Tuesday, 600 Group PLC (SIXH.L), a precision engineering products manufacturer, in its interim management statement for the four-month period from September 28, 2008 to January 31, 2009, said that it now expects to report an operating loss for the full year, hurt by a reduction in the volume of orders and exchange rate movements. Also, the company announced a further reduction in workforce as part of its ongoing restructuring programme.
Earlier, the company had said it experienced a reduction in the volume of orders for its machine tools following the half-year end. The continued regressive trend throughout the four-month period affected revenues in the U.K. and North American markets and the profitability in the machine tools business, noted the company.
Group sales, after adjustment for currency movements, decreased 16% compared to the same period last year. Also, overall gross margins deteriorated during the four-month period, primarily due to exchange rate movements.
Further, the company announced restructuring measures that are currently in progress, like consolidating the sales, marketing and distribution activities for UK machine tool products at the West Yorkshire operation, relocating all the US operations into one new facility to combine all North American business activities at that location.
In addition, the company said it will close the South African machine tool operation and consolidate it into the main manufacturing facility. Also, the company said it will close one facility in Germany and co-ordinate all European sales and marketing initiatives from one location.
The company expects the restructuring exercise to deliver annualized cost savings and other benefits in excess of GBP 5 million. Meanwhile, the company noted that this will involve further reduction in headcount of around 110 people. The associated exceptional costs are expected to be approximately GBP 1.9 million, most of which will be incurred in the current financial year.
The company anticipates that the restructuring will be completed within the next six months and that cost-base benefits will be delivered during the year ending 27 March, 2010.
Looking forward, chief executive David Norman said, "The restructured organization will be able to respond quickly to future market opportunities both in terms of organic growth and strategic development where our criteria for value and earnings enhancement are met."
SIXH last traded at 11.10 pence on the London Stock Exchange.
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