Friday 8th May 2020
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Automation and robotics solutions provider, Scott Technology Limited (NZX: SCT ), has today released its unaudited interim results for the six months to 29 February 2020 (1H20)
The results reflect strong growth in the USA offset by softening economic conditions in key markets, as noted last year; lower volumes and lost overhead recoveries; the impact of COVID-19 in the second quarter; and realising the financial impact on complex and challenging projects in New Zealand and Australia, which are now either completed or nearing completion.
Strong sales growth has been seen in the USA and in parts of the service business, and value continues to be added by acquired businesses, particularly Transbotics and Bladestop.
Revenues in Australasia, Europe and China softened as the economic slowdown and uncertainty around Brexit and global trade noted last year continued into the first half of the financial year. In addition, revenue in the second quarter was impacted by COVID-19 restrictions, particularly in Asia with the China shutdown in January and February.
The challenging projects in Australia and New Zealand, as previously discussed, are now either completed or nearing completion and the financial impact of these has been realised in 1H20. Strengthened project management and more rigorous risk assessment for new projects has been implemented to ensure delivery of projects on specification, on time and on budget. New projects which were underway prior to the COVID-19 lockdown are recommencing as restrictions ease, although there may be some deferral of timing. The start-up of the recently announced Rio Tinto project will benefit Australian revenue in 2H20.
Long term demand for smart automation and robotic solutions is expected to remain strong, driven by businesses wanting to remove labour costs, increase safety and improve efficiencies.
For the six months to 29 February 2020, revenue was $101.8m and EBITDA was $(12.2)m including non-trading adjustments of $(11.8)m, with the company reporting a Net Loss After Tax (NLAT) of $(13.7)m.
Non-trading adjustments comprise a non-cash $(10.4)m impairment adjustment and a $(1.4)m restructuring provision for the closure of the DC Ross operations in Dunedin as previously announced3.
Excluding non-trading adjustments, Normalised EBITDA was $(0.4)m with Normalised Net Profit After Tax of $0.8m. The EBITDA result reflects the impact of reduced revenue, lower volumes leading to lower recoveries and margin erosion.
Net debt was $20.2m as at 29 February 2020. The company has satisfactory debt facilities in place and a supportive banking arrangement, and also has support from its majority shareholder, JBS Australia.
The Board has resolved not to pay an interim dividend for the year ended 31 August 2020.
The past five years has been a period of rapid acquisition growth for the company, resulting in a diverse reach across sectors, customers and geographies. With a new leadership team in place and given the changing operating environment, Scott is now moving to streamline its business and will focus on leveraging core strengths and expertise which offer profitable sustainable growth and margins.
The company’s new strategy will build on five pillars – Customer Partnerships, Leading Edge Technology, One Global Team, Operational Excellence and a Robust Global Platform. In particular, Scott will be increasing its focus on repeat, profitable sales of developed and proven technology, products and services which are core to the Scott Group; and increasing its service and support offering for customers. New project design & development will be carefully risk assessed and R&D activities will become highly focused on core technologies, with additional, carefully targeted strategic projects aimed at delivering positive commercial growth opportunities.
In line with the new strategy, the company is transitioning to a streamlined, regionally focused business model with four regions - Australasia (New Zealand & Australia), Europe, North America and China. Each will be led by a Regional Director with local teams providing product expertise, sales and customer support.
Manufacturing plants will become Centres of Excellence where each plant will have a specific focus on a product or industry sector, rather than all plants striving to produce a number of different and often highly complex systems and products.
Source: Scott Technology Limited (NZX: SCT )
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