THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014, AS AMENDED (AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018).

22 December 2022

The 600 Group PLC

Unaudited Interim Results for the six months ended 30 September 2022

The 600 Group PLC ("the Group"), the 600 Group plc, the Industrial Laser Systems Business (AIM: SIXH), today announces its unaudited interim results for the six months ended 30 September 2022.

Financial Highlights                            

·      Revenue up 12% to $17.0m (FY 22 H1: $15.2m)

·      Net underlying* operating loss of $0.7m (FY 22 H1: profit $0.7m)

·      Underlying* pre-tax loss of $0.8m (FY22 H1: profit $0.1m)

·      Group net debt excluding lease liabilities was $2.5m as at 30 September 2022 (31 March 2022: $17.0m) with long-term borrowings paid down from the sale of the Machine Tool Division

Strategic & Operational Highlights

·      Completed the disposal of the Machine Tool division as the Group refocused its strategy on the high-margin growth market of Industrial Laser Systems

·      Continued growth in the Laser Division with revenue up 12% on the previous half year

o  TYKMA Electrox has seen particularly strong growth with revenue up 20% as it transitions from commodity products to higher-margin custom and high-specification products

o  CMS maintained its position despite not receiving any tablet drilling machines during the previous year, making up the shortfall from other activities and new market sectors

·      Retained focus on R&D with development of new techniques and technology; further updates to proprietary software with backward compatibility options

·      Good forward order book and enquiry pipeline; levels maintained at $9.1m, excluding the large one-off $4.3m order for four tablet drillers in CMS last year

*from continuing operations, before adjusting items.

Paul Dupee, Chairman of the Group, commented:

"The 600 Group has now completed its transformation to target the high-margin, high-growth market of industrial laser systems. Our top-line results for the first six months of the year were encouraging with double-digit revenue growth and a particularly strong performance from TYKMA Electrox. This business is progressing well in its transition to high-specification products with improved margins, a key reason behind the Group's revised strategy. 

"Like many engineering businesses, our profitability has been impacted by supply issues and cost inflation resulting from the aftermath of the Covid pandemic and conflict in Ukraine. However, we have taken a proactive approach to manage our operations and expect the lingering issues from extended build times to clear the system by the end of the financial year.

"The 600 Group is a streamlined business with a low debt profile, agile operations and a large addressable market serving applications in key industries of the future. With highly trusted technology solutions and a strong order book, we remain well positioned to capture this market opportunity."  

Enquiries:

 About The 600 Group PLC

The 600 Group PLC is focused on the delivery of Industrial laser systems which cover laser marking and processing including cutting, drilling, ablation and a host of other niche applications in the marking and micro machining sectors. They require no consumables and can operate on a continuous high speed basis and can be integrated into customers' production lines. The businesses have their own technology and proprietary software. Customer applications are diverse and range from aerospace to medical and pharmaceuticals. The requirement for increased product and component traceability is one of the market drivers.

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

The 600 Group Plc

Executive Chairman's Statement for the six months ended 30 September 2022

Overview

The six-month period ended 30 September 2022 began with the completion of the sale of the Machine Tools Division for $21m on 11 April 2022 and the repayment of all $19m of the Group's debt, including the loan notes.

The Laser Division has seen continued growth in this period with revenue up 12% on the previous half year and particularly good progress in the TYKMA Electrox business which is up over 20%, as it continues the transition from commodity product to custom and high specification. Order book levels have been maintained, excluding the large one-off $4.3m order for four tablet drillers in CMS last year, at $9.1m.

The Laser Division has not been immune from supply issues and labor and input price increases during this period, as world economies react to the aftermath of the Covid pandemic and the war in Ukraine, which has impacted margins and overhead costs. Central costs have increased on the prior half year with additional resources, including new websites and marketing for all activities, deployed to help organic growth and the search for external synergistic developments.

Results

Revenue was up 12% at $17.0m (FY 22 H1: $15.2m) with a net underlying operating loss (excluding adjusting items) of $0.7m (FY 22 H1: profit $0.7m).

The Group benefitted from the repayment of debt at the start of the period with interest on borrowings and leases falling from $0.6m in the prior six month period to $0.1m, giving an underlying loss for the Group pre-tax, before adjusting items, of $0.8m (FY22 H1: profit $0.1m) and a loss of $0.9m (FY 22 H1: profit $0.1m) after adjusting items.

The sale of the Machine Tools Division resulted in a profit of $0.9m, after taking account of all costs related to the sale in the period, which is shown in discontinued operations on the face of the Consolidated Income Statement. There was no trading activity for the Machine Tool Division in this period as the sale was effective as at 31 March 2022.

Basic loss per share on continuing operations was 1.15 cents (equivalent to 0.94p loss) per share (FY 21 H1: profit 0.14 cents (equivalent to 0.10p profit). The underlying continuing earnings per share (excluding adjusting items) was a 0.70c loss (equivalent to 0.57p loss) (FY 21 H1: profit 0.09c (equivalent to 0.06p).

Given the continuing Global uncertainty, no dividend is proposed.

Financial Position

Inventory levels have increased to support the continued uplift in activity but also as a result of supply issues where several months of critical components have been bought forward to secure supply and also hedge against price increases. In addition, the continual supply chain issues have extended manufacturing times and increased work in progress with machines awaiting components to be completed. Inventory overall has increase by $1.9m since 31 March 2022 to $10.0m.

Trade and other receivables have also seen an increase of $2.4m since 31 March 2021 to $9.0m. Whilst normal trade terms for Lasers, in particular on the custom higher specification sales, usually benefit from a significant deposit with order which helps to keep working capital lower, a number of orders were taken during the pandemic in CMS with reduced margins and extended terms to cover overheads and keep our skilled workforce together which, due to the long lead times on manufacturing, are only just working through the system.

Trade and other payables have decreased in the period by $0.3m leaving the overall working capital increase at $4.6m.

As a consequence of this working capital increase and the payment of costs relating to the Machine Tools Division disposal of $1.3m, total net debt excluding leases at 30 September 2022 was $2.5m against $17m at 31 March 2022 and $16.2m at 30 September 2021

Bank of America continue to be very supportive and have maintained a working capital facilities totaling $7.5m with annual review in August 2023. The Group remains covenant compliant.

Adjusting Items

Adjusting Items have been disclosed separately to provide a clearer picture of the Group's underlying trading performance and are set out in note 4. The amortisation of acquisition intangibles relating to the acquisition of CMS of $0.2 has been recorded as an adjusting item in operating expenses. As the loan notes were repaid at the start of the period the related costs of $0.4m which were being amortised have been written off in the period in financial expense. In the prior half year period as a consequence of the extension of the repayment date of the loan notes a credit of $0.6m was recorded in financial income in respect of the adjustment to the carrying value of the amortised cost. The loan note amortization has also been recorded as an adjusting item. The loan notes were repaid in full in April 2022.

Operating Activities

The Laser Division has continued to grow, particularly strongly in the TYKMA Electrox business with the continued shift from commodity products to the higher margin custom and high specification products. CMS has maintained its position despite not receiving any tablet drilling machines during the previous year. This type of pharmaceutical business is particularly lumpy in nature but the operation had made up the shortfall from other activities and new market sectors.

The division continues to be forced to buy forward several months of critical components to secure supply and also hedge against price increases. Supply chain issues with delays in receiving components, particularly in the micro processing sector, have resulted in extended manufacturing times with re-designed products and increased work in progress as machines await component deliveries.

Input costs of materials and labor have both increased, driven by market forces. Whilst sale price increases are being implemented, a number of orders taken by CMS during the pandemic were taken at marginally profitable levels in order to keep the shop working and preserve our skilled workforce. Whilst the government assistance helped during the pandemic period, due to the extended build times on many of these products they are only now being completed which is depressing gross margins in this business. These products will clear the system by the end of the financial year. In addition to lower margins, extended credit terms were also given to customers which has resulted in increased receivables. Once again, these non-standard terms will have worked through the system by the end of the financial year. 

The development of new techniques and technology is forefront to the Division and the Group has continued to update its proprietary software with backward compatibility options. This development drive is supported by both internal R&D and the search for appropriate bolt on acquisitions.

The results of the Division were as follows:

*from continuing operations, before adjusting items.

Summary and Outlook

The Group continued to grow and invest in its businesses in this first six months of the financial year and has a good order book and enquiry pipeline going into the second half of the year. Whilst the lingering effects of work taken during the pandemic will impact CMS in the short term, the de-risking of the Group, both operationally and financially, as a result of the Machine Tool Division sale has created a leaner and more focused technology Group.

Whilst there will continue to be concerns over a recession, COVID variants and supply chain disruption, given the continuing good orderbook activity and backlog and the move to higher specification and custom products, the Board believes the Group is more resilient to market changes and this strategy will lead to improved shareholder value in the future.

Paul Dupee

Executive Chairman

22 December 2022

The 600 Group Plc