Scott Technology is continuing to find success with its product-focused strategy, posting strong half-year results.
Revenue was up 11% to $127 million, and earnings before interest, tax, depreciation and amortisation (Ebitda) were up 20% to $15m for the six months to February 2023.
Margins also improved across the smart automation and robotic solutions company’s portfolio, up to 26% from 22%, which ultimately led to a 60% increase in net profit to $7.8m for the period.
Chief executive John Kippenberger said the results were evidence of the success brought about by moving away from trying to create bespoke solutions for every customer, to a focus on creating industry-specific products.
“It’s the strategy playing out … a focus on core technology and proven products and big global markets,” he said.
The company’s board has approved a half-year dividend of 4 cents per share, the same as the first half in the prior financial year, which ended with a full-year dividend of 8cps.
Scott Tech posted operating cash flow of $26m and a net cash position of $12.8m that it attributed to the timing of deposits for large contracts.
With profit and cashflow looking much stronger than the 2021-22 financial year, Kippenberger was asked if a higher dividend could be on the cards for the full current financial year.
Kippenberger, also an executive director on Scott’s board, said that the board would consider it in the second half, but there were still pressures to consider and the company was “still in growth mode”.
“All those supply chain pressures that have really pushed out lead times, there has certainly been pressure on our company, as well as a lot of other companies,” he said.
“That cashflow is starting to show that we’re getting through some of the worst impacts of the supply chain pressure, but we think the prudent thing is to hold the dividend where it is.”
Kippenberger noted that Scott is far from resting on its laurels when it comes to developing new products and pushing its more successful products further into market.
It secured contracts for poultry trussing machines with Costco Wholesale in the US, among others.
A modular product for the automation of laboratory systems for the mining industry is just entering the market, with an $11m sale to a major Australian customer.
It is also experiencing growth in the uptake of its BladeStop bandsaw that forces the machine to abruptly stop if it comes into contact with skin, rather than a carcase.
The company’s lamb processing system has had strong success, using a combination of robotics and computer vision (training computers to understand what is in an image) to automatically butcher lamb carcases with high precision.
Kippenberger said the product can save $3 per lamb carcase, which would be equivalent to $250m if the entire Australian lamb processing market used that product – currently, it’s about 50%.
Work is underway to create a version of the product that works for cows – a far bigger market than lamb, especially in North America where the company has had much of its recent growth.
“That quarter of a billion gives you an idea, if you take that, and its higher per carcase, into the huge market in the US for beef, you are talking an extremely strong amount of value contribution to that sector,” Kippenberger said.
Product development is still underway, but Kippenberger predicts it will start delivering strong returns for the company in three to seven years.
Service agreements for its equipment account for 31% of Scott’s revenue, an area that is expected to scale up alongside improving product sales.
There can be cases where third parties can undercut manufacturers of equipment for service and support, but Kippenberger said that the specialised nature of Scott’s tech gives it “natural protection” against third-party providers.
“Combining x-ray vision systems with robotics, that is very specialised technology, and I think that gives the protection to Scott,” he said.
“The big food companies or the big meat processing companies, they will try and do a lot of maintenance in house, but where they don’t have those [specialised] resources on their payroll and maintenance teams, they do need Scott.
“We see it as an opportunity, not a risk.”
A major focus for Scott has also been on talent retention and health and safety.
The company’s announcement to the NZX boasted of an employee net promoter score of 83% and a significant decrease in total recordable injury frequency.
It said it has launched an engineering scholarship for women and is in the process of having the last of its carbon footprint data audited.
With labour shortages impacting markets globally and the appetite for automated solutions increasing, Kippenberger is confident that Scott can continue to grow in the coming years.
