Scott Technology : 2017 Half Year Report

Scott Technology Limited‌‌‌‌‌

2017

HALF YEAR REPORT

FOR THE SIX MONTHS ENDED 28 FEBRUARY 2017

CONTENTS

Chairman & Managing Director's 1 Commentary Statement of Comprehensive Income 4 Statement of Changes in Equity 5 Balance Sheet 6 Statement of Cash Flows 7 Notes to and Forming Part of the Interim Financial Statements8-12

Scott X-Ray, Primal and Middle Systems (left and rear) integrated into

a customer's lamb boning room.

REVENUE

$56.7M

an increase of 32% on the prior year

CHAIRMAN & MANAGING DIRECTOR'S COMMENTARYThe Directors are pleased to report the company has achieved a surplus before tax of $4.2 million for the six months ended 28

February 2017, an increase of 50% on the $2.8 million recorded for the first half of the 2016 financial year. The current year's growth has been greatly assisted by the integration of recent acquisitions and the commercial uptake of the company's own developed technologies.

Reported revenue for the first half of 2017 was $56.7 million, an increase of 32% on the $42.8 million recorded in the first half of 2016.

There continues to be a significant trend toward automation and robotics around the world; at the same time the international markets we operate in remain volatile and unpredictable. Scott's strategy to grow our skill base and to establish critical mass in our key markets of Australasia, North America, China and Europe means we are well positioned to take advantage of and manage the impact of these trends and risks.

A strong operating cash inflow of $10.2 million recorded for the first half of 2017 resulted in cash at bank of $32.8 million at 28 February 2017. $25 million of this is from the April 2016 capital raising, after repayment of all company bank debt. The company's strong balance sheet positions us well to deliver growth through planned organic and acquisition growth.

REVIEW OF OPERATIONS

Operating performance across the group continued in line with the increase in sales. Economies of scale gained through a series of repeat builds for the food and industrial automation industries, together with a closer sharing of skills and resources on projects between Australia and New Zealand, resulted in the company's Australasian sales being up 34% from the previous corresponding period. The Australasian manufacturing segment also benefited from the purchase of the BladeStop bandsaw safety technology in October 2016 which sits alongside our expanding suite of food processing applications that focus on improving safety, efficiency and yield.

Within our Americas manufacturing segment, RobotWorx continues to experience pressure on margins and profitability as a result of the reduced availability of robots for refurbishment. However, the stronger 'local presence' in the US market provides

1

4 CENTS

per share interim

dividend

REVIEW OF OPERATIONS (Cont)

benefits to the wider Scott group through access to many potential new customers; quicker in-market response for service work; and it provides a launching point into the North American market for the sale of BladeStop bandsaws.

Our Europe and Asia manufacturing segment was expanded in the second half of the previous financial year through the acquisition of the business assets of a German competitor who supplied equipment to the appliance industry. This acquisition provides

us with critical mass to deliver and support Scott's engineered solutions into the large European market. The European market is very competitive and conversion of new sales will be slow initially, and we have taken a longer term strategic view to the development of this market and our business in Germany. The China market has been lumpy for direct manufacturing sales into China, however, our China business provides a valuable source of lower cost manufactured components which are inputs to our Australasian activities.

A wide range of Research and Development activities continues to be undertaken and these will support and supplement future organic growth.

DIVIDEND

The Directors have declared an interim dividend of 4.0 cents, fully imputed, payable on 26 April 2017. This dividend, at the same level as the prior year, is being paid on the increased share capital introduced last year through the Scheme of Arrangement with JBS Australia. The dividend reflects the strong operating cash flows being generated by the business and the Directors' confidence of a strong full year result.

LOOKING AHEAD

The company is well positioned to take advantage of the increasing demand for our skills, our technology and our equipment.

Commercialisation of the company's technologies will continue and will underpin organic growth, while potential acquisitions are regularly being reviewed and evaluated to further drive strategic growth where they provide strong value propositions for all stakeholders.

Stuart J McLauchlan Chairman

Chris C Hopkins Managing Director

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