Chairman's Address and Chief Executive's Address to AGM
12:00AM, 2 Dec 2004 | ADDRESS
Scott Technology Ltd has provided the following Chairman's Address and Chief
Executive's Address delivered at the Annual Meeting in Christchurch this
afternoon at 4.00pm.
As Chairman of Scott Technology Ltd, it is my pleasure on behalf of the Board
of Directors to welcome shareholders to the eighth 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
Our newest director Mark Waller
All of these gentlemen are Non-Executive Directors.
Kevin Kilpatrick Chief Executive/Director
Chris Hopkins Financial Director
Kevin and Chris as Executives of Scott Technology Ltd are Executive
Scott Technology Ltd has now completed 91 years of successful trading and
today the company is first and foremost a global leader in the design and
manufacture of high technology production lines for the international
A typical production line will start with a coil of pre-enameled steel which
is fed through a number of computer controlled stations which bend, notch and
pierce the blanks of steel to create a refrigerator cabinet, or similar,
without damaging the enamel on the steel. These production lines run
continuously and can produce millions of appliances each year.
However Scott Technology has largely implemented its earlier announced plans
to apply its technical expertise into the field of robotics for industry,
including the meat, food and beverage sectors.
The company's more recent development of robotics for the meat industry at
its Dunedin Technology Centre and the development of the food and beverage
handling robotics at its Auckland Technology Centre, has greatly widened the
scope of Scotts global marketing opportunities.
Scott Technology Ltd now has three strong divisions with global export
potential and our Chief Executive Kevin Kilpatrick will give more details of
these exciting developments in his address.
Scott Technology Ltd is somewhat unique among listed companies in New Zealand
with its very strong financial position. As at 31st October 2004 Scotts
balance sheet reflects no debt, $4 million in the bank, two valuable freehold
technical centres in Christchurch and Auckland and a strong positive
operating cash flow.
This conservative financial position enables the company to pay out a high
proportion of its net earnings as fully imputed dividends.
The implementation of this policy means that in the good years the rewards
will be exceptional but even in a down cycle year the return will still be
Your Directors were pleased to report earlier that the Company earned an
audited operating surplus before taxation of $5.5 million on sales of
$36million for the year ended 31st August 2004. This is the second highest
annual result for the company and reflects the growing diversification of
Scotts global markets.
In line with the Directors' commitment to maintain a relatively high dividend
pay out, a final fully imputed dividend of 7 cents per share was declared and
paid, bringing the total dividend for the year to 13 cents per share. This
total dividend was paid on the capital increased by last year's one for eight
bonus issue, whereas last year only the final dividend of 8 cents per share
was paid on the increased capital. The total dollar dividend paid to
shareholders was at a similar level to that paid in respect of the year to
31st August 2004. The dividend was fully imputed and a supplementary dividend
applied to overseas shareholders.
The very strong New Zealand dollar has certainly impacted our past years'
results and management is working very diligently to offset this currency
impact wherever possible.
Our Chief Executive will elaborate on measures which we are taking to
partially offset this impact. We believe that the New Zealand dollar is
artificially high caused mainly by the very weak US dollar but will return to
more normal levels in due course and this will impact very positively on
future results of the company.
The company's strategic move to diversify its markets geographically is
producing real benefits with major contracts completed or currently being
built for customers in China and Turkey. This contract is supported by a
Guarantee by the New Zealand Export Credit Office which is administered by
the New Zealand Treasury.
Scotts now has strategic sales offices in Sydney Australia, Dallas USA and
Shanghai in China.
Currently sales enquiries are being pursued in our traditional markets as
well as in Thailand, Russia, India, Slovenia, Egypt, Jordan, Syria and
Bahrain. These markets reflect the changing pattern of global manufacturing.
During the year it was decided to strengthen the board and a sub-committee of
non-executive directors undertook an extensive review of possible candidate
with a preference for a Chief Executive of a demonstrably successful Public
Company preferably based in Christchurch who could bring a new level of
experience to our Board. We were delighted that Mr Mark Waller, the Managing
Director of Ebos Group Ltd was able to accept our invitation to join the
board of Scott Technology Ltd.
Mr Waller has been Managing Director of Ebos for 17 years during which time
he has taken the Company from an underperforming position to one of New
Zealand's outstanding medium sized public companies. Mr Waller is only 50
years of age and we believe he will make a major contribution to our Board
over many years to come.
Finally may I take this opportunity to express the appreciation of the
Directors to all of our Scott Technology people for their considerable
commitment to a company which has the vision to grow through its internal
intellectual team of highly qualified engineers.
Scott Technology Ltd engenders a unique high technology people focused
culture and the skills of our technical people are absolutely competitive
with similar positions amongst our global competitors.
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. We look forward to the
future with considerable confidence.
As shareholders, I thank you for your continued support and as your Directors
and many of Scott's personnel are significant shareholders we all have the
motivation to achieve the best results possible for our stakeholders.
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 2004 be adopted and invite our Chief Executive Kevin
Kilpatrick to address you and second the motion.
CHIEF EXECUTIVE OFFICER'S ADDRESS
Thank you Mr. Chairman and welcome everyone to this annual meeting of
shareholders. As Chief Executive, it's my privilege to review the company's
operations with you.
Firstly I would like to acknowledge the significant contribution made by the
staff to the success of the company through their cumulative talent,
dedication and passion. It is that which sets us apart and makes Scott
Technology a great company.
The Scott team consists of 250 members; 150 in Christchurch, 60 in Dunedin,
30 in Auckland and 10 or so based around the world in Dallas, Shanghai and
Exceptional performance requires exceptional leadership and it is my
privilege to introduce the senior executive team to you at this time.
From Scott Technology HO Dunedin
- Chris Hopkins Chief Financial Officer
From Scott Technology Christchurch
- Philip Johnston General Manager
- Iain Sillars Operations Manager
- Gordon Todd Sales & Marketing Manager
currently in China
- Tony Joyce Technical Services Manager
currently in the US
From Scott Automation Dunedin
- Andrew Arnold General Manger
- Brian Rekittke Operations Manager
currently in Australia
From Scott Automation Auckland
- Paul Denton General Manager
Company performance may be measured using many yardsticks. The ultimate
measure of performance, however, is the value added to shareholder investment
in the form of capital growth and operating profit.
As reported by the Chairman, the year-ended 31 August 2004 produced a very
good result returning an operating surplus of $5.5 million (before tax) on
group sales of $35.8 million.
Operating profit alone does not necessarily provide a good measure of
operational efficiency and other factors must be considered to determine
For example, if the average currency exchange rates for the 2003 year were
applied to the export sales for the 2004 year, group revenue and pre-tax
operating surplus for the year would increase by $4.8 million and surpass the
2003 result by returning a surplus of $10.3 million on sales of $40.6
million. (The 2003 result was $8.4m on $47.5m)
On the basis of this measure of operational efficiency, the year-ended 31
August 2004 was indeed a very good year.
SCOTT TECHNOLOGY (Christchurch - Appliance Production Systems)
The company's current core business is the production of sophisticated
manufacturing systems for the home appliance industry and Scott Technology's
Christchurch operation is dedicated to this global activity and to its
ongoing growth and development.
The challenge for the Scott Technology team, following an exceptional 2003
year, was to maintain momentum and to develop operational techniques to meet
developing and competitive market demands for lower cost and shorter
During the course of the year, several (8) appliance production system were
shipped and installed around the world in countries such as Australia, Brazil
and the United States of America for customers such as Electrolux, General
Electric, Mabe, Maytag and Whirlpool. An equally numerous number of appliance
production systems are currently under construction OR undergoing factory
testing for several international customers.
The company's appliance market is becoming very geographically diverse with
appliance manufacture, and the corresponding demand for production systems,
becoming "truly" global. As reported by the Chairman, active enquiries are
currently being pursued by the company in Australia, the United States of
America, Mexico, Brazil, China, Thailand, India, Turkey, Egypt, Jordan,
Syria, Bahrain, Poland, Russia and Slovenia.
This market expansion provides the company with new, exciting and developing
business opportunities. Some of this, however, is likely to come at the
expense of demand from traditional markets (such as the United States) and it
will also present the company with further competitive and cost reduction
Along with currency factors and rising domestic costs, these market
challenges are likely to maintain pressure on margins throughout the current
year requiring additional operational efficiency gains, particularly through
the development of lower cost offshore procurement and outsourcing
At this time, the first (of what is expected to be many) offshore procurement
order has been negotiated with a reputable company in China for the supply of
(28) press tools. This and similar future supply contracts are expected to
release significant competitive benefit to the company in terms of capacity,
cost and schedule.
During the year, a production system was delivered to one of the company's
major customers in China (it was the third system supplied to this customer).
This project provides a good example of current "global market" trends with
the appliance to be produced in China on New Zealand equipment for an
American producer for sale in the United States.
Also during the latter part of the year, the company secured a strategically
important contract to provide three production systems (with a nominal value
of NZ$ 8 million) to a significant listed company in Turkey.
I am very pleased to announce that Scott Technology has just secured a
contract with Haier, a major Chinese manufacturer of home appliances, for the
supply of an automated appliance production system (with a nominal value of
NZ$ 4 million). Haier is ranked No.1 whiteware producer in China and No.5 in
the world behind Whirlpool, Electrolux, Siemens and General Electric. There
is expectation Haier will soon leap-frog Siemens and General Electric to
become No.3 in the world.
Along with several other major projects, these recently secured contracts
provide a substantial forward workload to be completed by the company during
the current 2005 financial year. This high level of activity is further
supported by a high level of positive enquiry originating from within
traditional and developing markets.
SCOTT AUTOMATION (Dunedin - Automated Robotic Systems)
To expand the company's business horizon (beyond the geographic & economic
diversity associated with our international appliance business) the company
established Scott Automation (a wholly owned subsidiary of Scott Technology)
in 2001 to develop new business opportunities having diverse industry appeal
by utilising, and further expanding, the company's acquired expertise,
knowledge and vast experience (especially that relating to process
Scott Automation has subsequently developed (and continues to develop)
leading edge robotic capability applicable to a broad variety of production
processes including (but not limited to) the development of revolutionary
automation within the meat processing industry.
The exciting development within the meat industry in particular has
significant global opportunity for the company prompting a major move in 2003
to establish a joint venture company, Robotic Technologies Ltd, with leading
New Zealand meat processor, PPCS Ltd, to facilitate the development and
commercialisation of this potential.
The company also has a close working relationship with Meat & Livestock
Australia ('MLA') who represent and invest in the red meat industry in
Australia. Scott, in conjunction with PPCS and MLA, have several robotic
meat processing development projects underway.
Significant advancement has been made with the initial boning system,
operated under seasonal production test conditions at PPCS's Silver stream
plant, to achieve impressive performance results in terms of meeting expected
yield, speed and process reliability criteria. In parallel to this, other
meat processing automation is being developed and are about to enter into
field development phases.
Contribution from the Automated Robotic Systems business is expected to
increase as the company implements its strategic plan for the future of
robotics in the meat industry. Research and development work consumes
significant resources and comes at a substantial cost however this is a
positive investment to increase our future potential earnings. The current
target for commercialisation of selected meat robotic systems is mid 2005.
SCOTT AUTOMATION (Auckland - Automated Package Handling Systems)
The establishment of Scott Automation in Auckland in 2002 (via the
acquisition of CBS) is significant to the company's development and business
diversification, broadening its industry and skill base into package handling
systems and providing a strong and committed presence within the heart of New
Zealand industry and an excellent platform from which to service Australia
Our Auckland division has "put in the hard yards" over the last 12 months and
is showing the benefit with significant opportunities and enquiries
originating from both Australia and New Zealand. Several materials handling
systems have been constructed with installations occurring in both countries
during the year including a major "automated warehouse" system installed here
in New Zealand.
During the year, Scott Automation's new and refurbished Auckland Technology
Centre was completed and officially opened on the 29th July 2004. This
milestone marked the completion of our current Auckland site development
programme however it also marked the beginning of the next phase of our
business development programme.
A key element of the company's growth and diversification strategy is to
maintain and develop group operational synergies allowing inter-divisional
workload sharing to maximise efficient utilisation of the group resource as a
Scott Automation's Auckland operation now complements this philosophy
increasing the Group's overall resource to 11,000 square meters of first
class design and manufacturing facilities and the cumulative experience of
250 skilled staff.
Although the New Zealand wine industry is experiencing phenomenal growth, the
company wishes to remain focused upon its core (high tech manufacturing)
business and has negotiated the sale of the indent winery equipment business
to the senior management of the wine & beverage division.
The purchasers will continue to work closely with the company to provide an
increased level of single source service to the wine industry and will market
the company's manufactured winery equipment.
We enter 2005 year with an extensive order book. This work has been secured
in a very competitive environment and provides management with a single
minded focus - to be smart and effective in the way we design and build these
systems, to meet project schedules and to maintain profitability.
The company's achievements represent the cumulative achievements of all staff
and I take this opportunity to thank all our employees who have contributed
so much to the success of the company this year. The management team of
Scott Technology Ltd believe Scott's future and opportunities are exciting
and look forward to building on the results achieved to date.
Doing that which is easy provides little challenge and usually produces
little reward. Scott's business is built upon achieving that which is
difficult & demanding to provide superior solutions within shorter schedules
at more competitive prices. Success in our business doesn't just happen - it
requires, vision, passion, commitment and a team effort. As Chief Executive,
I look forward to facing the challenges ahead with, and as part of, this
Finally, I would like to express my personal appreciation and thanks to the
Chairman and fellow Directors, Managers, Staff and Shareholders for your
guidance, support, dedication and commitment.