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Annual Meeting Chief Executive Officer's Address

12:00AM, 4 Dec 2003 | ADDRESS

Scott Technology Limited Dunedin Chief Executive Officer's Address

Thank you Mr.Chairman and a warm welcome to everyone here today.
As the Chief Executive of Scott technology Ltd, it is my privilege to address
this annual meeting of shareholders and to review the company's operations
with you.

As the Chairman mentioned in his address, Scott Technology has now traded
from its Dunedin base for ninety years. Although our focus must be forward
looking, the past does provide a foundation of experience upon which to build
the future. As this is the 90th anniversary of the founding of the company, I
think it appropriate to reflect briefly at this point upon the often
fascinating past that has molded the company into what it is today.

Scott Technology began as J&AP.Scott in 1913 when father and son, John and
Andrew Paton Scott, formed an engineering business on the corner of Albany
and Leith Streets in Dunedin.
John, the father, was a mechanical engineer who came to New Zealand in the
1890's and worked in Central Otago assembling and maintaining gold dredges.
Soon after its establishment, the father withdrew from the business and
Andrew was joined by his brother, John (preserving the J of J&AP.Scott).
The brothers initially specialized in automotive engineering and later in
gear production. The engineering facilities were extended during the Second
World War at which time the company was engaged in the manufacture of
precision tools and gauges (along with mortar bombs) as part of the New
Zealand war effort.
The expertise acquired during this period was then applied to tool-up for the
manufacture of washing machines and this led to the establishment of a plant
specifically for the production of these appliances. A washing machine made
by Scott during this era is on display in the foyer).
The appliance business was sold in 1961, however the company's engineering
activities were further extended at that time into contract manufacture of
precision press tools & dies and into design and manufacture of special
purpose machinery for local industry.
This precision engineering operation was relocated into new premises in
Carroll Street, during the early 1970's, and became the "embryo" from which
has grown the current day Scott Technology. Ultimately the Dunedin operation
outgrew this site and was relocated to its current premises in Crawford
Street where it continues to forge new and developing business opportunities,
particularly in the field of industrial robotics and process automation.
The acquisition of Christchurch based FC.Penfold in 1962, and its subsequent
relocation to new premises in Maces Road during the early 1970's, provided
significant opportunity for business development and growth. Initially a
small manufacturing enterprise that produced a range of cast iron gearboxes,
this operation now provides sophisticated production systems to the
international domestic appliance industry. It has become the largest division
of the company and contributes significantly to the company's overall level
of business activity and performance.

The acquisition of Auckland based CBS Engineering in 2002 provides Scott
Technology with further opportunity for business development and growth,
particularly within the field of automated materials handling systems for and
food and beverage industries.
Throughout the history of the company, Scott Technology's success has been
underpinned by the talent, commitment and dedication of its people. The Scott
Technology team of 2003 consists of 225 people with 125 being based in
Christchurch, 60 in Dunedin, 30 in Auckland and 10 or so scattered around the
globe at our sales and service centers in Dallas, Shanghai, Sydney and

To harness individual talent into a team performance requires strong
leadership. It is my privilege to introduce these leaders to you at this

From Scott Technology - Christchurch
Gordon Todd General Manager of Sales & Marketing
Philip Johnston Operations Manager
Iain Sillars Works Manager ) Not here today
Damon Page Chief Design Engineer )
From Scott Automation - Dunedin
Andrew Arnold General Manger - SAL
Richard Aimers Chief Design Engineer
Brian Rekittke Operations Manager ) Not here today
Andrew Burt Chief Controls Engineer )
From Scott Automation -- Auckland
Paul Denton Manager - SAL package handling systems
David Betts Sales Manager - SAL wine & beverage systems ) Not here today

The year ending 31st August 2003 has been a period of exceptional achievement
for the Scott Technology Group.
The level of sales and profit achieved, along with the number and value of
systems shipped during the year, have all been at record level. In total,
nine major systems, valued in excess of NZ$ 45 million were shipped to
various customers and destination including Australia, the United States of
America and Mexico.
2003 AGM CEO's Address.doc (C) 2003, Scott Technology Limited Page 3 of 5
The business upturn experienced during the previous year continued into the
first half of the year resulting in further contracts of significant value
being secured during that period. The second half of the year however
experienced a decline in the level of capital expenditure on a global scale.
Several high value contracts were carried forward from the previous year.
These contracts, along with those contracts secured during the first half of
the year, originated predominantly from the North American market and were
secured (and hedged) at favourable rates of currency exchange.
The level of research and development during the 2003 year has also been at
record level.
This expenditure (which has been expensed and not carried forward) reflects
the company's commitment to future business opportunities particularly with
regard to the development of expertise and competency in industrial robotics.

The company's business diversification plan requires that inter-division
operational synergies be maintained or enhanced. The implementation of this
mutual development policy and the sharing of engineering and technical
expertise has allowed the distribution of workload across all three of the
group's manufacturing facilities to be achieved in the manner expected.
The combined resource of Christchurch, Dunedin and Auckland provides in
excess of 8,000 square meters of facilities and the cumulative skills of 225
staff. The efficient utilisation of this extended resource, combined with a
significant level of outsourcing, contributed greatly to the overall
performance of the group and to the achievement of the required level of
throughput and profitability.

Scott Technology's Christchurch operation has contributed significantly to
the group result for the year. This performance benefited greatly from the
measures initiated the previous year with the introduction of a nightshift
operation and the development of design and project engineering tools, skills
and resources.
To meet highly competitive market expectations, appliance producers are
demanding shorter delivery periods and increased system flexibility. Scott
Technology's design, manufacturing and project management team is meeting
this demand with sophisticated production system delivery periods, once
thought to be impossible, being regularly achieved. During the year, six
major systems were shipped from Christchurch.
The bulk of Scott Technology's appliance systems workload for the year
originated from North America. This region is expected to remain the
company's prime market for some time however it is ultimately expected to be
overshadowed by developing markets as the trend for US production to move
offshore progresses.
Appliance production in China continues to grow rapidly in terms of units
produced both for local and export markets. This production growth is
expected to provide significant business opportunity for the company and to
support this expectation, a representative office has been established
(during the year) in Shanghai. This presence in China has provided immediate
benefit in terms of market credibility (within the greater East Asia region)
and with regard to our current foundation marketing activities. (It has also
elevated the company's profile in 2003 AGM CEO's Address.doc (C) 2003, Scott
Technology Limited Page 4 of 5 diplomatic circles leading to the CEO meeting
President Hu during his recent visit to New Zealand).
I am very pleased to announce at this time that Scott Technology has just
secured a contract with a Chinese manufacturer of home appliances for the
supply of an automated appliance production system. This contract, valued at
NZ$ 4 million, has been secured within a highly competitive environment
(against competition from Europe and Asia) and provides early testimony to
the value of our Shanghai office.
Scott Technology's Technical Services Division, which includes the company's
Dallas operation, continues to provide and develop after-sales customer
services. This division provides a significant contribution by way of
profitable service contracts and the enhancement of major sales opportunities
through customer contact and market awareness.

Scott Automation's Dunedin operation has continued to develop its
Australasian market, with projects undertaken during the year being for
clients in both Australia and New Zealand.
Industrial robotics remains the major business focus as the company continues
to develop robotic expertise, alongside other industrial automation
Partnerships with key players within the Australasian meat industry have
continued to be developed. These partnerships are being pursued through
Robotic Technologies Ltd; a joint venture company established in conjunction
with PPCS Limited (one of New Zealand's leading meat marketing companies).
The business opportunities available to Scott Automation within the meat
processing industry are very exciting and these are being pursued as quickly
as is technically possible. Testing and development of the initial boning
system has been advanced through a full season of variables at one of PPCS's
plants. This process, which could not be accelerated, has provided a
significant level of experience and information essential to the development
of a production system capable of accommodating "whatever comes down the
chain". (A separate primal cut system is also being developed in parallel to
the boning system).
Scott Automation's Auckland operation (which includes the package handling
and the wine & beverage divisions) has completed its first full year of
trading with the company and has provided a positive contribution to Scott
Automation's performance for the year. This operation is undergoing
significant change and it enters into the current year with confidence and
with expectation of achieving significant business development and growth.
I am very pleased to be able announce at this time that Scott Automation's
Auckland based package handling division has just secured a contract for the
supply of an automated package storage and retrieval system. This New Zealand
contract, valued at NZ$ 2.6 million, has again been secured within a highly
competitive environment (against competition from offshore).

Global economic uncertainty and unfavourable rates of exchange will provide a
significant challenge for the company during the 2003-2004 year. Contracts
carried forward from the previous year, and secured at more favourable rates
of exchange, will maintain margins
2003 AGM CEO's Address.doc (C) 2003, Scott Technology Limited Page 5 of 5
however the anticipated level of competition, combined with the high value of
the NZ$, will place significant pressure on future contract margins in the
short term.
The challenge for the management during the current year will be to realise
business development opportunities and to balance the company's resources to
meet project schedules and maintain the profit expectations.
The challenge for the engineers during the current and future years will be
to achieve design simplification to reduce the magnitude of the task thereby
allowing shorter deliveries at less cost to preserve or increase our
competitive advantage.

Finally, I would like to take this opportunity to express my personal
appreciation and thanks to my fellow Directors, Managers, Employees and
Shareholders for your guidance, support, dedication and commitment.
Thank you

It is my pleasure to now formally second the motion