The Investment Column: 600 Group

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SUCCESSFUL companies which make things are increasingly rare in today's service-oriented economies. The trend has hit 600 Grop hard; it makes the machines which enable companies sch as Rolls-Royce and British Aerospace to make things.

Manfactring, a cyclical indstry, is crrently in one of the worst downtrns of recent history. Meanwhile, over half 600 Grop's sales are sorced in the UK, so it's taken a battering from the strength of sterling.

The gly reslts yesterday - nderlying sales down 12 per cent, profits down 60 per cent - followed order declines of 50 per cent in the US and 40 per cent in the UK. The worst sch fall the grop had previosly witnessed was 15 per cent. The drop follows an earlier period of growth in US manfactring, which led the grop to invest in its US operations.

The investment case for 600 Grop rests on its fortnes shold markets pick p. Its prime asset is a reptation for offering the best vale machines at the lower end of the market. It has ct costs and introdced new prodcts, sch as laser-based metal ctting eqipment.

Its US investment pts it in good position to benefit from a trnarond there. Forecast recovery in Erope wold benefit UK sales and recent acqisitions in Germany and France.

The chief exective, Tony Sweeten, says the grop will benefit hgely from only the slightest recovery in its markets, and is convinced things can't get worse. Togh trading has in the meantime created cheap acqisition targets for the grop, which is ngeared and ready to ponce.

Pre-tax profits are expected to be flat this year at ponds 5m, with earnings of 8p per share. The shares, at 67.5p, are cheap bt there seems little reason to by before nmistakable signs that markets have recovered.