Tuesday 29th October 2019
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A 20 percent drop in net profit for Scott Technology despite a 24 percent revenue lift is not enough to deter the automation specialist from continued expansion.
Last week, the company said net profit for the 12 months to Aug. 31 fell from $10.7 million to $8.6 million, despite revenue being up to $225 million from $182 million the preceding year. A day later, the Overseas Investment Office said it had reached a deal with Scott’s majority owner JBS Australia, after a corruption probe.
The OIO said while JBS Australia shareholders Joesley and Wesley Batista do not meet the regulator’s good character test, they are far enough away from the Dunedin-based business.
Shares of the company fell 9.4 percent to $2.23 on Friday, taking their decline to about 18 percent this year.
Scott chair Stuart McLauchlan played down the impact of the probe, telling BusinessDesk it wasn’t really involved with the matter and hadn’t had to make changes to its business.
The ownership is "working very well. JBS is very supportive, we’ve grown a lot since 2015 when you look at the size of the business, and they’ve certainly encouraged that,” he said.
Scott recently purchased Belgian warehouse automation company Alvey, and US-based automated guided vehicle manufacturer Transbotics in 2018. It also purchased a three-person beef grading firm Normaclass in June this year, for an initial sum of 1.1 million euros.
McLauchlan acknowledged the firm has a way to go in bedding down recent acquisitions, but wouldn’t rule out taking on anything else, because Scott has "growth in its DNA.” He said the acquisitions had been profitable this year.
He added he is confident about receiving the same level of research and development support under the new tax credit regime as it had before.
The company accelerated R&D spending in 2019, from $11 million to $14 million. It currently makes up about 6 percent of revenue.
“It's mainly the timing of the benefit. Before we got a cash grant and now we get a credit, so we’ve looked at the changes in the scheme and feel we can work with that.”
Technology worked on during the year included warehouse management software, lamb de-boning equipment and x-ray pork processing systems.
The impact of Brexit uncertainty had meant the European market was soft, McLauchlan said, but the company was moving as much out of Germany and to the Czech Republic as possible to cut costs.
“We are just in the process of incorporating our systems and reducing overheads to get rid of duplication,” he added.
The company had bank debt of $16.4 million at Aug. 31, against total shareholders funds of $111.8 million.
Scott declared a final dividend of 4 cents per share, a 70 percent payout ratio, retaining funds to support its increasing working capital requirements.
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