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AGM Chairman & Managing Director's Addresses

12:00AM, 2 Dec 2009 | ADDRESS

Scott Technology Limited have provided NZX with a copy of the Chairman and
Managing Director's Addresses to be delivered at our Annual Meeting today at


It is my pleasure on behalf of the Board of Directors to welcome shareholders
to the Annual Meeting of Scott Technology Ltd.

This Annual Meeting is the 13th since the company was relisted on the New
Zealand Stock Exchange in 1997.

2009 also marks Scotts 97th year in business, having been founded in Dunedin
in 1913.

At this time I wish to introduce to you the members of the Board of Directors
of Scott Technology Ltd.

My name is Stuart McLauchlan and I am the Independent Chairman of Directors.
Graham Batts Independent Director
Mark Waller Independent Director
Chris Staynes Independent Director

All of these gentlemen are non-executive independent directors.
Chris Hopkins Managing Director
Chris is an executive director.
Greg Chiles - Our Secretary and Chief Financial Officer.

I would like to acknowledge Mr Graeme Marsh, who retired at the Annual
Meeting in Dunedin two years ago after serving 38 years as a Director of
Scott Technology - 32 years of this were as Chairman.

The financial year to the 31st August 2009 produced an after tax profit of
$265,000 on revenue of $31.3 million. This compares to an after tax loss of
$818,000 on revenue of $25million in the previous year.

At last year's Annual Meeting I announced we had been successful in winning a
$7million order which was subsequently cancelled due to the further
deterioration in the world's Financial Markets. This left the company short
of work and it is a credit to our management team that during the most severe
downturn the world has witnessed since the Great Depression, the company is
now in a position of having a very good order book heading into this new
Financial Year.

During the past two years the company farewelled, through retirement, a
number of long serving senior staff. I am pleased to report Chris Hopkins,
our Managing Director, has, in most cases through promotion, rebuilt his
senior team which will drive the company forward for the foreseeable future.

Scott Technology Ltd operates in world markets and is reliant on a sustained
improvement in the financial fortunes of the United States and the other
world leading economies.

The United States, since at least the Second World War, has often provided
global leadership on important issues. Its Marshall Plan was a major factor
in the post war reconstruction of Europe, it assisted the development of new
economic and political institutions and of trade, financial and other

Now, however, there are indications of significant shifts amongst regions and
countries, reflecting politics, capability and performance. The credibility
and leadership credentials of the United States seem to have been eroded,
over several decades leading to the irrational exuberance bubble economy and
the global financial crisis that has seen the demise of major financial
institutions, including Bear Sterns and Lehman Brothers. These failures were
on a scale that fundamentally threatened the whole global financial system,
did enormous damage in many countries and will continue to affect the global
economy for many more years yet.

Scott Technology has been successful with its diversification into the
European and Chinese markets with several large orders being received. Our
Rocklabs subsidiary operates in many key markets, including North and South
America, Russia, and the former Russian States, Southern Africa and
Australia. Rocklabs has noticed a strong recovery in its markets and is
finding favour with the automation options the company is now able to ...?

New Zealand's economic decline has continued, due to low productivity and
weak competitiveness and this has constrained exports, living standards and
policy choices. Low savings and continuing external deficits will increase
the already excessive net foreign liabilities dependence on foreign capital,
foreign control and vulnerability to market shocks. Government expenditure
has risen sharply in recent years and is excessive and public service
performance limitations inhibit value delivery and improvement.

This consistent under performance and reliance on foreign capital is
responsible for the extremely volatile New Zealand dollar which makes life
difficult for the export sector.

It is pleasing the government has set its sights on catching up with
Australia's productivity growth by 2025. This is a good target to aim for and
Scott Technology has been advocating an improvement in productivity by
investment in technology, such as our innovative automation and production
systems. The company has been actively looking for further opportunities in
automation applications and have several proposals under consideration at
present. The past investment in research and development will deliver
continuing opportunities which the company is well placed to pursue to
maximise the return for shareholders.

Scott Technology enters the new financial year with a strong balance sheet, a
modest level of borrowings and a resumption of the payment of dividends. The
company is poised for a period of growth which will be achieved through
existing operations and acquisitions which will be complimentary to the areas
we are presently operating in.

I would like to thank Chris Hopkins and his senior management team for their
continued hard work and dedication to the successful rebuilding of the
company's capabilities over the past year. Despite the slow first half, we
have seen a steady improvement in the second half of the financial year and
this momentum will continue into the current year and beyond.

To my fellow Directors, I thank you for your support and I look forward to
sharing with you the exciting future that lies ahead of the company due to
the solid foundations that have been laid through the strong governance
oversight you have given. Finally, may I thank you as Shareholders for your
patience and support over the past two years. I look forward to delivering
improved shareholder value in the form of increased dividends and a share
price reflective of the intrinsic value of the company's world class

I now formally move that the Annual Report, including the Directors Report,
Financial Statements and Audit Report of Scott Technology for the year ended
31st August 2009 be adopted, and I invite our Managing Director, Chris
Hopkins, to address you and second the motion.

Thank you.


Our Chairman, Mr McLauchlan, has covered the global economic and financial
environment that has such an impact on our business. My task is to provide
you, our shareholders, with further insight into our business activities,
what we have been up to in the past year, and our plans for the future.

Scott Technology's area of operation is not the same as it was five years ago
and I am sure you will agree with me when I say that this is very fortunate.
Our diversification has spread our base beyond appliance automation and it is
this diversification, along with the benefits of a robust history and a vast
experience in automation that has enabled us to survive the turmoil of the
past few years.

Five years ago Scott's main business was supplying automated production lines
for the appliance industry and this was the mainstay of our business. In
North America, our main market, the appliance industry is driven by housing
starts and construction activity. As we know, this sector has been under
severe pressure over the last two years and this, in turn, has affected our
customers, and our market. The good news is that our reputation and long
standing in the market has enabled us to increase our market share, both in
North America and in Europe, and this, along with our activities in China,
has helped us to sustain ourselves over the past two to three years.

Several years ago we embarked on a path of automating the meat processing
activities, and in particular the boning rooms, of our joint venture partner,
Silver Fern Farms. This was an extremely ambitious project at its
commencement and there were many doubts expressed by the industry and, at
times, by ourselves. However, we have stuck true to our vision and belief in
ourselves, and as I will cover later, you will see that we have now started
to realise this dream.

Further diversification was achieved in early 2008 with the acquisition of
Rocklabs. Rocklabs supplies laboratory equipment for sample preparation in
the mining and mineral sector and has now commenced some mechanised and
automated system development as well. There is much synergy between the two
businesses and this acquisition has presented many exciting prospects for the

Over the past few years we have explored and taken further opportunity to
expand Scott Technology's automation expertise and develop strategic
partnerships with likeminded companies that meet our internal criteria of

World leading
Engineering automation
A global player

As a result, we are currently building internal capability that will focus on
these other engineering and automation opportunities. This now provides us
with four solid foundations to market and grow the business:

Appliance Systems
Meat Processing
Industrial Automation

Before I get into further detail I would like to introduce key members of our
Executive management group. These are just a few of our talented and
motivated team who are charged with realising the potential of Scott
Technology. You have already been introduced to Greg Chiles our Chief
Financial officer, who did such a good producing the annual report for 2009.
Other executives are:

Ken Snowling - Head of Appliance Division.

Andrew Arnold - Head of Meat Processing activities.

Phil O'Brien - Acting General Manager of Rocklabs. I would also like to make
a special mention of Ian Devereux, who is here with us today. Ian was the
founder and former owner of Rocklabs. Ian has stepped back from day to day
operations but remains with the company in an active role, promoting Rocklabs
internationally and driving our innovation developments.

Tony Joyce - Who has been given responsibility for the other industrial
automation areas of the business.

Alan Prince, who heads up Scott Service International, our service arm,
established in 2006

And our two Operations Managers:

Steve Henshaw, in Christchurch and

Kevin Kearney, responsible for operations here in Dunedin.

Sales Summary:
I would like to breakdown our sales activities into the markets I have
mentioned and have firstly outlined the sales by the four segments:
Appliances, Meat Processing, Rocklabs and Industrial Automation. I have also
outlined a breakdown of our sales by country and we can all be extremely
proud that we are a truly global company with global reach and global

Research and Development:
It is appropriate at this stage to mention that this diversification has in
part been only achievable through a large commitment to research and
development over the past seven years. Total spend by ourselves and our many
partners on research and development in meat processing areas alone now
totals in excess of $14 million since we started in 2002 . Our total spend on
R&D in the year to 31 August 2009 totalled in excess of $1.0 million, which
includes the spend within our joint ventures and associates.

Our research and development spend is carefully managed and monitored, both
internally and by the Board, and I can assure you as shareholders that our
sights are firmly set on commercial returns on our investment. This leads me
into our key achievements and highlights to date. In light of my comments on
research and development I should start off with the commercialisation of our
meat processing equipment.

During the past year we have had a very strong commencement to the
commercialisation of our meat processing equipment. The first commercial
X-Ray Primal System was sold to Alliance Group in Invercargill. It is worth
mentioning that they operate in the same market as our joint venture partner,
Silver Fern Farms, and this in itself speaks volumes of our achievements to
commercialise such a system. In a recent letter from Alliance they confirmed
that the benefits promoted on the system have been achieved, and in some
areas have exceeded our promises and their expectations. A copy of this
letter is available for any interested shareholders.

In addition, we have also commenced full commercialisation of our beef boning
units and there are several other products that are nearing commercialisation
with strong expressions of interest from industry participants, both in New
Zealand and Australia, wanting to purchase the equipment we are offering.

The Beef Boning System has good potential and the payback has been
independently verified by Meat & Livestock Australia.

In addition, we have just delivered our second X-Ray Primal System to Silver
Fern Farms and this is currently in production start up at Takapau, in the
lower North Island, and we are very confident that we will be selling and
installing further systems in 2010.

Other Highlights & Achievements:

Other highlights and achievements to date include:

A strong second half financial performance.
A small dividend but a large gesture of faith in our future ability.
Scott Service International achieved record sales and profitability.
New Capex on technology within the Group, including a water jet cutter for
Scott Fabtech and new CNC 4 Axis milling machine for Christchurch.

Scott Fabtech set up here in Dunedin in recent months and will expand our
capability and boost our bottom line.
Joint venture agreement entered into with NCMC in Australia for developing
beef processing, along similar lines to, and in conjunction with, Silver Fern
Scott Technology Australia subsidiary recently established and will become a
major driver of meat processing and other automation sales in Australia.

Securing major appliance lines for North America and for Europe.
Positive feedback and compliments from customers, including Bosch Siemens
Germany and Alliance Group.
First repeat order for an automated sample preparation system for a
commercial laboratory operating in the mining sector. This, we believe, is a
world first to have a repeat order for a system from a commercial laboratory.
Our competitors have attempted automation and there have been several without
success. This indicates a significant successful achievement of a goal that
no one else has achieved.

Successful move to our purpose built facilities at Kaikorai Valley Road,
Start on our 100 year book, celebrating 100 years of Scott Technology due for
release with our celebrations in 2013

Looking Forward
Operations in Auckland, Christchurch and Dunedin are all extremely busy at
present, with substantial automation systems for the mining sector, meat
processing, appliance and other automation underway at each of these sites.

We are continuing to invest in research and development with the clear
objective being profitable commercialisation. RTL, our joint venture with
Silver Fern Farms is now trading profitably and we expect strong growth from
this venture over the next 5 years.

We are also starting to see an increase in the general level of enquiries,
and the opportunities and prospects for major projects is reasonable.

However, the exchange rate continues to be a wild card as long as the
Government allows the fluctuations to continue.

To provide you with some feel for the level of enquiry, we are currently
bidding on or in early discussion with customers for four mining industry
projects, five appliance systems and multiple meat processing systems. These
total in excess of $40m and in addition there are at least another fifteen
prospects that are in early stages.

An exciting area for us is where we have formed strategic alliances with
several companies where we have the opportunity to provide ongoing
engineering and automation in close collaboration with our partners.
Automation projects arising from these strategic alliances have the potential
to add tens of millions of sales over the next few years.

In summary, our current prospects for major projects is very encouraging and
at a level we have not seen for some time. We continue to build strategic
alliances with customers and partners. We are currently evaluating several
acquisition opportunities and we are also working with UCLA Anderson School
of Business to develop a business plan to grow Rocklabs' sales in the North
American market.

Rebuilding profitability from a constrained base is challenging. The value of
the New Zealand dollar is providing substantial head wind to this task. The
volatility of the currency provides uncertainty and risk. To counter this, we
are concentrating on providing our customers with the level of service and
innovation that our customers demand and with careful restraint we will
increase our activity, grow our revenue line and our profits, and will
continue the proud tradition of Scott Technology through to 100 years, and

That ends my address, but before I pass back to the Chair I would like to
express my personal thanks to all staff, colleagues and friends and
acknowledge the hard work and effort that they put into the business every
day. I would like to thank the Board, in particular Stuart, for his support
and encouragement during another challenging year for the company. I keep
saying it because I believe it - that we have a great company, with great
opportunities, and great people.

I am now pleased to second the motion moved by the Chairman, that the annual
report, including the directors' report, financial statements and auditors
report of Scott Technology Limited for the year ended 31 August 2009, be

Thank you.

On the conclusion of the meeting I would like to invite you all on a tour of
the factory.