2017 Half Year Financial Statements

SCOTT TECHNOLOGY LIMITED
STATEMENT OF COMPREHENSIVE INCOME
For the Six Months Ended 28 February 2017
6 mths 6 mths 12 mths
28 Feb 17 29 Feb 16 31 Aug 16
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s

Revenue 56,670 42,816 112,044
Interest received 353 38 299
Other income 126 158 2,172
Share of joint ventures’ and associates’ net surplus/(deficit) (31) 67 378

Raw materials, consumables used and other expenses (32,976) (23,445) (66,579)
Employee benefits expense (18,686) (15,611) (34,920)
Depreciation and amortisation (1,205) (848) (1,744)
Finance costs (40) (418) (685)
────── ─────── ───────
NET SURPLUS BEFORE TAXATION 4,211 2,757 10,965

Taxation expense (1,324) (809) (2,831)
────── ─────── ───────
NET SURPLUS FOR THE PERIOD AFTER TAX 2,887 1,948 8,134
══════ ═══════ ═══════

Other Comprehensive Income
Translation of foreign operations (172) 148 (201)
────── ────── ──────
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD NET OF TAX 2,715 2,096 7,933
══════ ══════ ══════

Net surplus for the period is attributable to:
Members of the parent entity 2,498 2,032 7,485
Non controlling interest 389 (84) 649
────── ─────── ───────
2,887 1,948 8,134
══════ ═══════ ═══════

Total comprehensive income is attributable to:
Members of the parent entity 2,326 2,180 7,284
Non controlling interest 389 (84) 649
────── ────── ──────
2,715 2,096 7,933
══════ ══════ ══════



Cents Per Ordinary Share

Earnings (attributable to members of the parent entity):
Basic 3.3 4.5 13.3
Diluted 3.3 4.5 13.3

Net tangible assets:
Basic 65.9 37.5 82.2
Diluted 65.9 37.5 82.2

SCOTT TECHNOLOGY LIMITED
STATEMENT OF CHANGES IN EQUITY
For the Six Months Ended 28 February 2017






Six Months Ended 28 February 2017

Fully Paid
Ordinary
Shares
(Unaudited)
$’000s


Retained
Earnings
(Unaudited)
$’000s
Foreign
Currency
Translation
Reserve
(Unaudited)
$’000s

Non
Controlling
Interest
(Unaudited)
$’000s



Total
(Unaudited)
$’000s


Balance at 31 August 2016 71,312 24,279 (1,660) 669 94,600
Net surplus for the period after tax - 2,498 - 389 2,887
Other comprehensive income for the
period net of tax

-

-

(172)

-

(172)
Dividends paid (5.5 cents per share) - (4,107) - - (4,107)
Acquisition of minority interest in
Subsidiary - 990 - (997) (7)
Balance at 28 February 2017
71,312 23,660 (1,832) 61 93,201






Six Months Ended 29 February 2016

Fully Paid
Ordinary
Shares
(Unaudited)
$’000s


Retained
Earnings
(Unaudited)
$’000s
Foreign
Currency
Translation
Reserve
(Unaudited)
$’000s

Non
Controlling
Interest
(Unaudited)
$’000s



Total
(Unaudited)
$’000s


Balance at 31 August 2015 30,943 21,114 (1,459) 20 50,618
Net surplus/(deficit) for the period after tax - 2,032 - (84) 1,948
Other comprehensive income for the
period net of tax

-

-

148

-

148
Dividends paid (5.5 cents per share) - (2,501) - - (2,501)
Balance at 29 February 2016
30,943 20,645 (1,311) (64) 50,213







Twelve Months Ended 31 August 2016

Fully Paid
Ordinary
Shares
(Audited)
$’000s


Retained
Earnings
(Audited)
$’000s
Foreign
Currency
Translation
Reserve
(Audited)
$’000s

Non
Controlling
Interest
(Audited)
$’000s



Total
(Audited)
$’000s


Balance at 31 August 2015 30,943 21,114 (1,459) 20 50,618
Net surplus for the year after tax - 7,485 - 649 8,134
Other comprehensive income for the year
net of tax

-

-

(201)

-

(201)
Dividends paid (9.5 cents per share) - (4,320) - - (4,320)
Issue of ordinary shares under JBS
Australia Pty Ltd Scheme of Arrangement

40,597

-

-

-

40,597
Share issue costs (228) - - - (228)

Balance at 31 August 2016
71,312 24,279 (1,660) 669 94,600

SCOTT TECHNOLOGY LIMITED
BALANCE SHEET
As at 28 February 2017
6 mths 6 mths 12 mths
28 Feb 17 29 Feb 16 31 Aug 16
(Unaudited) (Unaudited) (Audited)
Notes $’000s $’000s $’000s
CURRENT ASSETS
Cash and cash equivalents 32,810 7,338 34,244
Trade debtors 13,540 11,879 15,833
Other financial assets 472 1,208 1,377
Sundry debtors and prepayments 1,037 1,367 1,125
Inventories 10,660 13,110 12,343
Receivable from joint ventures and associates 1,863 1,869 1,393
─────── ────── ───────
60,382 36,771 66,315
NON CURRENT ASSETS
Property, plant and equipment 12,415 11,438 12,831
Investment in joint ventures and associates 890 612 923
Other financial assets - 2 99
Goodwill 29,911 29,758 29,911
Deferred tax asset 2,206 1,717 1,603
Receivable from joint ventures and associates 137 1,501 431
Intangible assets 6 11,873 1,696 1,698
─────── ─────── ───────
57,432 46,724 47,496
─────── ─────── ───────
TOTAL ASSETS 117,814 83,495 113,811
═══════ ═══════ ═══════
CURRENT LIABILITIES
Trade creditors and accruals 9,406 9,383 8,362
Finance lease liabilities 32 33 32
Other financial liabilities 182 195 523
Employee entitlements 3,316 3,229 4,006
Provision for warranty 1,096 750 1,100
Payable to joint ventures 214 430 346
Taxation payable 1,686 1,082 1,912
Current portion of bank loans - 9,797 -
Contract work in progress 2,310 900 1,137
Current portion of deferred settlement of intangible 6
asset purchase 1,066 - -
─────── ─────── ───────
19,308 25,799 17,418
NON CURRENT LIABILITIES
Bank loans - 6,907 -
Other financial liabilities - 2 99
Employee entitlements 2,067 498 1,639
Finance lease liability 40 76 55
Non current portion of deferred settlement of intangible
asset purchase 6 3,198 - -
─────── ─────── ───────
5,305 7,483 1,793
EQUITY
Share capital 71,312 30,943 71,312
Retained earnings 23,660 20,645 24,279
Foreign currency translation reserve (1,832) (1,311) (1,660)
────── ──────── ────────
Equity attributable to equity holders of the parent 93,140 50,277 93,931
Non controlling interest 61 (64) 669
────── ──────── ────────
TOTAL EQUITY 93,201 50,213 94,600
────── ──────── ────────
TOTAL LIABILITIES & EQUITY 117,814 83,495 113,811
══════ ════════ ════════

SCOTT TECHNOLOGY LIMITED
STATEMENT OF CASHFLOWS
For the Six Months Ended 28 February 2017
Notes 6 mths 6 mths 12 mths
28 Feb 17 29 Feb 16 31 Aug 16
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s

CASH FLOWS FROM OPERATING ACTIVITIES

Cash was provided from/(applied to):
Receipts from operations 60,576 51,264 118,880
Interest received 353 38 299
Net GST received/(paid) 531 470 (372)
Payments to suppliers and employees (49,023) (41,030) (100,463)
Interest paid (40) (451) (773)
Taxation paid (2,153) (385) (1,463)
─────── ─────── ───────
Net cash inflow from operating activities 2 10,244 9,906 16,108

CASH FLOWS FROM INVESTING ACTIVITIES

Cash was provided from/(applied to):
Purchase of property, plant, equipment and intangible assets (6,720) (799) (2,984)
Sale of property, plant and equipment 90 - 481
Advance from joint ventures and associates (306) 131 1,593
Repayment of advance to Employee Share Purchase Scheme - - 2
Purchase of business assets - - (880)
Purchase of non controlling interest in subsidiary (550) - -
────── ────── ──────
Net cash outflow from investing activities (7,556) (668) (1,788)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash was provided from/(applied to):
Repayment of borrowings (15) (684) (17,410)
Dividends paid (4,107) (2,501) (4,320)
Issue of share capital, net of issue costs - - 40,369
─────── ─────── ───────
Net cash inflow/(outflow) from financing activities (4,122) (3,185) 18,639
─────── ─────── ───────
Net increase / (decrease) in cash held (1,434) 6,053 32,959

Add cash and cash equivalents at beginning of the period 34,244 1,285 1,285
─────── ─────── ───────
Balance at end of the period 32,810 7,338 34,244
═══════ ═══════ ═══════

Comprised of:
Cash and cash equivalents 32,810 7,338 34,244
═══════ ═══════ ═══════

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2017

1. FINANCIAL STATEMENTS

Statement of Compliance

The unaudited interim financial statements have been prepared in accordance with Generally Accepted
Accounting Practice in New Zealand (“NZ GAAP”). They comply with New Zealand equivalents to International
Financial Reporting Standard 34 (“NZ IAS-34”) “Interim Financial Reporting” and other applicable financial
reporting standards as appropriate for profit orientated entities. Compliance with NZ IAS-34 ensures compliance
with International Accounting Standard 34 “Interim Financial Reporting”.

These financial statements have been prepared using the same accounting policies as the previously published
annual financial statements as at 31 August 2016. These interim financial statements should be read in
conjunction with the policies disclosed in the annual financial statements.

2. NOTES TO THE CASHFLOW STATEMENT
6 mths 6 mths 12 mths
28 Feb 17 29 Feb 16 31 Aug 16
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s

Net surplus for the period 2,887 1,948 8,134

Adjustments for non-cash items:
Depreciation and amortisation 1,205 848 1,744
Net loss/(gain) on sale of property, plant and equipment - - 215
Deferred tax (603) 504 618
Share of net deficit/(surplus) of joint ventures and associates 31 (67) (378)
Impairment of net assets (QMT Machinery Technology
(Qingdao) Co Limited) - - 449

Add/(less) movement in working capital:
Trade debtors 2,293 4,033 79
Other financial assets - derivatives 1,004 438 172
Sundry debtors and prepayments 88 (260) (18)
Inventories 1,683 (1,694) (927)
Contract work in progress 1,173 3,948 4,185
Taxation payable (226) (80) 750
Trade creditors and accruals 1,044 511 (510)
Other financial liabilities - derivatives (440) (440) (17)
Employee entitlements (262) 69 1,987
Provision for warranty (4) - 350

Movements in working capital disclosed in
investing/financing activities:
Movement in foreign exchange translation reserve relating to
working capital (172) 148 (201)
Working capital relating to business purchases/amalgamation - - (75)
Impairment of net assets (QMT Machinery Technology
(Qingdao) Co Ltd - - (449)
Working capital relating to purchase of non controlling interest 543 - -
─────── ─────── ───────
Net cash inflow from operating activities 10,244 9,906 16,108
═══════ ═══════ ═══════

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 29 February 2017

3. CONTINGENT LIABILITIES
6 mths 6 mths 12 mths
28 Feb 17 29 Feb 16 31 Aug 16
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s

Payment guarantees and performance bonds 3,550 7,275 6,071
Stock Exchange bond 75 75 75
Rental bond 16 - -
Maximum contract penalty clause exposure 2,317 2,064 1,431

Payment guarantees are provided to customers in respect of advance payments received by the Group for
contract work in progress, while performance bonds are provided to some customers for a period of up to one year
from final acceptance of the equipment.

Scott Technology Limited has a payment bond to the value of $75,000 in place with ANZ Bank New Zealand
Limited in favour of the New Zealand Stock Exchange.

The Group has exposure to penalty clauses on its projects. These clauses relate to delivery criteria and are
common in international contractual agreements. There is a clearly defined sequence of events that needs to
occur before penalty clauses are imposed.



4. SEGMENT INFORMATION

4.1 Products and Services from which Reportable Segments Derive Their Revenues

The Group’s reportable segments under NZ IFRS-8 are:

 Australasia Manufacturing
 Americas Manufacturing
 Asia and Europe Manufacturing

Australasia is reported as a single segment due to the integrated nature of customers, manufacturing, sales and
financing activities across New Zealand and Australia.

Asia and Europe is reported as a single segment due to the integrated nature of customers, manufacturing and
sales activities across Asia and Europe.

Information regarding the Group’s reporting segments is presented below.

4.2 Segment Revenues and Results

The following is an analysis of the Group’s revenue and results by reportable segment. For the purposes of NZ
IFRS-8 allocations are based on the operating results by segment. The Group does not allocate certain resources
(such as senior executive management time) and central administration costs by segment for internal reporting
purposes and therefore these allocations may not result in a meaningful and comparable measure of profitability
by segment.

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2017

4.2 Segment Revenues and Results (Cont)

Six Months Ended Australasia Americas Asia & Europe
28 February 2017 Manufacturing Manufacturing Manufacturing Unallocated Total
(Unaudited) $’000s $’000s $’000s $’000s $’000s

Revenue 45,091 6,263 5,316 - 56,670
═══════ ═══════ ═══════ ═══════ ═══════

Operating profit/(loss) 7,202 598 (648) - 7,152
Depreciation and amortisation (825) (76) (121) (183) (1,205)
Share of surplus/(deficit) of joint
ventures - (18) (13) - (31)
Interest revenue 2 - - 351 353
Central administration costs
and foreign exchange - - - (2,018) (2,018)
Finance costs (40) - - - (40)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) before taxation 6,339 504 (782) (1,850) 4,211
Taxation (expense)/credit (1,934) (149) 219 540 (1,324)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) after taxation 4,405 355 (563) (1,310) 2,887
═══════ ═══════ ═══════ ═══════ ═══════


Six Months Ended Australasia Americas Asia & Europe
29 February 2016 Manufacturing Manufacturing Manufacturing Unallocated Total
(Unaudited) $’000s $’000s $’000s $’000s $’000s

Revenue 33,533 8,184 1,099 - 42,816
═══════ ═══════ ═══════ ═══════ ═══════

Operating profit/(loss) 4,911 840 (237) - 5,514
Depreciation and amortisation (380) (117) (87) (264) (848)
Share of surplus/(deficit) of joint
ventures and associate 21 43 3 - 67
Interest revenue 2 - 2 34 38
Central administration costs
and foreign exchange - - - (1,596) (1,596)
Finance costs (341) (77) - - (418)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) before taxation 4,213 689 (319) (1,826) 2,757
Taxation (expense)/credit (1,227) (210) 89 539 (809)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) after taxation 2,986 479 (230) (1,287) 1,948
═══════ ═══════ ═══════ ═══════ ═══════

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2017

4.2 Segment Revenues and Results (Cont)

Twelve Months Ended Australasia Americas Asia & Europe
31 August 2016 Manufacturing Manufacturing Manufacturing Unallocated Total
(Audited) $’000s $’000s $’000s $’000s $’000s

Revenue 88,151 15,355 8,538 - 112,044
═══════ ═══════ ═══════ ═══════ ═══════

Operating profit/(loss) 18,362 881 (1,092) - 18,151
Impairment of net assets - - (449) - (449)
Depreciation and amortisation (1,150) (150) (141) (303) (1,744)
Share of surplus/(deficit) of joint
ventures 250 120 8 - 378
Interest revenue 5 - 2 292 299
Central administration costs
and foreign exchange - - - (4,985) (4,985)
Finance costs (346) (241) (2) (96) (685)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) before taxation 17,121 610 (1,674) (5,092) 10,965
Taxation (expense)/credit (4,599) (110) 469 1,409 (2,831)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) after taxation 12,522 500 (1,205) (3,683) 8,134
═══════ ═══════ ═══════ ═══════ ═══════

Revenue reported above represents revenue generated from external customers. Inter-segment sales were $1.4
million for the six months ended 28 February 2017 (six months ended 29 February 2016: $0.7 million).

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in
Note 1. Segment profit represents the profit earned by each segment without allocation of central administration
costs, share of profits of joint ventures, investment revenue and finance costs.

5. FINANCIAL INSTRUMENTS

The Group enters into foreign currency forward exchange contracts to hedge trading transactions, including
anticipated transactions, denominated in foreign currencies.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently re-measured to their fair value. The resulting gain or loss is recognised in profit or loss immediately
unless the derivative is designated and effective as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedging relationship. The Group designates certain
derivatives as cashflow hedges of highly probable forecast transactions.

6 mths 6 mths 12 mths
28 Feb 17 29 Feb 16 31 Aug 16
Fair value of derivative financial instruments (Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s
Other financial assets - derivatives:
Foreign currency forward contracts held as effective
fair value hedges 180 196 620
Foreign exchange derivatives 148 948 377
Foreign exchange collar option derivatives 144 89 479

Other financial liabilities - derivatives:
Fair value hedge of open firm commitments (180) (196) (620)
Foreign exchange collar option derivatives - (23) -
─────── ─────── ───────
292 1,014 856
═══════ ═══════ ═══════

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2017

5. FINANCIAL INSTRUMENTS (Cont)

The Group has categorised these derivatives, both financial assets and financial liabilities, as Level 2 under the fair
value hierarchy contained within NZ IFRS 13.

The fair value of foreign currency forward exchange contracts is determined using a discounted cashflow
valuation. Key inputs include observable forward exchange rates, at the measurement date, with the resulting
value discounted back to present values.

There have been no changes in valuation techniques used for foreign currency forward exchange contracts during
the current reporting period.

There were no transfers between fair value hierarchy levels during either the current or prior periods.

The fair value of financial instruments not already measured at fair value approximates their carrying value,


6. ACQUISITION OF BLADESTOP TECHNOLOGY

On 31 October 2016 the Group purchased the business assets of Bladestop Pty Limited, being entirely intellectual
property. The purchase price consisted of an upfront cash payment of A$6 million, plus the vendors will share in
the Bladestop earnings for an agreed period. The deferred portion of the purchase price is estimated to be A$4
million.


7. SUBSEQUENT EVENTS

On 5 April 2017 the Board of Directors approved an interim dividend of four cents per share with full imputation
credits attached to be paid for the 2017 year (2016 interim dividend: four cents per share).