SCT - Scott Tech

[winner69]

Remind me John Thurman is please

Thread seems to have tags like ‘John Thurman fraud’, ‘John Thurman incompetent’ etc

[Snoopy]

Remind me John Thorman is please

Thread seems to have tags like ‘John Thorman fraud’, ‘John Thorman incompetent’ etc

Perhaps this from 2015?
https://www.forexpeacearmy.com/commu...broprox.39116/


"The fake Datuk Chong Chee Siong is now active in China. They have cheated billions of money in Sichuan Province Chengdu City. They said their foreign currency exchange company Broprox is registered in New Zealand and regulated by New Zealand FSP. they even gave their company registration ID FSP345246. but when checking on the New Zealand FSP website, the company is registered under the name of John Thorman and the registered address is actually a company called TMF. John Thorman is also managing director of TMF.
https://www.linkedin.com/profile/vi....s:john+thorman
recently Broprox was unregistered by the FSP registrar. If anyone knows more information about them, please let me know."

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SNOOPY

[winner69]

Perhaps this from 2015?
https://www.forexpeacearmy.com/commu...broprox.39116/


"The fake Datuk Chong Chee Siong is now active in China. They have cheated billions of money in Sichuan Province Chengdu City. They said their foreign currency exchange company Broprox is registered in New Zealand and regulated by New Zealand FSP. they even gave their company registration ID FSP345246. but when checking on the New Zealand FSP website, the company is registered under the name of John Thorman and the registered address is actually a company called TMF. John Thorman is also managing director of TMF.
https://www.linkedin.com/profile/vi....s:john+thorman
recently Broprox was unregistered by the FSP registrar. If anyone knows more information about them, please let me know."

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SNOOPY

Interesting Snoopy

Wonder why Scott thread has such tags?

[Snoopy]

Interesting Snoopy

Wonder why Scott thread has such tags?

Maybe someone trawling the forum got scammed? Looks like a case of stolen company identity?

There is also this press release on John Thorman's appointment as a Scott Technology director.

Wow, I have never seen an announcement quite like this! Scott's battling to fulfill their legal obligations!

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INTERIM DIRECTOR APPOINTMENT & INDEPENDENCE DETERMINATION

Interim Director Appointment

The Board has appointed Mr John Thorman as a Director effective from 1 May 2018. The Board has determined that Mr John Thorman is an Independent Director.

Following the retirement of Mr Mark Waller, the Board commenced a search for a suitable replacement Independent Director with the appropriate skills and experience. To date the search has been unsuccessful and to ensure the Company complies with the requirements for independent and New Zealand based Directors, this interim appointment has been made.

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The board has appointed a new director and gone on record as saying he is not up to the task! Extraordinary! I wonder if Mr Thorman will be adding 'incompetant interim director' to his resume?

SNOOPY

[winner69]

And he stil a Director

[Snoopy]

And he still a Director

Since the Mainzeal affair, incompetence has become a very sought after trait when appointing a new director to the board of an NZ company. Incompetence lowers company costs, because when something does go wrong that is pinned on directors at board level, the directors insurance policy does not have to pay out!

SNOOPY

[winner69]

Here’s what Scott’s Board looks like

Couldn’t fit Penny Ford photo in ….would have upset the balance of the group in more ways than one.

But Penny been there over 2 years so should be emerging from her Emerging Director role soon. She seems a pretty clued up person.

[Snoopy]

Here’s what Scott’s Board looks like

Couldn’t fit Penny Ford photo in ….would have upset the balance of the group in more ways than one.

But Penny been there over 2 years so should be emerging from her Emerging Director role soon. She seems a pretty clued up person.

If you are going for the pale, male and stale look, best to do it in the city with the best ale, aye: Speights. I guess Penny will 'emerge' soon. When is her sex change operation scheduled?

SNOOPY

[Snoopy]

1/ New Zealand has once again been 'a star' performer over FY2023. Look at that meat industry Net Profit Margin of 33% (Slide 12 of PR2023 on Protein). The NPM is even higher at Rocklabs (Slide 13 of PR2023, 40%)! The NZ NPM I calculated in the table above to be 35.1% overall.

Leaving the best until last. Time to have a look at the New Zealand operations. Actually the real reason I left NZ until last, is because it was the hardest to deal with. The NZ manufacturing unit was split up for FY2024, into:

a/ The new 'NZ manufacturing', basically Dunedin (the meat industry centre of excellence) with a few rats and mice operations in Christchurch, AND
b/ 'Rocklabs manufacturing' (mineral industry equipment and projects) headquartered in Auckland.

Back in FY2023, the 'old' 'NZ manufacturing' days, the Auckland, Wellington and Christchurch manufacturing units combined as one unit. Refer to posts 1150 and 1151 for the full detail on that. But the comments in this post refer to the updated FY2024 separated segmentation of 'NZ manufacturing' and 'Rocklabs Manufacturing'.

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Rocklabs

FY2024 is showing a slightly lower 'margin' for 'the new Rocklabs' (minerals) of 36%, down from last years 40% (PR2024 slide 13). I am not clear what definition of 'margin' Scott are using here. If I use 'net profit margin' as defined in my own posts 1150 and 1151 for 'Rocklabs', I see that declining from 22.0% to 9.95%, even as revenue increased from $39.243m to $43.377m. I suspect one difference is that Scotts are not apportioning a head office administration charge when calculating their earnings margin, which is one explanation of why my own margin figures are lower. A more general comment on the global mining interest market, from AR2024 p15, notes:
"The overall minerals sector has seen an approximately 30% reduction in processing volumes due to market demand and a slow down in exploration investment."

Nevertheless if FY2024 was a 'bad year' for Rocklabs, the returns are still quite impressive in the context of the profitability of the whole company. I wonder what will happen when mining markets turn upwards, as they inevitably will, and the full increased productivity available from the 'doubled in size' Rocklab's operating premises in Auckland comes into play?

NZ Manufacturing

Changing tack to the new 'NZ manufacturing' segment, over FY2023, I mentioned the reported 'margin' on 'protein' which covers the meat industry equipment created at the Dunedin base (see quoted text). But I have since realised this 'protein' industry segment also covers global Bladestop bandsaw revenue and carcass X-ray equipment, - both made in Australia. Slide 14 of PR2024 sees protein 'margins' declining from 33% to 28%. Based on my own definition of 'Net Profit Margin', I recorded the 'New Zealand manufacturing' segment (Protein New Zealand) increasing their margin from 34.1% to 77.4% even though, revenue decreased from $23.884m to $18.263m (reference my table, post 1150).

Why did the net profit margin for 'New Zealand manufacturing' (substantially lamb boning and poultry trussing machines turned out in Dunedin) increase over FY2024, while Scotts show the 'margin' (whatever that means) for 'protein' overall was decreasing over the same period? What is indisputable is that the raw NZ segment 'net profit before taxation' was $16.494m over FY2024 and $10.319m over FY2023 (AR2024 p45). Furthermore, taxation charges in each year do not change the relative profit positions between FY2023 and FY2024. I can only assume that difficult new installations in Australia, and slowing sales of 'Bladestop' -in sympathy with a meat industry slow down-, have cast a disproportionate shadow over 'protein' sales in FY2024. But 'NZ protein', with its proven lamb boning room and chicken trussing robotics, had a robust year, with selling what are now 'standardised products'.

Seasonal demand changes but, longer term, customer drivers for meat processing automation stay firm. From AR2024 p15:
"We've cultivated a strong partnership with Costco and it is exciting to see it continuing to invest in our technology (chicken trussing). Our commitment to ongoing innovation is setting the stage for a future where automation drives significant advancements across the global proteins sector."

SNOOPY

[Snoopy]

The following is a review of the information presented in post 1078.
https://www.sharetrader.co.nz/showth...=1#post1027993

I went through this again yesterday and corrected a transcription error that rippled through the table. It was only a small correction that didn't change the big picture. But I am now satisfied that the whole table, an expansion of the table found in the annual report under 'Segment Information' (AR2023 p47), is correct. Discussion points I note are as follows.

1/ The administrative 'Net Profit Before Tax adjustment' (table row 4) is just my way of allocating 'outside of direct sale costs' back among the operating divisions. My method of doing this will tend to over-allocate costs to areas where less management time is needed to 'keep the ship steaming'. For example, where Scott's has a well established 'standard product' selling into a 'defined market' very little wider input outside of the direct sales and product construction teams will be needed. That means my table may have exaggeratedly estimated, in a negative way, the adjusted earnings from the Australian hub that manufactures 'Bladestop' band saws. For Australia my administrative allocation expense almost wiped out all of the Australian division profit! However, it doesn't change the view that Australia is still a problem hub for Scotts, as evidenced by the careful examination of Australian goodwill highlighted in the Deloitte auditors report (AR2023 p84).

2/ In Europe the administrative 'Net Profit Before Tax adjustment' similarly almost wiped out the European manufacturing hub profit. In this instance, with Europe assuming management control of the USA division, European management would certainly have required more procedural approvals with head office staff. Perhaps more trans-Atlantic flights to keep up the intercontinental contact as well. Furthermore, because the patent protection available for materials handling is somewhat less than the rest of the Scott product portfolio, I think it is very reasonable to assume that revenues are closely correlated with head office 'back up work' hours. I apply a similar argument in reverse to the USA based hub. I do believe that the overall loss making picture that the table shows - taking all relevant costs into account - both in Europe and the USA, is genuine.

3/ The notional tax rate (table row 8) contains what most would see as 'crazy figures'. But I have double checked them and those figures are correct. These figures are based on actual tax expense during the year, which may reflect top up payments from previous years as well as current tax. For example in New Zealand the error in any provisional tax paid is not corrected until the subsequent tax year. The other point to consider is that overseas jurisdictions may not be working on the same allocation of head office expenses that I have used. In the news media this kind of thing often comes under a news heading of 'transfer pricing'. 'Transfer pricing' is normally read about in the context of large multinationals adding exorbitant costs onto their NZ operations to avoid paying tax in New Zealand. However in this instance I am talking about an opposite process called 'transfer costing'. That means that we in NZ Scotts HQ shoulder what are really overseas business costs that Scott's overseas subsidiaries should be incurring, thus increasing tax paid by Scott's in those overseas countries. What good global citizens we are at Scotts to do this! The reason some of those tax percentages in the table look so crazy is that I have allowed for 'transfer costing' (by dint of the way I have redistributed unallocated expenses), but Scotts in their actual tax payments have not. This could explain why the tax bill paid by Scott's Europe is more than 20 times my 'adjusted earnings' for the same period(!).

I have been thinking more on the discussion we have been having on this mysterious metric that Scott have come up with called 'group margin'. The more I think about it, the more I think 'group margin' should be ignored. I don't think you can disregard a whole sub group of business costs just to make your 'margin' (whatever you deem that to mean) look better. Furthermore using a metric like this can lead to what I deem to be inaccurate comments. For example, Slide 15 from PR2023 states:
"Appliance business remains challenging with the overall contribution to group profitability still being marginal."

Yet if we look at my table in post 1078, it is showing the China division, which has been exclusively dedicated to appliance line manufacturing as the second most profitable manufacturing country in the Scott manufacturing hub portfolio, almost the equal of New Zealand! The moral of this story is that 'profitability depends on how you allocate costs'. And 'you should not misallocate (or ignore) certain costs to reinforce your own personal biases'.

One thing that has ballooned out from year to year are the company central administration costs: From $9.959m (FY2022) to $14.835m (FY2023), a rise of 49% in a single year! No wonder Scotts want to leave at least some of these costs out, in their measure of 'group margin' profitability!

Looking at each of the five geographical manufacturing hubs, it is New Zealand showing the best profitability. This will be largely due to the globally unique automated lamb boning unit, soon to be boosted by the well received automatic trussing machine for chickens. Meanwhile, China has just moved to new premises. This should increase project build capacity, and eliminate any need to outsource (at higher cost) work at peak demand.

The European hub assembly facility in the Czech Republic has recently moved to a larger manufacturing premises too. Will this allow Europe to increase sales? Perhaps it is this build program, and the one in China, that has greatly increased underlying administrative costs this year (FY2023)?

I understand the drive to create 'Centres of Excellence' at different locations. No point in 'inventing the wheel' twice on both sides of the world. Yet my vision on the 'Australian Centre of Excellence' remains opaque. Yes the 'Bladestop' technology was designed and invented in Australia. But with Bladestop as a 'standard product', surely it can now be manufactured anywhere? With the wind down on those complex non standard mining application projects, where does that leave Australia's 'core expertise'? Is the real Australian specialty skill now 'losing money'?

Scott aren't big on 'future forecasting', instead preferring to release progress to the market as new opportunities are signed. But I find it worthwhile to cast one's eye over the currency hedging in place (section D1 in the annual report) to get an indicator on the comparative quantum of work on the books. For FY2023, the Foreign Currency Risk Management for Assets (this is I think represents future repatriated revenues) looks very encouraging indeed. Revenue assets booked to be brought home from the USA (Transbotics) and Australia (Bladestop) and China (completed manufacturing lines) are nearly doubling,compared to the previous year. However, we have to remember that such revenue is historically lumpy. So we can't say if this increasing revenue is a definite annual trend. Furthermore, it is early days for forecasting repatriating profits for FY2024. The hedged asset return is still only one quarter of the total FY2023 revenue (perhaps our best guide as a FY2024 revenue measuring stick). Nevertheless these early indications, for what they are worth, would suggest that Scotts are headed for a record year. The share price keeps climbing to all time highs (buyers at $3.93 as I write this). I expect that materials handling on both sides of the Atlantic will return to 'actual net profit after tax' in FY2024 rather than the self calculated 'superior gross margin' that Scotts go on about. Before I sign off on the foreign currency exchange commentary, it is worth remembering we are talking about revenues here and not profits.

The way we go over returns from the just finished financial year in the referred table is, by definition, historical. What is not reflected in these figures is any upside from the fully automated beef boning room project, should it ever come to fruition, or the Caterpillar electric mining truck robotic refuelling project. These are two 'free options' you get to hold by owning Scott Technology shares.

This post brings together the raw data here:
Segmented Result Figures FY2023: https://www.sharetrader.co.nz/showth...=1#post1073269
Segmented Result Figures FY2024: https://www.sharetrader.co.nz/showth...=1#post1073207

.......and the reports on the individual company segments here:
Americas for FY2024: https://www.sharetrader.co.nz/showth...=1#post1074036
Australia for FY2024: https://www.sharetrader.co.nz/showth...=1#post1074119
Europe for FY2024: https://www.sharetrader.co.nz/showth...=1#post1074141
China for FY2024: https://www.sharetrader.co.nz/showth...=1#post1074149
New Zealand & Rocklabs for FY2024: https://www.sharetrader.co.nz/showth...=1#post1074193

.....to produce an overall 'Where is this company going?' picture. Firstly, a couple of caveat points:

1/ The administrative 'Net Profit Before Tax adjustment' (table row 4 in the Segmented Result figure tables) is just my way of allocating 'outside of direct sale costs' back among the operating divisions. My method of doing this, via revenues, will tend to over-allocate costs to areas where less management time is needed to 'keep the ship steaming'. For example, where Scott's has a well established 'standard product' selling into a 'defined market', very little wider input outside of the direct sales and product construction teams will be needed. That means my table may have exaggeratedly estimated, in a negative way, 'Australian manufacturing' segment earnings. Take the adjusted earnings from the Australian hub that manufactures standard 'Bladestop' band saws as an example.

2/ The notional tax rate (Segmented Result figure tables, table row 8) contains what most would see as 'crazy figures'. But I have double checked them and those figures are correct. These figures are based on actual tax expense during the year, which may reflect top up payments or refunds from previous years - as well as current tax, but divided by my own divisional net profit estimates. A further explanation as to why these figures are so different to the expected 28% tax rate in New Zealand is that any error in any provisional tax paid is not corrected until the subsequent tax year. The other point to consider is that overseas jurisdictions will not have the same tax rates and allowable tax deductions as NZ. Finally the company may not be working on the same allocation of head office expenses that I have used. Some 'reallocation of costs' can come under the moniker of 'transfer pricing', and such cost shifting may not have been done strictly according to revenue breakdown between segments as I have modelled.

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The latest Forsyth Barr (the only brokerage house that covers Scotts, I believe) research report is here:
https://www.forsythbarr.co.nz/resear...t-on-the-table

I can't access it, but I think the header 'Result needing more meat on the table' is a fair summary of Scott's year. The red meat industry in particular is very sensitive to varying profitability between years, despite the pay back of some of Scott's automation equipment being as short as 1-2 years. Even controlling shareholder JBS Australia was looking at ways to cash up their stake in Scotts to raise extra funds for their parent company. And if JBS, ultimately headquartered in Brazil, and one of the largest meat producers in the world, was feeling the cold winds of market change, then, you can imagine the effect of those same cold winds on smaller market players, like Alliance in New Zealand. Ultimately, the sale of JBS's Scott stock stake was taken off the table, which should provide operational certainty for Scotts - until the next meat industry downturn at least (next year ;-P ?).

After being invested in Scotts for so many years, I have come to the conclusion that Scott's 'protein' segment is both its greatest opportunity and its greatest curse. The industry structure of 'meat industry co-operatives', where owners favour 'getting short term cash out' ahead of longer term investment may have something to do with this. But JBS (not a co-op) as a customer seems committed. And the poultry trussing opportunity at CostCo in the USA, where meat is only one part of a much larger multi-sectorial CostCo business, is another example of signing up a less capital constrained customer. Even back home, the Chinese involvement in 'Silver Fern farms' has seen that company/co-op outfit adopt a longer term view. Given the wider meat industry climate, I think it is particularly meritorious how Scotts in New Zealand has preformed over FY2024. For those who look below the surface, you can see it is the protein arm of Australia that has masked this good performance in the 'protein segment' over FY2024.

'Bladestop' deserves a special mention because, despite what looks like disappointing sales from that Australian base, I still think it is a real winner in that 'we've only just begun' kind of way. Most pointedly, it is not just a product exclusively for the meat industry. It has applications in every industry where bandsaws are used. The customer is any firm that wants to be seen as the kind of employer that wants all of their employees to come home with two full handfuls of 5 fingers each at the end of each work day. I think beyond FY2024, we will see the 'protein' (even if an ever increasing portion of those protein sales end up outside the meat industry), bounce back.

Moving onto 'Rocklabs', this strikes me as the least integrated of all Scott company segments. It is the sort of segment that I would have expected outgoing CEO JK to describe as 'non-core'. But Rocklabs possesses one very important characteristic that has kept it being 'fobbed off': It makes good money - consistently! In AR2021 on p10 we find the comment:
"The strength in demand is testament to the global reputation of the Rocklabs brand, a talented production and sales team combined with continuing high precious metal prices."
With more uncertainty on the world global stage, I think we could see the price of gold holding up well on the world stage in FY2025. I reckon a doubling of segment profits, which admittedly will only take things back to FY2023 levels, could be on the cards.

I have more or less covered Scott Australia, when talking about 'Bladestop' above. But outside of 'building X-ray machinery for automated meat processing' I am still not sure what they do. The only thing I can be sure of is that without a dedicated 'Industrial & Automation' office, they will be doing a lot less. Very little more has been said about further progress the 'Robofuel' project and its application to heavy duty electric mining trucks, the project dubbed 'AETS Energise', via Caterpillar. And yes I did check the Caterpillar website before I wrote that! I think Australia will remain a trouble spot in the Scott portfolio, papered over by Bladestop.

Scott China has had a good year, doubling profits with their newly doubled and resited floor space. The good thing about China is that even last year when there was minimal work about, they still turned a profit. Yet the number of people 'on the job' in China only rose from 43 to 45 over the FY2023 to FY2024 period. I find that difficult to fathom, unless the workforce in China are on impossibly low wages. But the turnover and profit numbers don't lie, so here we are. FY2025 was the first full year in the new expanded premises. The fact that NPAT adjusted only rose by 18.3% from $1.623m to $1.920m between FY2023 and FY2024, while revenue rose by 266% from $4.609m to $12.249m would suggest the new expanded Chinese base now needs 'a decent volume of business going through it', to work effectively. The fact that there was no hedging back to the Chinese yuan a year earlier (note D1 AR2023), would suggest that both Scott workers and customers were operating in the same currency. This ties in with the annual presentation for FY2024 slide 15, where we learn appliance manufacturing lines were installed for Sub-zero, Midea and GEA. Yet Sub-zero refrigerators are entirely manufactured in the. USA, even if GEA (General Electric Appliances, now owned by Chinese firm Haier) and Midea (Chinese owned) do have strong manufacturing bases in China. For many years China pegged their currency to the US dollar. However, although currency movement controls have been lessened since 2016 it would be inaccurate to say it is fully floating. The fact that China does not want to damage their domestically domiciled workforce would suggest that the practical need to hedge against US contract payments may be somewhat diminished. Are we looking at a trade war between China and the USA in 2025? That would not bode well for goods made in China selling into US shops. And would a revitalised US domiciled Appliance industry be lining up to get their production machinery from China? I can't see that either. Consequently I can see the Chinese Appliance Production line arm having a poor year in FY2025.

OTOH Scott Europe, effectively the materials handling operation, is seeing an incredible renaissance. I thought the macro environment was not that great. Yet Scott seems to have attracted a lot of work in these troubled markets. I guess being heavily weighted towards creating packaging solutions for food industry producers helps. Food expenditure is generally not discretionary after all! But this does show that if you have the right product, and manufacturers who can look through the current market funk, there is a very resilient market for this kind of product. In Scott Europe we have a highly skilled design engineering centre based in Belgium, while the skilled trades work actually producing the goods is done in the low cost Czech Republic with, I might add, a much expanded new factory footprint to work from.

Scott USA or in effect 'Transbotics', the makers out autonomous guided cargo carriers, had a record year in revenue over FY2024. But this seems to have dovetailed with a record level of expenses, which looks to have been spent on developing the new modular AGV product. This resulted in a significant loss for this segment. I am hopeful that with their significant R&D program complete, financial indicators will return to a level they were in the previous year (FY2023).

A couple of comments that are pertinent to all segments: Servicing of installed equipment has bee a big push of just departed CEO John Kippenberger. Servicing revenue has jumped from $33.360m or ($33.360m/$225.093m=) 14.8% of all external revenue for FY2019 to $72.392m or ($72.392m/$267.526m=) 27.1%as for FY2024. Over the medium term, service revenue is not only more predictable in timing and margin. It also strengthens the bond between existing customers and Scotts, and improves the chances of working together on future new projects. Unallocated expenses (see section A3 in the respective annual reports) reached $22.630m over FY2024, up from $14.835m over FY2023, which was up from just $9.959m over FY2022. So unallocated expenses more than doubled over two years. Really? If unallocated expenses had been pinned at FY2022 levels, the underlying profit of the company would have risen by 0.72($22.630m-$9.959m=) $9.123m. This equates to an underlying profit of $7.177m + $9.123m = $16.300m. That would have been a record net profit for the company. Yet the actual $9.860m normalised profit (post 1147) was just ($9.860m/$16.300m=) 60% of that figure. What on earth has happened to allow unallocated costs to blow out to this extent over such a short time? And no, the $2.5m in strategic review costs incurred over FY2024 do not go anywhere near far enough to explain it.

I didn't set out to set a tone for this post. But reading over it, the near term outlook is looking a bit negative, What is not reflected in these thoughts is any upside from the fully automated beef boning room project, 'when it comes to fruition' (I think enough progress has been made to be definite about this now), or the Caterpillar electric mining truck robotic refueling project (should that progress to commercialisation) . These are -still- two valuable 'free long term options' you get to hold by owning Scott Technology shares.

SNOOPY