Scott Technology back in black, sees momentum building

Newly-restructured automation and robotics specialist, Scott Technology, said it expected its earnings momentum to continue in the second half after returning to profit and paying a dividend in the first.

Dunedin-based Scott’s net profit came to $4.7 million for the six months to February 28 compared with a loss of$13.7m in the previous first half, which included the costs associated with the programme.

For the first time since 2018, the company is paying a dividend – 2 cents a share.

The company’s shares rallied on the back of the result.

Scott’s technology is used extensively in the meat processing industry, but also in the mining sector.

Its systems are also used by whitegoods manufacturers and in warehouse management and logistics.

Scott, 51 per cent owned by the world’s biggest meat company – Brazil’s JBS – said the result reflected positive momentum gained from last year’s restructuring and as most regions started to recover from Covid-19.

“This has seen forward work programmes in Europe, USA, China and Australasia grow firmly from this time a year ago as new system design and build contracts have been awarded at a steady and focused pace over recent months,” the company said.

The product and service businesses of Scott were continuing to show strong recovery and positive margin performances.

The mining products and parts business-Rocklabs-together with “BladeStop”revenues from the meat industry, were showing strong growth on prior year.

Service revenues across several key markets were also growing.

“As the world begins to slowly open up as vaccines are rolled out, we are confident of building on the early positive momentum seen in the first half,” chief executive John Kippenberger he said.

EBITDA of$11.2m recovered to exceed the pre-Covid performance of $10.4m from the first half of 2019.

Improved revenue as well as a “right sizing” programme delivered a 28 per cent improvement in gross margins to 23 per cent.

Overhead costs fell by $4.1m or 25 per cent.

The impact of Covid-19 was still being felt deeply across the group, as travel restrictions within markets and across continents often prevent sales meetings in person and continues to inhibit some projects, Scott said.

Kippenberger said the company was seeing particularly strong growth in the mining and meat processing sectors – both areas to be hit hard by lack of manpower over the Covid-19 period.

“The mining and meat processing sectors are at the epicentre of the crisis of labour supply,” he said.

“We are in ongoing discussions with our customers in those markets about making sure that the automation plans continue, because they are under pressure on labour supply and on costs,” he said.

“Those are the key facts that are underpinning our confidence,” he said.

In the last 10 years a lot of Scott’s activity had been dominated by acquisitions but Kippenberger, who was appointed CEO late in 2019, said the company was now focusing its efforts on where it can win.

“My view is that if you take a too broad an approach in terms of what we are good at, you can get into some quite dark and complex situations and I think you have some of that in the most recent past,” he said.

“It’s grown significantly through acquisitions. It’s not been a straight trajectory of revenue and earnings growth.”

Scott counts the world’s big whiteware appliance makers, such as Bosch, GE and Whirlpool as customers.

“They are all scaling up as the whitegoods industry, throughout Covid, has grown very, very quickly,” he said.

“Those big companies are dialling up their programmes to bring on capacity,” said Kippenberger, who was previously chief executive of Manuka Health.

Shares in Scott Technology, which has a market cap of $172m, last traded at $2.20, up or 5.2 per cent, having gained 22 per cent over the last 12 months.

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