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More On SIXH 26 November 2014

 

 

There are a few companies reporting today or delivering news, but for now, I thought I would concentrate on 600 Group, which I have covered a few times now, having previously spoken with the CEO Nigel Rogers.

Although I was not in a position to catch up with him again today, I am sure there will be a few people posting on bulletin boards and the likes after the company has presented at the Sharesoc meeting later today.

Although 600 will certainly not appeal to a number of people due to the nature of its somewhat unexciting business, along with a past disappointing track record, I nevertheless keep a close eye on the company.

 

The shares, having enjoyed a good run earlier this year have been tracking back of late and this morning, on the release of its Interim numbers for the six months to 27 September are off 1.5p to 15.5p.

That, given a recent heading southwards looks overdone to me and may represent an opportunity for a reversal over the next twelve months.

 

Six Hundred for those who are unfamiliar is a designer and distributor of various machine tools such as lathes, along with laser marking systems.

Although it has been through some tough times over the years, a more recent management change has at least shown early signs of turning things around.

 

In the announcement released today, the company revealed that pre-tax profits came out at £3.2m, although that, as in previous results was boosted by the booking of a pension credit of £2.2m.

After stripping this out, the adjusted pre-tax profit comes in at £670k, which is slightly higher than the corresponding £610k, which in turn delivers EPS of 0.65p.

 

Although the company was in part hit by currency headwinds, on the positive side the order book is now at a two year high, while divisional margins increased slightly from 6.9% to 8%.

Broker FinnCap retains its Buy stance on the stock, with a target price of 27p per share.

While that may well be pushing it a bit, the shares do nonetheless look on the value side, particularly as management appear to have a strategy that combines organic growth along with strategic acquisitions.

 

Full year pre-tax profits are likely to be boosted by another pension credit, but leaving that aside, adjusted profit is forecast with a stronger second half to come out at £2.1m giving EPS of 2p.

That equates to a forward PER of under 8, which looking ahead to 2016 drops to 7.

While 600 doesn’t represent exciting growth, it nevertheless retains some strong brand names, along with continuing improving prospects within its laser marking arm.  

 

That aside, company has also in the past been the subject of the unwanted attention of others, which in part must make it vulnerable to the possibility of further approaches.

Although there is a net debt position of £6.75m at present, this is forecast to reduce over the next couple of years, which should also result in gearing falling from the current 30%.

 

The company, where there net asset value for the year in progress is estimated to be circa 25p per share, is also talking of resuming dividends at some point in the future.

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