SCT - Scott Tech

[Snoopy]

If alternative scanning technology, the European E+V whole carcase yield camera, ends up preferred, this does not integrate with Scott's add on robotic systems. That could deal a serious blow to Scott's being able to transfer their lamb boning knowledge into the beef industry.

A couple of excerpts from the 24th April 2019 letter to the stock exchange outlining the arrival of this newest member of the Scott family.

"Normaclass is the leading provider of a grading technique to meat processors in both France and Uruguay. The system uses digital cameras to collect data and measurements of each carcass (while in motion on the production line) which is then analysed by software in real-time to determine a carcass classification. This classification, in conjunction with carcass weight and market prices, determines the carcass price paid to the farmer."

"Normaclass will also provide SCOTT with a complementary technology to DEXA for those customers who simply want an objective carcass grading tool."

Effectively 'Normaclass' allows Scott to have a 'bet each way' with meat industry players, if DEXA 'doesn't cut it' as a grading tool for the beef industry. Yet if both systems work for grading, would an abattoir that has just installed a 'Normaclass' system (cheaper than DEXA because there is no requirement for shielding to isolate the X-rays as used in DEXA), then proceed to order a fully automated meat room? Perhaps not, which means that each 'Normaclass' sale represents 'business lost' to that fine automation team in Scott's Dunedin base.

'Normaclass' profits supposedly equate to 1-2% of Scott group profits before the acquisition. Group NPAT for FY2018 was $10.772m. So 'Normaclass' profits must be $0.107m to $0.215m. If we work on EBITDA of $19.305m, then ongoing Normaclass EBITDA is about $0.193m -$0.386m.

The initial payment for 'Normaclass' was 1.1m euro. On the 30th May 2019 settlement date $NZ1 = 58.5 euro, This means the $NZ purchase price was: 1.1 / 0.585 = $NZ1.88m. The purchase price equates to an EBITDA margin of:

($0.107m - $0.215m) / $1.88m = 5.7% to 11.4%

SNOOPY

[sb9]

Strange price jumps (big) today on low volume, interesting if something's up as with tightly held stocks either way up or down.

[emveha]

Strange, I can't find their 2019 half-year report on the SCT web site. Am I blind, or has anyone here an obvious explanation before I write them?

MVA

[percy]

Go to www.stocknessmonster.com
type in SCT
then news
scroll down and you will find it.
Can also bring up previous year's news.
It's a free service.

[Snoopy]

Strange, I can't find their 2019 half-year report on the SCT web site. Am I blind, or has anyone here an obvious explanation before I write them?

MVA

Hi emveha,

You won't find the half year report for Scott's for FY2019 because it doesn't exist! It is all due to the new stock exchange rules that the NZX listed companies are gradually adopting which does away with the requirement to produce a half year report. Of course when shareholders vote to adopt these new rules, no mention is made of the half year report being dropped. We are sold all the streamlining benefits of bringing reporting into the modern age and reducing compliance costs blah blah blah.

We now have to make do with a rather less informative 'half year announcement' which is no longer sent to shareholders. You can find the half year announcement for HY2019 here:

https://www.scottautomation.com/asse...nouncement.pdf

This dropping of half year reports doesn't apply to just Scott Technology. You will quite soon find no more half year reports will be issued for any NZX company. A retrograde step in my view.

SNOOPY

P.S. I note you are based in London, and that Scott's, through their acquisition of Alvey, have greatly increased their presence in Europe. Have you noticed an increased profile for Scott's in Europe that has piqued your interest as an investor?

[BeeBop]

Strange, I can't find their 2019 half-year report on the SCT web site. Am I blind, or has anyone here an obvious explanation before I write them?

MVA

I can’t see it on the website either.

[emveha]

Thank you Snoopy, I didn't know about that aspect in the change of rules and I agree that's a step backwards. I guess all the same information is in the HY Announcement + HY financial statement, but without the convenience of a single document.

To answer your question, even though I am based in London, I am a Kiwi at heart and my investments are very much NZX-based. That's how I came to Scott.

[BeeBop]

Thank you Snoopy, I didn't know about that aspect in the change of rules and I agree that's a step backwards. I guess all the same information is in the HY Announcement + HY financial statement, but without the convenience of a single document.

To answer your question, even though I am based in London, I am a Kiwi at heart and my investments are very much NZX-based. That's how I came to Scott.

I am through London a lot....Gulf based though...if you ever want to chat about NZ shares (and Scott), do let me know.

[Snoopy]

Thank you Snoopy, I didn't know about that aspect in the change of rules and I agree that's a step backwards. I guess all the same information is in the HY Announcement + HY financial statement, but without the convenience of a single document.

To answer your question, even though I am based in London, I am a Kiwi at heart and my investments are very much NZX-based. That's how I came to Scott.

I am through London a lot....Gulf based though...if you ever want to chat about NZ shares (and Scott), do let me know.

Emveha and Beebop. I hereby bestow the honour on you both of 'honourary roving hound' with the mission of sniffing out whatever Scott/Alvey is doing in the northern hemisphere. I have to admit to feeling a bit disconnected now that nearly half of Scott's business is European based. The press releases on what was the Alvey website have slowed to a trickle. There wasn't exactly much detail in the Scott's half year 2019 non-report nzx letter either.

The overall impression I have is that the justification for the Alvey purchase is to provide a packaging and final distribution add on to the 'automated boning room' concept. Robots from go to whoa. However, at least in New Zealand, there was a previous loose synergistic arrangement with 'Millers Mechanical', also Dunedin based, to do this. I imagine this relationship is still intact as Scott's have taken over the international spare parts arm of Millers. How Millers will fit in with the Alvey operation going forwards, I am not sure. I wonder how many Alvey production finishing lines will find their way into the JBS Australia Meat Processing sites over the next few years? And on that last thought, given what I see as doubtful synergies and the apparently positive reputation of Alvey, I wonder if the northern hemisphere rebranding of 'Alvey' to 'Scott' really makes sense?


SNOOPY

[kiwidollabill]

Emveha and Beebop. I hereby bestow the honour on you both of 'honourary roving hound' with the mission of sniffing out whatever Scott/Alvey is doing in the northern hemisphere. I have to admit to feeling a bit disconnected now that nearly half of Scott's business is European based. The press releases on what was the Alvey website have slowed to a trickle. There wasn't exactly much detail in the Scott's half year 2019 non-report nzx letter either.

The overall impression I have is that the justification for the Alvey purchase is to provide a packaging and final distribution add on to the 'automated boning room' concept. Robots from go to whoa. However, at least in New Zealand, there was a previous loose synergistic arrangement with 'Millers Mechanical', also Dunedin based, to do this. I imagine this relationship is still intact as Scott's have taken over the international spare parts arm of Millers. How Millers will fit in with the Alvey operation going forwards, I am not sure. I wonder how many Alvey production finishing lines will find their way into the JBS Australia Meat Processing sites over the next few years? And on that last thought, given what I see as doubtful synergies and the apparently positive reputation of Alvey, I wonder if the northern hemisphere rebranding of 'Alvey' to 'Scott' really makes sense?


SNOOPY

You do realise that Millers Mechanical (Milmeq) went into liquidation last year....?

https://www.odt.co.nz/news/dunedin/d...e-cost-40-jobs