Diversification key to Scott Technology's strong half-year result

Chris Hopkins
Chris Hopkins
Product diversification in multiple industries has delivered a strong half-year result for listed Dunedin company Scott Technology with work orders for the remainder of the year at record levels.

Scott services the New Zealand and Australian meat industry in a Dunedin-based joint venture with Silver Fern Farms developing robotics for the freezing works; manufactures assembly lines for world-wide sales from its Christchurch plant; and has established a niche-market in manufacturing sampling machines for the mining sector; through acquisition of Rocklabs company.

For the half-year to February, Scott's revenues increased from $20.3 million to $21.8 million, while profit before tax was up from $1.4 million to $2.2 million, chief executive Chris Hopkins said yesterday.

"The group's diversification across a range of industries has enabled us to deliver a strong result ... whilst dealing with variable global economic conditions and a high New Zealand dollar exchange rate."

In its full-year result to last August, reported in October, its after-tax profit rose from $265,000 the previous year to almost $2.8 million.

With Scott's reliance on overseas-derived income and lengthy contracts, manufacturing and delivery times, the volatile New Zealand dollar has caused havoc in recent years.

Following the announcement, Scott shares were unchanged at $1.42.

Craigs Investment Partners broker Peter McIntyre said Scott would be pleased to report increasing sales and demand across all sectors, saying the Rocklabs purchase was a "superb acquistion", being cash-flow positive at the time, and because of its high regard in its niche selling environment.

"Scott is a benefactor of the improving global economy, and in some respects, the improving elements of New Zealand's economy," Mr McIntyre said.

During the past 12 months, Scott shares had hit a low of $1.05 and a high of $1.45, with yesterday's result likely to be a "catalyst" to underpin and retain its share price in the upper year-rolling range, he said.

Its dividend is up from 1.25c per share to 2c.

Scott was in a "strong and healthy position" given its cash and bank balances for the period stood at $1.7 million and customers owed about $9.9 million for work, Mr Mcintyre said.

Scott's chairman, Stuart McLauchlan, said while Scott had a "strong underlying performance" in its cash flows and strong balance sheet, there was increasing pressure on a broad range of costs.

Scott would be focusing on those rising costs, to complete work "with maximum efficiency".

"The group's forward work is at record levels as we head into the second half of the financial year," Mr McLachlan said.


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