SCT - Scott Tech

[Under Surveillance]

Snoopy, from memory there is an express provision in the DRP statement from SCT that enables them to set aside the discount formula if there is clear evidence of manipulation of the share price over the determining period.

Given the volume of shares traded, if there is manipulation afoot it points to someone with a very substantial holding pulling the strings (in order for the associated gain in the number of issued shares to cover the loss on sale at $1.20).

Agreed, Voltaire, the putative loss on sale of 60,000 at $1.20 would exceed the benefit of the ensuing increase in the number of discounted shares under the DRP for all but the 3 largest shareholders (as of 17 September 2010). In theory a syndicate of less large players could obtain a net benefit.

Disclosure: I placed a buy order at $1.20 today (part-filled when last I checked) not to abet manipulation but to steal a bargain.

[Snoopy]

60,000 (about one month's normal trading) shares sold at $1.20 yesterday, c.f. $1.36 being the theoretical ex-dividend price!

Another couple of days of 60,000 share traded. Looks like the DRP share issue price will be $1.08. Now that the determination of price period has finished, trading volumes drop by 95% the very next day! What a quiet chap that Mark Wheldon is!

Good on you "Under Surveillance", for being awake and astute enough to take advantage of the situation. Chalk up one to the Mum and Dad investor at least.


SNOOPY

[Snoopy]

Snoopy, from memory there is an express provision in the DRP statement from SCT that enables them to set aside the discount formula if there is clear evidence of manipulation of the share price over the determining period.

Given the volume of shares traded, if there is manipulation afoot it points to someone with a very substantial holding pulling the strings (in order for the associated gain in the number of issued shares to cover the loss on sale at $1.20).

Hindsight now provides the answer, and nothing was done. 263,092 shares were issued as a result of the DRP at $1.09. Chatting after the AGM I was told that the board had identified that it was largely a substantial holder doing the selling and playing an arbitrage game. Selling at $1.20 and picking up new shares at $1.09 to replace them was a good little cash generating exercise by the looks of things. The seller was a "new" large shareholder, acting on advice of their financial advisor. The board are looking at changing the DRP parameters next time to make this sort of thing less attractive. As a general policy this new large shareholder apparently assured the board it is a net buyer not a seller of shares. The board was apparently genuinely surprised that their DRP scheme had been manipulated like this. I thought the board were probably a little naieve....

SNOOPY

[Snoopy]

A good turnout of shareholders made their way to Scott Technologies Mace's Road headquarters for the AGM presentations and a post AGM tour of the facilities, with senior staff assisting.

Much was made of the connection between economic productivity and the need for ongoing investment. SCT significantly made $NZ7m of research and development investment over the year, which represents around 15% of sales. If that sounds high it is because some of the one off project work done for customers is classified as Research and Development under our laws. This wasn't just cash lost to the company either. Government R&D tax breaks on both sides of the Tasman made this investment less cash negative than it other wise would have been.

An open day at the Finegand Meat Works near Dunedin was held for Australasian industry players in June 2010. MD Chris Hopkins was uncharacteristically enthusiastic at the reception they got from showing that dream on paper 7 years ago was now a working reality. The robotic beef processing line has been squarely aimed at the NZ and Australian markets so far. But there are now potential customers in England and Brazil that are showing interest. Hopkins envisages selling lots and lots of these systems now. Processing of lamb would require some robot reengineering, but remains another growth avenue for the future.

We were told that the automated milking shed joint venture is a largely seasonal rather than a year round development project. Nevertheless within a timeframe of 6 months to a year shareholders should prepare themselves for some positive developments with this joint venture. If it is anything like the meat robotics joint venture though, don't hold your breath for any significant profits from this for quite a few years!

The automated production line systems have a very full order book, with lines on the point of being commissioned in Brazil and Spain. This latter success it was pointed out is particularly meritorious as one of Scott's only true global competitors operates from Spain, so this sale was a bit of a coals to Newcastle event. The customer was Bosch Siemanns, manufacturer of high line appliances. BS have been very impressed by the way Scotts have conducted themselves and have a couple more production line projects on the go in Europe, in association with Scotts, the next being Turkey. Quality is apparently superiour to any work they have had done from german engineering companies and Scotts are a significantly cheaper supplier as well.

Helping keeping contract pricing competitive are 4x Euro 10m foreign exchange contract taken out at the rate of 1NZD = 0.4 Euro (!) This exchange rate will apply to all of these BS projects, and that more or less guarantees strong profitability in Europe for at least two years to come. Now we know how SCT have been able to do so well when the day to day exchange rate (1NZD =0.55 euro) is not nearly so favourable! One doubt I still have is the ability to keep costs on the workforce over periods when many outside contractors must be hired to complete tasks on time and on budget.

Nevertheless I left the meeting probably happier than I have ever been to be an SCT shareholder.

SNOOPY

[Marilyn Munroe]

Processing of lamb would require some robot re-engineering, but remains another growth avenue for the future.

SNOOPY

Your recollection of the above point differs from mine. I recall that the automated boning system was currently only capable of processing sheep meat. It would require some redesign to handle beef but was thought to be mainly a matter of scale and not seen as an difficult hurdle. The potential market for beef machines was said to greater than that for sheep.

I found the outlook from the top table to be quite positive and enjoyed the factory tour.

The refreshments afterwards were nice. There cannot have been many Sharechaters there, as was no danger of the supply of pies being under threat.

Boop boop de do

Marilyn

[percy]

Your recollection of the above point differs from mine. I recall that the automated boning system was currently only capable of processing sheep meat. It would require some redesign to handle beef but was thought to be mainly a matter of scale and not seen as an difficult hurdle. The potential market for beef machines was said to greater than that for sheep.

I found the outlook from the top table to be quite positive and enjoyed the factory tour.

The refreshments afterwards were nice. There cannot have been many Sharechaters there, as was no danger of the supply of pies being under threat.

Boop boop de do

Marilyn

MM.
I expect you know your boners!!!

[Marilyn Munroe]

MM.
I expect you know your boners!!!

You are probably making a snide remark about the amorous history of my alter-ego Marilyn.

But the real person behind the mask has worked in the freezing works in the past, so yes I used to know some boners.

Which brings me to band saws. They are nasty dangerous things, just as likely to cut the meat worker as the meat.

My opinion is that if these machines from Scott Technology eliminate band saws from boning rooms then they are doing Gods work.

Boop boop de do

Marilyn

[percy]

Yes I agree the boner machines will be welcome in freezing works,as you point out eliminating the dangerous band saws,and think it fitting you chose a fellow boner expert as your alter ego.I felt the comment was more factual than snide.!!!!???? I can just imagen MM in a meat works with Tony Curtis and Jack Lennon.

[Under Surveillance]

Hindsight now provides the answer, and nothing was done. 263,092 shares were issued as a result of the DRP at $1.09. Chatting after the AGM I was told that the board had identified that it was largely a substantial holder doing the selling and playing an arbitrage game. Selling at $1.20 and picking up new shares at $1.09 to replace them was a good little cash generating exercise by the looks of things. The seller was a "new" large shareholder, acting on advice of their financial advisor. The board are looking at changing the DRP parameters next time to make this sort of thing less attractive. As a general policy this new large shareholder apparently assured the board it is a net buyer not a seller of shares. The board was apparently genuinely surprised that their DRP scheme had been manipulated like this. I thought the board were probably a little naieve....

SNOOPY

If the NZX website is to be believed, the only new large shareholding advised by SCT to NZX since the list in the annual report is that of the trustees of the estate of Ian Urquhart. The notice to NZX gave CraigsIP as the email contact; presumably they are the advisors to the trustees? The trustees could have foregone all or part of a total cash dividend of $197,533 [4,938,327 shares x $0.04] in favour of up to 181,223 shares @ a nominal $1.09.

The total uptake of new shares under the DRP was just 263,092 of the possible 1,149,445 [31,322,369 shares x $0.04 dividend/$1.09]. Holders of 77.1% of the dividend-bearing shares took the cash. Holders of just 22.9% took shares, even with the 10% discount, and the arbitrage player. An unsuccessful exercise all round for the credibility of the directors.

[Snoopy]

Your recollection of the above point differs from mine. I recall that the automated boning system was currently only capable of processing sheep meat. It would require some redesign to handle beef but was thought to be mainly a matter of scale and not seen as an difficult hurdle. The potential market for beef machines was said to greater than that for sheep.

Quite right Marilyn, I stand corrected. But you have to admit those carcase shots in the Annual Report look like very large animals! I was seduced by the imagery.

The refreshments afterwards were nice. There cannot have been many Sharechaters there, as was no danger of the supply of pies being under threat.

Well I tried to hold the end up by eating more than my share!

SNOOPY