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  1. #871
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    Quote Originally Posted by winner69 View Post
    Burning cash (and not counting acquisitions) for a few years and you expect dividends?
    I have been to the AGM in Dunedin a few times Winner. The southern silver set shareholders like their divvies as much as the after event spread. In previous years divvies have been maintained in adversity with anticipation of greater things to come in the ensuing six months. I guess CEO JK isn't so optimistic about 2HY2020? Or maybe he hasn't yet fully plugged in to the culture of this company? I expect JK will get a grilling on the resumption of dividends at the next AGM!

    SNOOPY
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  2. #872
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    Default Scott Strategy for FY2020 onwards

    Quote Originally Posted by forest View Post
    Scott themself seem to think model needs to change.

    Part of todays SCT announcement.

    The past five years has been a period of rapid acquisition growth for the company, resulting in a diverse reach across sectors, customers and geographies. With a new leadership team in place and given the changing operating environment, Scott is now moving to streamline its business and will focus on leveraging core strengths and expertise which offer profitable sustainable growth and margins.

    The company’s new strategy will build on five pillars – Customer Partnerships, Leading Edge Technology, One Global Team, Operational Excellence and a Robust Global Platform. In particular, Scott will be increasing its focus on repeat, profitable sales of developed and proven technology, products and services which are core to the Scott Group; and increasing its service and support offering for customers. New project design & development will be carefully risk assessed and R&D activities will become highly focused on core technologies, with additional, carefully targeted strategic projects aimed at delivering positive commercial growth opportunities.
    The most interesting change for Scotts going forwards is highlighted on p11 of the HY2020 results presentation.

    "Pivot the Project/Product/Service mix from 60/20/20 to 40/30/30 to drive growth and margins, while reducing risk."

    These three business categories are further defined as follows:

    --------

    Project: Bespoke customer solutions focused on areas of expertise to reduce risk, improve customer delivery and generate higher margins.

    Products: Repeat, profitable sales of developed and proven technology, products and systems which are core to the Scott Group and offer strong margins.

    Service: Structured long-term support and servicing of products and technologies, driving safety, performance and efficiency at customer sites.

    --------

    What makes this interesting is the current break down of Project/Product/Service work to be found under note 2 of the HY2020 accounts. I have adjusted these to percentages to make it easier to compare the current positions with JK's targets.

    Project Product Service
    Targets 40% 30% 30%
    Australasia Manufacturing {1} 47% 32% 21%
    Americas Manufacturing {2} 44% 24% 32%
    Asia & Europe Manufacturing {3} 75% 14% 11%
    Total Manufacturing {1}+{2}+{3} 57% 23% 20%

    As a whole, the company is quite a long way from where it is targeting to be. 'Standard' products in Australasia must include 'Bladestop' Band Saws and the standard sample analysing equipment built at Rocklabs in Auckland. That puts Australasia 'above target' in Standard products. But the 'rest of the world' is way below where it should be. And that drags down the Standard total to well below target levels.

    Asia and Europe looks to be the most off target. They look to be pretty much geared to one off 'materials handing' (Europe) or 'appliance line manufacturing' (Asia) projects.

    Only the Americas are on target to meet the service work goals. I guess this category includes the 'Robotworx' second hand robot trading operation which has since expanded to Australia. Short of carrying out a lot more servicing that customers don't need, are we going to see Robotworx expand into Asia and Europe too?

    I tend to think about growing to meet JKs business category targets. But another way would be to reduce the number off one off 'Project' jobs undertaken and 'right size' (i.e. sack) various parts of the existing organisation. Will JKs term as CEO become known as 'the era of the big shrink'?

    SNOOPY
    Last edited by Snoopy; 18-05-2020 at 10:01 AM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  3. #873
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    Snoops ...lHaven’t even had the courtesy reply from Scott they’ve got our request and working on it

    Maybe the question was too tricky for them
    “Just consider that maybe the probability of you being wrong is higher than you think.”

  4. #874
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    Quote Originally Posted by Snoopy View Post
    I had a look at the maudlin economics website reference:

    https://www.mauldineconomics.com/reality-check

    And boy has that JBS share price dived during the Covid shock. From $14 to $8.40 for the ADRs by the look of it! Possibly down to the worker distancing requirements at each plant? I have heard that can reduce plant productivity by 50%.

    JBS Australia is small beer in the total JBS picture. But it is the JBS business arm that holds the interest in Scotts. So closing the export path to China for two of their biggest exporting plants will be hurting JBS Australia big time. The Reuters article seems to think the reasons for the stand off are political and not the stated reason of "Chinese labelling requirements". ScoMo isn't on the JBS payroll, so probably not much JBS can do.

    SNOOPY
    Never the less the parent JBS have alot of clout globally protein production wise and many countries are short atm.

    JBS have had 8 plant employee covid deaths and hundreds with covid, (CNBC) that will be a big part of the share price destruction. maybe time to start buying JBS.

  5. #875
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    Solved that mystery yet Snoops

    Haven’t heard back from Scott so have asked again

    Not really expecting a reply as Scott seems to be one of those companies that treat small shareholders with contempt
    “Just consider that maybe the probability of you being wrong is higher than you think.”

  6. #876
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    Quote Originally Posted by winner69 View Post
    Solved that mystery yet Snoops

    Haven’t heard back from Scott so have asked again

    Not really expecting a reply as Scott seems to be one of those companies that treat small shareholders with contempt
    I've had pretty decent response at least from ex-CFO Greg Chiles when I had a query or two re financials in the past.

  7. #877
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    Quote Originally Posted by Snoopy View Post
    SCT's normalised net profit after tax was just +$0.8m. Yet further up the income statement normalised EBITDA was a loss of $0.4m! I can't fathom how an EBITDA loss can turn into an NPAT profit. Perhaps someone who has some serious accounting training can explain.
    Quote Originally Posted by winner69 View Post
    Solved that mystery yet Snoops
    Not yet DI Winner. I have had a few more thoughts though. Going through our suspects again, I am not sure any of them are off the hook yet. I will go though them one by one:

    I

    If we look over the last six months, we can get an estimate of the interest rate paid.

    Bank Overdraft Current Portion of Term Loans Term Loans Total
    EOFY2019 $4.737m $4.217m $7.450m
    EOHY2020 $8.975m $2.679m $8.517m
    Average $6.856m $3.448m $7.984m $18.288m

    Average Net Interest paid = 2x($1.050m - $0.010m) / $18.288m = 11.4%

    That is a very high interest rate being paid

    In the half year report we learn

    "The company has satisfactory debt facilities in place and a supportive banking arrangement."

    I wonder if Scott's have negotiated something lower and have been able to 'normalise' their interest rate as a result? Is the normalised 'I' much lower than we think?

    T

    This guy was a prime suspect. But actual tax in the half year was a credit. 'Normally' you might expect to make a profit and pay tax. However, paying tax would mean a lower NPAT figure than the base EBITDA figure it is derived from. A 'normalised' T makes the normalised NPAT go in the wrong direction. Could the highly suspicious T be in the clear after all?

    DA

    We have very little information to go on with this guy. But the quoted figure for the half year is $5.032m. That is more than double the previous full year $8.969m. I wonder if there is a little extra D&A this half year in relation to the business restructuring write offs? If so and that was normalised out, the normalised 'DA' figure could be rather less than that quoted!

    Last but by no means off the hook is E

    The half year was conducted

    "realising the financial impact on complex and challenging projects in New Zealand and Australia, which are now either completed or nearing completion."

    I wonder if 'E' has been restated removing the one off effect of these challenging projects?

    Overall I am no closer to figuring out whodunit. It is a pity the whole affair didn't take place on the Orient Express. If it had, we could have simply shunted the whole train into a tunnel and not move it out until someone confessed!

    SNOOPY
    Last edited by Snoopy; 21-05-2020 at 09:41 AM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  8. #878
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    Quote Originally Posted by Snoopy View Post
    I wonder if 'E' has been restated removing the one off effect of these challenging projects?

    Overall I am no closer to figuring out whodunit. It is a pity the whole affair didn't take place on the Orient Express. If it had, we could have simply shunted the whole train into a tunnel and not move it out until someone confessed!

    SNOOPY
    But Snoopy, the normalised EBITDA and NPAT figures are given and in both cases, E has been normalised. So I think there is a cast-iron alibi. You are letting your natural bias against this character cloud your judgement.

  9. #879
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    Quote Originally Posted by Biscuit View Post
    It was Holmes, of course:
    "It is an old maxim of mine that
    when you have excluded the impossible, whatever remains, however improbable, must be the truth."
    Quote Originally Posted by Biscuit View Post
    But Snoopy, the normalised EBITDA and NPAT figures are given and in both cases, E has been normalised. So I think there is a cast-iron alibi. You are letting your natural bias against this character cloud your judgement.
    No I am merely invoking the reasoning of Holmes you highlighted above. My further musings on 'I' and 'DA' are interesting but not convincing to me. I think it is still possible that EBITDA and NPAT were normalised in different ways. And if that happened, 'E' becomes the guilty party by elimination!

    SNOOPY
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

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    Quote Originally Posted by Snoopy View Post
    No I am merely invoking the reasoning of Holmes you highlighted above. My further musings on 'I' and 'DA' are interesting but not convincing to me. I think it is still possible that EBITDA and NPAT were normalised in different ways. And if that happened, 'E' becomes the guilty party by elimination!

    SNOOPY
    Well, that's elementary my dear Snoopy, but could upstanding corporate gentlemen be reasonably accused of normalising earnings in two different ways?

  11. #881
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    Quote Originally Posted by Biscuit View Post
    Well, that's elementary my dear Snoopy, but could upstanding corporate gentlemen be reasonably accused of normalising earnings in two different ways?
    No they couldn't, but what about the management at Scott Technology?

    SNOOPY
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  12. #882
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    Quote Originally Posted by Snoopy View Post
    No they couldn't, but what about the management at Scott Technology?

    SNOOPY
    There seems, though, no motive for doing that and as a long-term shareholder, you would not suspect them of being rotters?

  13. #883
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    Quote Originally Posted by Biscuit View Post
    There seems, though, no motive for doing that and as a long-term shareholder, you would not suspect them of being rotters?
    Anything can happen with a Dunedin based company
    “Just consider that maybe the probability of you being wrong is higher than you think.”

  14. #884
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    Quote Originally Posted by winner69 View Post
    Anything can happen with a Dunedin based company
    Well, yes, foreigners, anything is possible. But, for the sake of focusing the investigation, I would eliminate E for the logical reason that the same income is in both terms. Also, though, I would agree with Snoopy's logic, that it cannot be T. How could T (an unusual credit) be normalised up? Therefore, we should eliminate T. That leaves us only I, D and A. So, we are making progress?
    Last edited by Biscuit; 21-05-2020 at 02:17 PM.

  15. #885
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    Quote Originally Posted by Biscuit View Post
    Well, yes, foreigners, anything is possible. But, for the sake of focusing the investigation, I would eliminate E for the logical reason that the same income is in both terms. Also, though, I would agree with Snoopy's logic, that it cannot be T. How could T (an unusual credit) be normalised up?
    OK I'll bite. Tough trading conditions could see Scotts making losses for years. So if they made a loss for many years, they might normalise things by projecting a tax credit every year?

    SNOOPY
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

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