Scott reports on strong performance

Scott Technology managing director Chris Hopkins addresses about 60 shareholders in Dunedin yesterday, at the company's annual meeting. Photo by Jane Dawber.
Scott Technology managing director Chris Hopkins addresses about 60 shareholders in Dunedin yesterday, at the company's annual meeting. Photo by Jane Dawber.
A strong previous financial year for Dunedin-based Scott Technology and additional forward work contracts worth $US11.5 million ($NZ14.7 million) were highlighted to shareholders at the company's annual meeting yesterday.

Scott managing director Chris Hopkins outlined acquisitions of small companies during the year; further contributing to manufacturing for the mining sector, a Chinese motor and lathe manufacturer and Scott's 51% stake in a Wellington-based superconductor company.

"To be effective on the international stage we have to be good at what we do. For a small company operating out of New Zealand, this means we have to be focused on niches and operate in fields where we are recognised as a world leader," Mr Hopkins told about 60 shareholders at the Kaikorai Valley headquarters.

For the year to August, Scott reported in early-October an operating profit of $7.3 million - a 32% increase on the previous year's $5.5 million - with revenue up 15% to $53.6 million.

During the past five years, Scott has moved from mainly assembly line manufacturing, to include meat industry robotics, several mining sector niche markets and to superconductor technology.

In a concept yet to be fully revealed, Mr Hopkins told shareholders development of its "dairy automation project" had been slower than envisioned, but on-farm concept testing should be complete by the New Year. Trials would be conducted during 2012 and commercialisation should be under way by 2012-13.

Scott, with almost 90% of its products sold to global markets, has been overburdened by the strength of the New Zealand dollar during the past three years, carrying hedging contracts against the US and Australian dollars, Chinese yuan and euro; but with most contracts denominated in the greenback.

Shareholders yesterday locked into questions on foreign exchange accounting procedures, asking if "other income" currency gains of $3.6 million really made up about half of the past year's $7.3 million profit.

Chief financial officer, Greg Chiles, said three contracts had been cancelled, which prompted the currency gain, but had they gone ahead, the financial outcome would have been the same.

Similarly, a "huge jump" in other expenses, noted by a shareholder, from $3.4 million to $7.7 million, revealed foreign exchange had been in revenue streams the year before, but for international accounting procedures was now taken out. There were additional business expansion overheads in the $7.7 million, he said.

Mr Hopkins said research and development remained "key" to Scott's fortunes. Scott spent about $8 million during the year, but he emphasised that wherever possible Scott sought to be paid for its research and development activities by customers or the governments of New Zealand or Australia.

A successful $9.5 million capital raising during the year was used to repay debt and to strengthen the balance sheet and would fund further growth.

Many opportunities required "significant working capital", Mr Hopkins said.


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