Annual Meeting - Chairman's Address
12:00AM, 4 Dec 2003 | ADDRESS
As Chairman of Scott Technology Ltd, it is my pleasure on behalf of the Board
or Directors to welcome shareholders to the seventh Annual Meeting of Scott
Technology Ltd since the company was listed on the New Zealand Stock Exchange
in 1997 when the Scott Technology shares were bonus issued at no cost to the
shareholders of Donaghys Ltd. At this time I wish to introduce to you the
members of the Board of Directors of Scott Technology Ltd. Most of you are
aware that I am Graeme Marsh, the Chairman of Directors
Kevin Kilpatrick Chief Executive
Chris Hopkins Financial Director
Scott Technology has traded successfully from its Dunedin base for 90 years
and today is a global leader in the design and supply of high technology
production plants for the international appliance industry as well as
developing an enviable reputation for its research and development in the
field of robotics, material handling machinery and its exciting development
within the meat industry.
Scott Technology Ltd is a high technology development and manufacturing
company heavily dependent on the Imagineering and Technical Innovation of
their employees who are very important partners in the business.
Scott Technology Ltd is a rather unique company in New Zealand, firstly
because it is a world leader in the high-end technology sector and also
because it is a publicly listed company with no debt, significant cash in the
bank and a strong positive cash flow. These are the strengths which protect
from the down cycles which inevitably occur from time to time.
Your Directors are very mindful of the company objective of maintaining
strong returns to its shareholders over the medium to long term.
The implementation of this policy means that in the good years rewards will
be greater but even in the down cycle year the return will still be
Your Directors are very pleased to have been able to announce a record year
for the company in many aspects including record sales which were 63% ahead
of the previous year, a record surplus after tax showed an increase of 132%
previous year and shareholders equity which increased by over 25% during the
I have to repeat that this was an exceptional year and as previously
announced to the Stock Exchange we do not anticipate the current year
reaching the same heights. But never-the-less we are planning for a good
result, having regard to the escalating exchange rate, particularly with the
US$ and the considerable research and development costs associated with our
automated meat processing systems.
For the year to 31st August 2003 Scotts achieved an operating surplus of $8.4
million compared with $3.7 million in the previous year. At balance date
total shareholders equity had increased to $16.9 million from $13.5 million
at the previous balance date.
Whilst Scott's primary business is the design build and installation of
automated lines for the international appliance industry, our wholly owned
subsidiary Scott Automation Ltd is rapidly gaining a reputation for the
development of robotic
applications for a range of industries within Australasia. Scott Automation
Ltd has recently secured a significant contract for a New Zealand company and
our Chief Executive Kevin Kilpatrick will give you more details of this in
However, the most exciting development within the company is the progress
which Scott Automation Ltd is making in developing robotic applications for
the meat industry through its joint venture with PPCS Ltd which is one of New
Zealand's leading meat marketing companies.
This is leading edge technology and will involve considerable ongoing
investment in development to achieve its full potential, which we believe can
be marketed world wide. We already have substantial interest from the
Australian meat industry in our robotic lines and Kevin Kilpatrick will
describe this venture
in more detail.
The joint venture with PPCS Ltd is by way of a joint shareholding in Robotic
Technologies Ltd which holds the intellectual property rights with Scott's
undertaking the development, marketing and building of the Robotic lines.
PPCS have first right to have Scott's build these robotic plants for their
own meat works for a period of two years from the instigation of the joint
The purchase of the business of CBS Engineering in Auckland last year gave
Scott's an entry into Robotic Palletisers and the acquisition also included
the Betts Wine Equipment business which is one of the largest suppliers to
the wine industry in New Zealand. This is a competitive sector but does
Auckland division to maintain contact with all significant wine makers in the
country. We have previously reported the purchase of the one hectare site and
factory buildings in West Auckland and the Company has recently let a
contract to build a new assembly hall and retrofit the remainder of the
complex to a high
standard suitable for the design and build of larger production lines for the
food and beverage industry.
The issue of Company Corporate Governance continues to be a prominent
international news topic and your directors are very much committed to a high
ethical standard of governance and management within Scott Technology Ltd.
We are in reality an uncomplicated company with a high degree of transparency
in our financial accounts and regular reports.
I want to refer to the remuneration structure of our key personnel which
involves realistic salaries, complimented by a profit share arrangement which
only applies to the amount of profit in excess of a benchmark on the average
funds of the company.
So the shareholders earn an attractive return on shareholders funds before
the senior personnel begin to participate and a proportion of profits in
excess of that level are then shared according to a formula approved by the
remuneration committee. The directors believe this provides a real incentive
to our key
decision makers to achieve the excellent results which are evident in this
Scott Technology Ltd operates in global markets and its performance is
impacted by events in the USA in particular but also in other South American
and Asian economies.
We have previously reported that Scotts have established a representative
office in Shanghai with a full-time Chinese National manager who is
undertaking excellent customer liaison work with our potential customers. In
recent times there has been a considerable shift in manufacturing processes
from the USA to China where labour rates are a fraction of those in the USA,
and Scotts needs to be at the forefront of machinery design and development
for that Asian expansion. Our Chief Executive Kevin Kilpatrick will advise
you in his address of a significant development out of our Shanghai office.
We expect in the short term that our operating surpluses will not match those
of last year, but will still be at a level which will continue to make Scotts
an attractive investment.
As already reported the company is undertaking considerable research and
development within the meat industry and this is being expensed as it is
incurred and the foundation marketing being undertaken in Shanghai, while
producing some early results should really pay off once relationships are
the growing number of appliance manufacturers in China.
We see both these tasks as laying strong foundations for the future. Finally
your directors have considerable confidence in the future of Scott Technology
Ltd and are consciously widening the group's base and geographical market
areas to protect the operating future of the company.
Last year Scotts paid a total dividend of .11cents per share prior to a one
for eight non-taxable bonus issue of shares.
At the time of the last annual meeting the Directors stated their intention
to at least maintain the rate of dividend of 11c per share on the increased
Having regard to the exceptional performance in the current year the
Directors have announced a further 1 for 8 non-taxable bonus issue of shares
and will pay a final dividend of 8 cents per share on the capital increased
by this current bonus issue.
This total dividend of 14 cents per share, is equivalent to 15 cents per
share on the issued shares pre the current bonus issue. The level of dividend
which the Directors are able to pay in the year to 31 August 2004 will depend
on the company's operating performance, the capital expenditure and the
research and development costs absorbed.
However, the company's policy is to reward all its stakeholders appropriately
and the Directors are confident that the company will continue to produce
strong results over the longer period.
The Group's sales and operating profit for the first two months of the
current year are similar to those of the corresponding period last year but
our forward order position is lighter at present than at the same time last
year and we are affected by the very strong N.Z. dollar. Our chief executive
will address our current operating position, forward outlook and current new
orders in more detail.
Finally may I take this opportunity to express the appreciation of the
Directors to all of our Scott Technology people for their ongoing commitment
to a company which has the vision to grow through its internal, intellectual
application. Scott Technology engenders a unique high technology people
focussed culture and the skills and efforts of every one of our associates
makes a very important contribution to the overall success of the group.
I also express my personal appreciation to both the Executive Directors and
my fellow non-Executive Directors for their contribution to the strategy and
governance of the company during an exciting year.
As Shareholders I thank you for your continued support and as your Directors
and senior personnel are significant shareholders they have the motivation to
achieve the best results possible.
I now formally move that the Annual Report including the Chairman's Report,
Financial Statements and Auditors Report of Scott Technology Ltd for the year
ended 31st August 2003 be adopted and invite our Chief Executive Kevin
Kilpatrick to address you and second the motion.