ------------
Cash at bank and in hand 1,536 (23) - (889) 624
Short term deposits (included
within cash and cash equivalents
on the balance sheet) 140 (10) - - 130
1,676 (33) - (889) 754
Debt due within one year (4,984) 44 - (1,483) (6,423)
Debt due after one year (842) 25 - 155 (662)
Loan Notes due after one year (11,287) 796 (138) - (10,629)
Finance leases (163) 1 - 21 (141)
Total (15,600) 833 (138) (2,196) (17,101)
---------------------------------- -------- --------- ----- ---------- ------------
9. Employee benefits
The Group has defined benefit pension schemes in the UK and USA.
The assets of these schemes are held in separate
trustee-administered funds. In addition, the Group operates a
retirement healthcare benefit scheme for certain of its retired
employees in the USA, which is also treated as a defined benefit
scheme. The principal scheme is the UK defined benefit pension
plan.
The UK scheme secured an insurance policy on 19 July 2018 with
Pension Insurance Corporation which matches the scheme
liabilities.
Value of UK and USA scheme assets and liabilities for the
purposes of IAS 19
29 September 29 September 30 September 30 September 31 March 31 March
2018 2018 2017 2017 2018 2018
UK Scheme US Scheme UK Scheme US Scheme UK Scheme US Scheme
------------------------------ ------------ ------------ ------------ ------------ --------- ---------
$000 $000 $000 $000 $000 $000
------------------------------ ------------ ------------ ------------ ------------ --------- ---------
Opening Fair value of schemes
assets 326,135 1,007 305,870 1,085 305,870 1,085
Experience adjustments
in the period (97,666) - 4,803 - 19,116 (78)
Closing Fair value of schemes
assets 228,469 1,007 310,673 1,085 326,135 1,007
------------------------------ ------------ ------------ ------------ ------------ --------- ---------
Opening present value of
schemes liabilities (271,816) (2,232) (240,193) (2,374) (240,193) (2,374)
Experience adjustments
in the period 50,236 84 (9,155) (96) (31,623) 142
------------------------------ ------------ ------------ ------------ ------------ --------- ---------
Closing present value of
schemes liabilities (221,580) (2,316) (249,348) (2,470) (271,816) (2,232)
------------------------------ ------------ ------------ ------------ ------------ --------- ---------
Surplus/(deficit) recognised
under IAS 19 6,889 (1,309) 61,325 (1,385) 54,219 (1,225)
------------------------------ ------------ ------------ ------------ ------------ --------- ---------
The principal assumptions used for the purpose of the IAS 19
valuation for the UK scheme compared to the 2018 year end were as
follows:
29 September 31 March
2018 2018
UK scheme UK scheme
% p.a. % p.a.
---------------------------------------------------------- ------------ ---------
Inflation under RPI 3.25 3.25
Inflation under CPI 2.15 2.15
Rate of increase to pensions in payment - LPI 5% 3.15 3.15
Discount rate for scheme liabilities and return on assets 2.65 2.50
---------------------------------------------------------- ------------ ---------
The liabilities of the UK scheme are valued under the prescribed
requirement of IAS 19 but given all the risk associated with these
have been covered by the insurance policy bought in, the insurance
asset is valued at the same amount.
10. FAIR VALUE
The group considers that the carrying amount of the following
financial assets and financial liabilities are
a reasonable approximation of their fair value:
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Loans and other borrowings
11. Principal Risks and Uncertainties
The principal risks and uncertainties affecting the Group remain
those set out in the 2018 Annual Report. Those which are most
likely to impact the performance of the Group in the remaining
period of the current financial year are the exposure to increased
input costs, the dependence on a relatively small number of key
vendors in the supply chain and a downturn in its customers' end
markets particularly in North America and Europe.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EAPFXFEPPFFF
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