A further £2.5m is to be invested in ensuring that the West Yorkshire-based machine tools producer the 600 Group is in shape to take full advantage of a predicted upturn in demand.

The company, whose European hub is based at Heckmondwike, is looking to raise the money as a loan from shareholders to enable it to complete a major turnaround programme, which has seen costs slashed by £13.2m.

It comes on the back of an improved performance by the diversified international engineering group in the year to April 3, 2010.

Chief executive David Norman said: “I am pleased to report that the turnaround of the group is almost complete. The improvement in orders we experienced in the second half has been sustained post year-end and we expect this to continue.

“With the proposed funding in place, the group will develop its manufacturing footprint to increase capacity and, therefore, improve its ability to supply. This, combined with the predicted upturn in the machine tools market, leaves us well placed to deliver a significant improvement.”

He said the Oxford Economics Group was forecasting a significant upturn in machine tools markets in 2011, which 600 Group was now better placed to take advantage of.

In the second half of the year, 600 Group achieved an operating profit of £600,000 compared with a loss of £2.5m the previous year. The company also boosted margins from 27 per cent to 32 per cent across the year.

Although the second half of the year showed a relatively better performance, overall revenue reduced by 40 per cent to £45.4m against£76.2m in 2009, as the company withdrew from low-margin activities.

The group loss before restructuring costs, costs in relation to closed operations, net pension credit, impairment of intangible assets and tax for the full year was £1.1m, compared with £2.2m a year earlier.

Chairman Martin Temple said the group had been positioned as a diversified engineering company with four principal areas of activity, covering machine tools, precision engineered components, laser marking and mechanical handling and waste management, as well as a global distribution capability.

He said: “The board’s strategy is to build the business around the group’s core strengths in its traditional markets, exploiting the streamlined business platform which has been developed through the turnaround programme.”