SCT - Scott Tech

[percy]

Depends on the time frame you are investing to. I still don't predict great things for FY2014. But the USA is recovering, and the exchange rate is moving in SCT's favour. The SCT share price could very well hit $1.82 again by the end of the year with a positive profit outlook.

SNOOPY

Needed to find funds to increase my DPC holding.
SCT remains on my watch list.

[Zeitgeist]

Not an amazing result for FY14 but not awful either. I’m pleased to see four of five industries grew in revenue, the exception being Mining.

A bit concerned about the payout ratio. D/EPS = 0.08/0.062 = 130% but I won’t complain at this point. Something to keep an eye on? Depreciation was slightly higher and I suppose the Board is confident the acquisitions will shine.

I hope this marks the turning point for SCT. With the NZD (hopefully) depreciating further and some strategic acquisitions I’m bullish on FY15.

[percy]

The spend on R&D at over $3mi is approx. 5% of revenue,so I take that as positive.
The dividend pay out seems to be over generous to me,and with still a lot of headwinds, could prove to be foolish.

[Hawkeye]

http://www.nbr.co.nz/article/scott-t...gins-bd-163728

[percy]

Thanks for the link.
The dividend does look really out of place when looking at the very modest cash flow from operating activities.

[Snoopy]

The spend on R&D at over $3mi is approx. 5% of revenue,so I take that as positive.
The dividend pay out seems to be over generous to me,and with still a lot of headwinds, could prove to be foolish.

Here is how the result was reported in the Dunedin home base Percy.

http://www.odt.co.nz/news/business/3...ected-slowdown

CEO Hopkins has taken a leaf out of your business lexicon.

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He was confident the company was was ''well positioned'' to take advantage of the increased demand for its technology and services, which was evident in global economies.

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SNOOPY

[Snoopy]

A bit concerned about the payout ratio. D/EPS = 0.08/0.062 = 130% but I won’t complain at this point. Something to keep an eye on?

SCT has lumpy cashflows Zeitgeist. Sometimes projects are close to completion, yet the final payment (which contains the profit) doesn't come through until the next reporting period. Sometimes you might get the reverse: namely a profit has been booked, but more than that profit is required as working capital for the next big project.

Nevertheless, in this instance not only is profit down, but cashflow is strongly negative. SCT were effectively borrowing to pay the last dividend and they may be borrowing to pay the final dividend as well. I share Percy's concern that in times of business market volatility, this is not a great move. Could it be a bribe to soften shareholders up for another small capital raising? I note that borrowing headroom (note 15) is down to a rather slender $3m, down from nearly $8m last year.

Well spotted on the payout ratio though, and definitely something to watch!

Depreciation was slightly higher and I suppose the Board is confident the acquisitions will shine.

Only one acquisition has ever shone for SCT, and that was Rocklabs. All the other acquisitions and joint ventures are, so far, a perpetual work in progress.

1/ Robotic Tehnologies (the joint venture with Silver Fern farms) have halved their profit. The joint venture for meat industry robotics in Australia makes no money (again) despite generating lots of interest and revenue.
2/ The joint venture automated milking system has been delayed with the launch now taking place in 2015, the worst dairy season for some considerable time.
3/ The Scott Separation Technology (the fancy centrifuge) has gone from a very modest profit to a loss.
4/ X Rock auotmation, the joint venture with XRF Scientific, making automated equipment for analysing mining samples has gone into a loss.
5/ Rocklabs Automation Canada, a joint venture with local company STG holdings is now loss making, losing $50k in FY2014, and has swallowed more than that in new capital requirements.
6/ The Robot Vision Limited joint venture has widened their loss for the year.

One bright spot: the joint venture with STG in Chile has contributed a $6,000 profit and repaid $118k in capital during the year. Overall though, the joint ventures are not a pretty picture.

I hope this marks the turning point for SCT. With the NZD (hopefully) depreciating further and some strategic acquisitions I’m bullish on FY15.

No more acquisitions please, until SCT managment can prove they can turn around the acquisitions and joint ventures they already have!

SNOOPY

[Snoopy]

I note that borrowing headroom (note 15) is down to a rather slender $3m, down from nearly $8m last year.

The declared dividend at 5.5cps will cost the company $2.42m dollars. That reduces the company's borrowing headroom to less than $600k. Blimey, I hope some positive cashflow comes into the coffers following balance date. This is getting tight.

(Edit: $2.966m of a slightly aged balance between 30-60 days is due according to Note 7, beyond balance date of 31st August. So hopefully that is now in the bank, and SCT will indeed be Ok cashflow wise)

The former Chairman, the conservative accountant Graeme Marsh, might be spinning in his grave. Except he isn't dead. Maybe when Graeme reads the results, that will send him spinning towards his grave.

SNOOPY

PS I guess shareholders taking their dividend in shares rather than cash is becoming more important to SCT. The discount to the DRP is 5%. I will be taking my dividend in cash though.

Last year (FY2014), 602,363 new shares were issued in lieu of dividends. That equated to a cash injection of $1.029m for the company.

[percy]

The declared dividend at 5.5cps will cost the company $2.42m dollars. That reduces the company's borrowing headroom to less than $600k. Blimey, I hope some positive cashflow has come into the coffers since balance date. This is getting tight.

The former Chairman, the conservative accountant Graeme Marsh, might be spinning in his grave. Except he isn't dead. Maybe when Graeme reads the results, that will send him spinning towards his grave.

SNOOPY

I see a lot of SCT's future wealth being dependant on RobotWorx.As this is a very recent acquisition, it may take time and money for it to reach its potential.Looking for growth requires a strong capital base,a good bank,and usually very strong cashflow.
Playing around with R&D,and depreciation can improve things in the short term,but will hinder things it the long term.
Must be difficult being a director,
knowing that so many shareholders want/require big divies. Cut the divie,and you upset
"the owners",keep it up and you compound your debt position.
Only comfort shareholders have is that the CEO has told them they are "well positioned". [chuckle lol]
The ODT article was pretty fair to the company.I would think G Marsh would be phoning the present chairman, and expressing his views strongly.!!!!!!!!!!!!!!!!!!!!!!!!

[Snoopy]

I see a lot of SCT's future wealth being dependant on RobotWorx. As this is a very recent acquisition, it may take time and money for it to reach its potential.

I thought note 23f was of interest with respect to "RobotWorx", and the much smaller "Applied Sorting Technologies" acquisition in Australia.

"Had these acquisitions been effected 1st September 2013, the revenue from the group would have been approximately $67m (c.f. actual $60.316m for FY2014) and the profit from the group after taxation and non-controlling interests from continuing operations would have been $3.1m (c.f actual $3.0m)."

So profit brought into the fold from the new acquisitions (mainly RobotWorx) was a mere $100k on $67m of sales!

Must be difficult being a director,
knowing that so many shareholders want/require big divies. Cut the divie,and you upset
"the owners",keep it up and you compound your debt position.

The DRP does go some way to addressing this.

SNOOPY