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Scott Technology sends out green shoots

Friday 9th May 2003

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Since listing in 1997 Scott Technology's fortunes have been an up and down affair. But lately it looks as though the company is starting to put on a growth spurt.

Sales at the maker of automated production machinery lifted from $21.7 million in the (14-month) 1997 year to $29.2 million last year after reaching a peak of $30.7 million in 2000.

But net earnings haven't kept pace. Last year's $2.4 million was only a touch higher than the annualised 1997 profit.

What's more, the company has been very vulnerable to economic trends. In 2001 a heavy slowdown in capital expenditure by firms worldwide halved Scott's revenue and cut earnings to just $415,000.

The shares' recent climb to record highs probably reflects robust half-year earnings ­ at $2.5 million, more than the company usually makes in a full year ­ and a bulging order book.

Signs US capex is recovering may be helping. Economists are forecasting 5% growth in 2003, compared with an expected 5% shrinkage last year.

Investors may also be backing Scott's recent expansion into robotics, which promises to help it diversify away from reliance on making machines that make appliances into the food, beverages, and packaging industries and further afield.

Scott has no debt and plenty of cash on hand, a sensible position for a firm whose revenues come from lumpy contract flows.

The company is not run by hotheads ­ CEO Kevin Kilpatrick, an engineer, has worked there for 35 years but seems to have plenty of fresh ideas.

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