Out of uncharted territory

9 min read

The 600 Group, in common with all machine tool industry players, has been battered by the recent business climate. Andrew Allcock went to hear how the business has been turned around and about its aims for the future (<i>This is an extended version of the print feature, published January 2010</i>)

The 600 Group threw open the doors of its Heckmondwike, West Yorkshire, facility early in November 2009 to reveal the company's new look, following extensive reorganisation and a change of strategy made under the leadership of David Norman, who was appointed 600 Group chief executive in August 2008. Image: The November Open House – the new showroom area Image: David Norman The Heckmondwike facility, the home of 600 Europe and its subsidiary 600 UK, takes in the manufacture of Colchester-Harrison Tornado CNC lathes and Alpha U slant bed manual/CNC lathes (assembly and some parts machining), plus the processing/final configuration of Colchester-Harrison flatbed Alpha manual/CNC lathes, Colchester-Harrison vertical machining centres and Colchester and Harrison manual lathes, all imported from Taiwan. With the closure of 600 Centre, Loughborough, Leicestershire, Heckmondwike is also now the home of sales and applications support for factored product sales – Fanuc RoboDrill drill-tap VMCs, Fanuc wire-cut EDM, and Okamoto surface grinders - together with Colchester-Harrison products, of course. High end Japanese system sales, based around Toyoda Mitsui and Fuji Machine Tools, have been dropped, due to their association with the automotive and civil aerospace markets where business prospects are not viewed as favourable; such sales are also considered a "distraction" to the detriment of a Colchester-Harrison sales effort, Mr Norman offers. European machine tool, equipment and spares stock is also now held centrally at Heckmondwike; before Germany had its own stocks. Heckmondwike's machine shop now not only manufactures parts for Tornado lathes but also supports manufacturing for chuck manufacturer Pratt Burnerd International, which incorporates Crawford Collets at the same Halifax location. Machines have been transferred from Halifax to Heckmondwike, with, additionally, new machines installed to help in this respect, while the existing Mitsui Seiki FMS is producing Pratt Burnerd parts more cost-effectively than the previous outsourced parts, it was highlighted. The Halifax site will be closed with all Pratt Burnerd/Crawford Collets operations centred in Heckmondwike. There's also been a move to UK sourcing of machine tool base castings, this influenced by the poor £/€ rate, plus the ability to order in smaller batches. Some of the older machine tools in the Heckmondwike factory, such a Snow slideway grinder, have been given a new lease of life and brought back into action to support a newly launched rebuild/re-engineering service for Colchester and Harrison manual lathes . Also now an element of a reorganised factory floor exhibiting more efficient layout and flow is a showroom area where the Group's machine tool and ancillary products can be viewed, while 600 Group PLCs HQ is now integrated at Heckmondwike, having moved from Leeds. Total headcount at the site is now around 150, with worldwide headcount having been reduced by about a third. Chief executive David Norman first spoke to the press in November 2008, just a few months after his appointment, and the measures he announced then for the Group's machine tool and related activities proved, subsequently, not to be enough, as the depth of the crisis that unfolded was not envisaged by anyone at that time. "When I took over, the company, which this year will have a turnover of £50 million, had 35 locations – far too many for a business of that size, while there was the Chinese supply chain issue to resolve [Dalian, see later]. We were also expecting the market to deteriorate, but I think that if we had known back in November [2008] just how it was to play out, we would all probably have stayed in bed. It was more severe, I think, than anything we have seen at any time in our careers," he explained, adding that the company had to act quickly if it was to avoid severe problems. And acting quickly is what has done, with action commencing in January of 2009. Measured by share price value, from a low of around 9p in March – having fallen from 20p in November 2008, shares are currently back up to around 20p, so the publicly listed company's backers clearly see improvement and potential, while Mr Norman suggests the company is about 90 per cent through its restructuring efforts, as off early November 2009. The company has three distinct areas of business: mechanical and waste handling, almost exclusively focused on South Africa and surrounding areas, with particular driver being the 2010 World Cup football event and mineral extraction; machine tools, spares and components (Pratt Burnerd/Crawford, Gamet bearings, Parat tool turrets), which accounts for 70 per cent of the company's turnover; and Electrox laser marking, based at Letchworth. In taking cost out, the company has moved to shared services, taking in back office, finance, logistics etc, which has seen saw sites merged, with consolidation around major sites, such as Heckmondwike, which at 180,000 sq ft is the Group's largest site. Site reductions in Canada, the USA and Germany have been made so that the company now claims 20 locations worldwide. All links with China have been severed, Mr Norman underlined, adding that the UK market was probably the least affected by the Dalian adventure, which gathered momentum in 2007 with a big launch of CNC lathes and machining centres made at the biennial EMO manufacturing technology show that year, in Hanover, Germany. The company is also reversing the outsourcing trend by bringing back work to its own factory, Mr Norman stressed. Indeed, increasing the Group's manufacturing footprint, by in-sourcing and through manufacturing partnerships with others, in UK, Europe and Asia [not China], is a stated aim. "The aim is that we will ultimately end up manufacturing the majority of our own products again." And where it is not manufacturing, it will rely on just a handful of partners, it was said. The top line results of action so far have been: a reduction in non-production overheads of £1 million/month, from £2.3 million/month to £1.3 million/month August 2008 to 2009 - £8 million across the year; labour and production overheads have been reduced by £4 million across the year; gross margin is 4 per cent higher; working capital reduced by £6 million. "We have entirely self-financed everything we have achieved over the last year," underlines Mr Norman – imperative as banks have been reluctant to extend credit, he adds. But in alluding to the scale of the achievement he also highlights that, in his experience, the amount of cost taken out of the business has been "unprecedented". One surprising fact in all this is that its machine tool sales are only down 38 per cent. While this might shock shareholders, Mr Norman suggests, compared to others who have seen a fall off of 70 per cent or more, this is "a big number, but compared to others, not bad". And the reasons for its relatively good performance are says the chief executive: "We have a more balanced portfolio of products; the major hit in the market has been on CNC production machines and that is only part of what we do. We have a good range of conventional lathes, in North America that is supplemented by other conventional products – saws and drills [Clausing brand] - and in the middle ground we have workshop CNC machines [Alpha], and they have held up much better than the CNC production market." Managing director 600 Europe, Mike Berry, highlights active machine tool business areas as education and training (Colchester and Harrison conventional lathes), environmental projects, energy (oil, gas, wind, tidal – Alpha, large capacity machines), special projects (again typically large Alpha), government projects. Image: Mike Berry Moving to the future, once manufacturing and supply chain issues have been tackled, the company will look more to product development and market demand, Mr Norman says. Indeed, the November event saw Colchester-Harrison European distributors invited to Heckmondwike to see what has been done and to air their views. And as the company gains strength, it will, as part of its increased manufacturing footprint ambitions, look for acquisition targets, Mr Norman revealed. "As we get stronger, our share price should go up, while we currently have very low borrowings. This will allow us to bolt on activities that are directly related to what we do or, alternatively, diversify." Indeed, regarding an increased manufacturing footprint, he said, in November, that he would be surprised if he wouldn't be able to reveal "some exceptional news" on that front in the next six months. Fundamentally, though, the chief executive underscored that the future of the 600 Group had been "secured". In March 2009, with shares trading at 9p, that was far from a certain outcome, with sales down 38 per cent "uncharted territory". Box item 1 Management changes Mike Berry has been appointed Managing Director of 600 Europe, responsible for managing and developing the Group's newly centralised machine tools business in the UK and Continental Europe. Mike, who joined 600 Lathes as director of business development Europe in 2001, has almost 31 years' experience in the machine tool market. He has held a number of key positions within The 600 Group since joining in 2001 and was, most recently, general manager of 600 UK. Prior to joining 600 Lathes, Mr Berry was, for 25 years, a director of lathe manufacturer Binns and Berry in Halifax. Box item 2 Product design and development A strategic product development team has been created within The 600 Group's Machine Tools Division. It will focus on product strategy and new product development for the Group's global markets. Jonathan Wright, engineering director of 600 UK, is heading the new team. He is supported by a strong team which includes Mike Berry, newly appointed as managing director of 600 Europe, Phil Cullen, 600 UK's marketing manager, and Don Haselton, president of 600 North America. Using customer feedback as its cornerstone, the team's brief is to review and develop the Group's machine tools product strategy to improve value further and quicken the return on investment for customers. Mike Berry said: "Customers tell us that the payback period is a key factor influencing which machine tool they buy. We aim to strengthen and develop the Group's product range strategically to fulfil our customers' needs rapidly, whilst giving them the best possible deal and return on investment." Engineering director, Jonathan Wright, explained further: "We are able to extend the models in our ranges by using modular design platforms, whilst having the flexibility to manufacture 'built to order' machines for customers with niche requirements." Image: The product development team – L to R: Jonathan Wright, Phil Cullen, Don Haselton and Mike Berry Box item 3 Machine refurbishment Machines such as Colchester's Student, Master, Triumph, Mascot and Mastiff ranges and the famous Harrison M and V-Series, produced in large numbers over the past 30-40 years and highly popular with engineering specialists, repair workshops and vocational training facilities, can all be given a new lease of life at a fraction of the cost of acquiring a brand new lathe. "This new re-engineering service represents a fantastic opportunity for owners of these British lathes to guarantee they will give many more years of excellent services by having them completely refurbished," says Mike Berry, managing director of 600 Europe. "As the original manufacturer with more than 100 years' experience in building these centre lathes, we are uniquely placed to offer this new service. We know these machines inside out, we hold the original design drawings and we have more than £5 million worth of genuine Colchester and Harrison spare parts." The full 600 UK re-engineering service comprises the following comprehensive stages: • Re-grind the bed • Check and re-work the headstock, apron and gearbox • Re-work the saddle, cross slide, top slide and tailstock • Check motors and replace all belts, wipers and pulleys • Re-fit or replace leadscrew guards • Repaint to current colours Available options include restoring or updating machines to current health and safety standards and fitting Digital Read Out to all models. Loan machines are available, subject to availability. Engineering specialists Stoneleigh Mechanical Services in Charlton, Greater London, and North Nottinghamshire College at Worksop, have both taken advantage of 600 UK's re-engineering service. Stoneleigh had a 1980 Colchester Mastiff and late-1970s Colchester Mascot refurbished, while North Nottinghamshire College had five Harrison M300 lathes rebuilt and retrofitted with DROs. Image: Refurbished machines at North Nottinghamshire College at Worksop Box item 4 Early adopter heaps praise on TT6 The Colchester-Harrison Tornado TT6 twin turret CNC turn-mill centre is one of the 600 Group's most recent product developments. One of the first customers is Graham Engineering, Nelson, Lancashire. The 140-employee firm selected the 100 per cent British designed and manufactured Tornado TT6 to boost productivity via 'single hit' machining of high volume, small-to-medium sized parts, including pipe fittings for Graham Engineering's domestic hot water cylinders, supplied direct to the construction industry. "The machine is running for up to 22 hours a day, including unmanned running through the night. Basically, the operator only needs to re-load the bar feeder and replace the coolant between machining runs," reports Shaun Riley, Graham Engineering's machine shop manager. Each hot water cylinder manufactured at the 100,000 sq ft Nelson factory has up to 25 pipe fittings, bolted or laser-welded to the unit, so machining times, unit costs, accuracy and highly consistent repeatability are all critical issues. The new Tornado TT6 and Graham Engineering's other Colchester-Harrison CNC machine, a Tornado T8MSYB, are used to support pipe fitting manufacture. Image: Tornado TT6 "The TT6 is a brand new, state-of-the art machine, which gives us this high accuracy over very long runs. With the twin spindles and twin turrets, it can be set up so that one spindle is finishing one component while the other spindle starts to work on the next one. "The advantage can be seen in the faster time to make each item on the new machine. The saving is around five minutes per item compared with eight minutes. We are currently making about 220 items per day on the machine," says Mr Riley. "The pipe fittings are made by machining solid bars, not from pipes. Approximately two-thirds of the material is machined out and the swarf is sold. Together with the low operator cost and the time-saving, the machine is able to pay for itself," he concludes. The TT6 has eight axes, twin 12-station driven-tool turrets and two identical 15kW integrated spindle units. First published in Machinery, January 2010