17 February 2016 – trading update
As was reported in December when interim results for the six months ended 26 September 2015 were released, market conditions have been difficult and customer confidence to commit to purchases was a concern. The adverse conditions have continued into 2016 and the weakness experienced in the European markets is now also being encountered in the US, principally in the machine tools division. Results are therefore expected to be below current market estimates.
The latest Oxford Economics Global Machine Tool Outlook Survey’s figures for machine tool consumption for the year to December 2015 showed Europe down by 18.8% with the US flat. Whilst the forecast for both was modest growth for this year at 4.6% and 2.6% respectively, other trade bodies and commentators are reporting more negative figures. 600 Group have seen continued weakness within Europe and the UK and a marked fall in confidence in the US. Figures for machine tool orders from the Association for Manufacturing Technology in the US showed a fall of 17.5% for the year to end December 2015. 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 divisions have taken steps to reduce overheads and improve factory efficiencies from which annual saving of approximately £1m will be achieved. Although trading conditions are clearly tough in the near term we believe that at the current share price a LONG TERM BUY rating should remain in place.