SCT - Scott Tech

[Snoopy]

The problem with keeping these workers busy between big projects is a long term issue. SCT is addressing this by increasing the complementary work allocation between the Christchurch and Dunedin bases. Having more standardized product, as most of the new generation robotics are, will also assist in filling those work flow holes.

Someone wanting in as share volume was 100,000 today. That is way more than usual with a buyer there at $1.73 and sellers at $1.79. I can't think of a particular reason why this should happen. True management and directors have been topping up their shareholdings of late, usually a good sign.

Then again SCT is small enough that one or two big deals can make a significant difference. I wonder how that under the radar dairy shed automation project is progressing? Progress so far has been tardy, but maybe some light at the end of the horizon?

SNOOPY

[Snoopy]

Then again SCT is small enough that one or two big deals can make a significant difference.

Looks like one of those deals came up today. The share price is up 5c to $1.80, and at close there were buyers at $1.82.

----------------

HEADS OF AGREEMENT – INTEGRATED CONVEYOR SYSTEMS
The Board of Scott Technology Ltd (“Scott”) are pleased to announce that the Company has
entered into an agreement to acquire the assets and intellectual property of Integrated
Conveyor Systems Ltd (“ICSL”).
The agreement allows the company time to complete due diligence on the technology whilst
enabling Scott to take effective control during the due diligence period. The due diligence
period ends in June 2013, at which time Scott has the option to acquire ICSL. The due
diligence period can be extended at Scott’s option for a further 12 months.
ICSL is based in Western Australia and has developed patented conveyor technology. ICSL
design, manufacture and distribute their flexible enclosed belt conveying system to meet the
global conveying demands for a wide range of industries. ICSL’s conveyor technology is a
logical extension for Scott with our progress in the mining automation market where the
technology is aimed at improving speed, OSH and labour costs, particularly in remote areas
or over difficult terrain. Of key interest to Scott is the work that ICSL is undertaking in
conjunction with a major mining company who is using and trialling the innovative conveyor
for a technically advanced project.
The immediate commitment is less than A$0.5m and is supported by tangible assets.

--------------

SNOOPY

[Under Surveillance]

Looks like another capital raising in 2013? Based on the happy event that was the 2011 capital raising, I'll be in again.
As I recall, some years back the board was aspiring to SCT being a $100 million company by the time of the centenary (which is to be celebrated around the AGM in Dunedin in December 2013, towards which an history has been commissioned). At 180 the capital value is about $73 million.

[Snoopy]

Looks like another capital raising in 2013? Based on the happy event that was the 2011 capital raising, I'll be in again.
As I recall, some years back the board was aspiring to SCT being a $100 million company by the time of the centenary (which is to be celebrated around the AGM in Dunedin in December 2013, towards which an history has been commissioned). At 180 the capital value is about $73 million.

The 2012 capital raising was really to pay for Rocklabs, built up by the founder over a working lifetime, as all the debt incurred in buying that company was wiped afterwards. I would be surprised if another capital raising will be needed for what is in reality a startup acquisition of Integrated Conveyor Systems Ltd (“ICSL”) though. Notwithstanding the continuous capital raising that is the dividend reinvestment plan, the best way to get to that $100m market valuation would be to improve the operational performance of the existing assets IMO. In fairness the ICSL potential acquisition, in combination with Rocklabs, may be designed to do exactly that.

SNOOPY

[Snoopy]

Someone wanting in as share volume was 100,000 today. That is way more than usual with a buyer there at $1.73 and sellers at $1.79. I can't think of a particular reason why this should happen. True management and directors have been topping up their shareholdings of late, usually a good sign.

SCT bid at $1.89 with shares on offer at $1.94. Good volume (for SCT) going through too. I would say the share price is being pushed up in anticipation of a good annual result, which could be released in as soon as a week. I don't think the Integrated Conveyor Systems potential acquisition is really enough to cause this kind of price movement, as it is still under trial.

I guess the other explanation could be holders selling out of F&P and looking for another export tech investment. A very small percentage of F&P proceeds would be enough to move the SCT share price.

I am still predicting a very good result but a subdued outlook. That may yet see the SCT share price 'do a MVN', but here's hoping not.

SNOOPY

discl. Hold SCT and will consider if I need to adjust my holding after the annual result information is in the public domain.

[Snoopy]

Then again SCT is small enough that one or two big deals can make a significant difference.

Bids in the market for SCT shares at $1.90 today. Possibly fueled by this announcement?

-----

24 September 2012
Listed Company Relations
New Zealand Exchange Limited

AUSTRALIAN BASED MEAT PROCESSORS INVEST IN AUTOMATION
Scott Technology is pleased to advise that the Company, in association with its joint venture
with Silver Fern Farms (Robotic Technologies Ltd (“RTL”)), has been contracted to provide
lamb boning room automation to two Australian meat processors. Innovative meat
processors the Australian Lamb Company (“ALC”) and JBS Australia (“JBS”), a division of
the world’s largest meat processor, have both agreed to invest in technology to help drive
automation in their Australian operations. Supported by Meat and Livestock Australia and
the Australian Meat Processor Corporation, the projects total NZ$11 million sales to Scott
Technology and are due to be installed and operational before the end of 2013.
Both ALC and JBS see enormous benefits in the technology, including improved carcass cut
accuracy, significant increase in room product flow, OHS improvements for staff and data
analysis for stock procurement.
The investment follows on from the 2011 installation by ALC of RTL’s automated x-ray
primal system.
Yours sincerely
Stuart McLauchlan,Chris Hopkins
Chairman,Chief Executive


About the project
In 2010 Australian Lamb Company, an innovative family owned lamb boning room based in
Melbourne Australia, made a significant investment in the future of its boning room by investing in a
fully automated x-ray primal system. The benefits that ALC have received to date include accurate
cutting via use of the x-ray image on each individual carcase, a significant reduction in bandsaw
meat dust and a consistent room product flow. With two less operational staff now using bandsaws
it is anticipated that future OH&S claims will also significantly reduce.
"We knew of all the cutting accuracy benefits that we would receive, however one of my biggest
surprises is the benefit of consistent room product flow as a result of the x-ray primal. This has
resulted in processing an extra 250 carcasses per shift" said Darren Verrall, General Manager of
Operations at ALC. "The Scott team delivered on their promise of a well engineered solution that
integrated seamlessly into our existing operation, delivering the pre-agreed benefits and then some.
Scott are always available either in person or on the phone if any questions arise." said Mr. Verrall.
The x-ray primal accurately dissects the lamb carcass into forequarter, middle (rack and loin) and
hindquarter segments with the use of the x-ray image in defining every bone position. Along with
powered rotary cutting knives that can pitch and yaw at the required angles, the entire system can
produce accurate cuts that are just not possible using a traditional manual bandsaw. When
questioned about the bottom line benefits John Verrall, Joint Managing Director (ALC) responded by
saying that "the scallop cuts give us extra loin recovery that was previously lost to waste. We have
already received unsolicited positive feedback from our customers on increased product
presentation and consistency."
During June 2012 Don Jackson, CEO of JBS USA, witnessed the operation of the ALC system first hand
and commented that "This was the future for JBS smallstock processing." "Why aren't you guys
doing this in beef and pork as well?" questioned Mr. Jackson. Both ALC and JBS have bought into the
vision of the future of an automated lamb boning room. JBS has contracted Scott to deliver a fully
automated and integrated x-ray primal middle system at their Bordertown facility in South Australia.
At the same time, ALC has contracted Scott to supply an automated middle machine to integrate
with their existing x-ray primal system. Denis Zarpellon, Joint Managing Director at ALC, when
referring to the recently signed ALC contract said, "we can't stop now, this is our future!"
JBS has requested that Scott hold a fixed price for another two complete units for their other
Australian lamb processing facilities. Graham Treffone, Innovation Manager at JBS said "once we
prove this to the rest of the company it is only a matter of time before we have the system at our
other sites in quick succession." Neil Brereton, JBS Group Engineer, concluded that "if you can
demonstrate to us, as you have ALC, that we do not need to 'nursemaid' this technology, we will be
installing more."
Scott will have the new systems operational for both ALC and JBS before the end of 2013. Along with
the original x-ray primal system installed at ALC, the total commitment from both ALC and JBS, has
resulted in a total Australian industry investment of A$11 million in automated lamb deboning.
Scott are currently working with both JBS and ALC to determine how to use the individual carcass
grading data that is obtained from the x-ray system to benefit their producers, in addition to bone-in
and boneless forequarter automation developments.
ALC, JBS and Scott would like to acknowledge the ongoing support of both Meat and Livestock
Australia and the Australian Meat Processor Corporation.

-------

SNOOPY

[Snoopy]

AUSTRALIAN BASED MEAT PROCESSORS INVEST IN AUTOMATION

<snip>
Supported by Meat and Livestock Australia and the Australian Meat Processor Corporation, the projects total NZ$11 million sales to Scott Technology and are due to be installed and operational before the end of 2013.
<snip>

In number terms this announcement is superficially not that fantastic. Scotts only have a 50% of the robotics joint venture. So $5.5m of sales translates to an after tax profit of what? $0.5m?

<snip>
During June 2012 Don Jackson, CEO of JBS USA, witnessed the operation of the ALC system first hand and commented that "This was the future for JBS smallstock processing."
<snip>
Graham Treffone, Innovation Manager at JBS said "once we prove this to the rest of the company it is only a matter of time before we have the system at our other sites in quick succession." Neil Brereton, JBS Group Engineer, concluded that "if you can demonstrate to us, as you have ALC, that we do not need to 'nursemaid' this technology, we will be installing more."
<snip>

I believe the above is the exciting bit of the announcement. SCT look to have gained a (lamb?) leg into the American market and these guys look keen to buy, and soon. This is I believe the global kick start that Robotic Technologies has been threatening to make for nearly five years. Very exciting stuff for SCT going forwards.

SNOOPY

[Lizard]

I believe the above is the exciting bit of the announcement. SCT look to have gained a (lamb?) leg into the American market and these guys look keen to buy, and soon. This is I believe the global kick start that Robotic Technologies has been threatening to make for nearly five years. Very exciting stuff for SCT going forwards.

SNOOPY

An unusual informality in the latter page of the announcement, but suggests big potential. Not sure who takes the prize for informal reporting though - Teamtalk's "2012 Annual Report and Cocktail Guide" is up there... (I went straight to the back looking for the cocktails... they were at the front of course!)

[percy]

These latest announcements are very positive.Good news for shareholders.

[Snoopy]

These latest announcements are very positive. Good news for shareholders.

I just hope management aren't setting shareholders up for a fall come annual result time Percy. I note no announcement has been made on the appliance production line side of the business. That division still accounts for 50% of SCT's work. I can't see much good news from production line arm of the business looking into 2013. Bracing myself for the bomb to be dropped, although I do expect a decent final dividend from this years work to cushion any blow!

SNOOPY