News blog
600 Group
- BY: Andrew Hore |
- POSTED: 10/08/2012 |
Machine tools and laser marking equipment supplier 600 Group is closing its Polish operations because they are losing money and would prove too costly to turnaround.
Former Stadium Group boss Nigel Rogers replaced David Norman as chief executive in March. On his arrival he bought 100,000 shares at 20.25p each. The share price has nearly halved since then. At 10.25p a share, 600 Group is valued at £6.55m.
Rogers initiated the strategic review that led to the decision to close the Poland business, FMT, which was launched in November 2010. Prior to this utsourcing manufacturing to China was not a success because of quality problems . The idea was to set up a more competitive manufacturing base in Poland but operational problems and escalating costs meant that it has been making large losses and absorbing the group’s cash. Insolvency proceedings will begin for FMT. There should not be any significant cash losses but there will undoubtedly be an asset write-down in the 2012-13 figures.
The company had blamed disruption from transferring production to Poland for contributing to the poor figures for the six months to October 2011. Prior to those figures 600 Group was expected to report a profit of £2m in 2011-12. A small loss is now expected.
The machine tools business will use a distributor model in the UK, as it does overseas. The UK operations will be restructured at a cost of £200,000 and this will produce annual savings of £600,000. The head office will move from Leeds to Heckmondwike.
Net bank debt has been cut from £5.2m to £3.3m since the end of March 2012. The disposal of the South African operations for £1.54m net and surplus land in Leicester for £1.2m has helped. The Leeds office is held in the books at a value of £400,000.
Rogers says that customer demand for 600’s products remains strong. The restructuring should improve trading performance.
Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFJuly2012_34.pdf
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