17 February 2016

The 600 Group Plc

Trading update

The 600 Group PLC ("the Group"), the AIM listed distributor, designer and manufacturer of industrial products (AIM: SIXH), today provides a trading update. 

As was reported at the beginning of December in our interim results for the six months ended 26 September 2015, market conditions were difficult and customer confidence to commit to purchases was a concern. These adverse conditions have continued into this year and the weakness we experienced in the European markets is now also being encountered in the USA market, principally in the machine tools division.

The latest Oxford Economics Global Machine Tool Outlook Survey's figures for machine tool consumption for the year to December 2015 showed Europe negative by 18.8% with the USA flat. Whilst the forecast for both was modest growth for the coming year at 4.6% and 2.6% respectively other trade bodies and commentators are reporting more negative figures and we have seen continued weakness within Europe and the UK and a marked fall in confidence in the USA. Figures recently released for machine tool orders from the AMT (Association for Manufacturing Technology) in the USA recoded a negative 17.5% for the year to end December 2015. With general economic and in particular manufacturing forecasts being weak, customers are leaving purchasing decisions until the last minute and consequently order books overall are at a little over one month and visibility of future trading is difficult to predict and subject to monthly fluctuations.

Both of our Divisions have taken steps to reduce overheads and improve factory efficiencies from which we will see annual saving of approximately £1m going forward. In addition, the benefits from the integration of the TYKMA and Electrox laser businesses are now producing improved margins.

The sales and marketing initiatives in both Divisions are gradually showing signs of success despite the poor market conditions. However, these improvements and the restructuring benefits are unlikely to offset the effects of the volume decline from the market weakness in the machine tool industry.

As a consequence of the above factors the Group's results are expected to be below current market estimates.

The Board remains optimistic that the process which has begun to leverage our industry recognised brands such as Colchester, Harrison, Clausing, TYKMA and Electrox through an increased worldwide distribution network will lead to revenue growth and that the actions taken to reduce overheads and become more efficient will yield better margins on increasing sales in the future.

More information on the Group can be viewed at: www.600group.com