Scott Technology 2017 Annual Report
ANNUAL
REPORT
2017
SCOTT TECHNOLOGY LIMITED
2
01
HIGHLIGHTS
02
GLOBAL PRESENCE
04
FIVE YEAR TREND
05
CHAIRMAN & MANAGING
DIRECTOR’S COMMENTARY
14
CORPORATE GOVERNANCE
22
FINANCIAL STATEMENTS
66
AUDIT REPORT
IBC
DIRECTORY
CONTENTS
1
DIVIDEND
Final dividend: 6.0 cents per share,
fully imputed.
Record date: 21 November 2017.
Payment date: 28 November 2017.
Dividend reinvestment plan applies to this
payment for shareholders who re-elect to
receive shares in lieu of a cash dividend.
ANNUAL MEETING
Thursday 30 November 2017 at 2:00pm
at Scott Technology Limited, 630 Kaikorai
Valley Road, Dunedin.
Proxies close Tuesday, 28 November 2017
at 2:00pm.
REVENUE
COUNTRIES
NET SURPLUS
BEFORE TA X
EMPLOYEES
ANNUAL
DIVIDEND
INCREASED TO
ACQUISITION OF
TECHNOLOGY
CENTS
An increase of 18%
on the prior year
Per share fully imputed
An increase of 36%
on the prior year
Across eight countries
Products exported to
Which reduces the risks
of serious injury in the
meat processing industry
$133M
75
$14.9M
423
10
BLADESTOP
HIGHLIGHTS
2
Melbourne, Australia
EUROPE
10%
RUSSIA
4%
12%
37%
ASIA
2%
AFRICA
AUSTRALIA
6%
52
Shanghai, China
Qingdao, China
Dunedin, New Zealand
Santiago, Chile
Wellington, New Zealand
Kürnbach, Germany
Milan, Italy
NEW ZEALAND
2%
SOUTH AMERICA
27%
NORTH AMERICA
Dallas, Texas, USA
Vancouver, Canada
KEY
MARKETS
ACTIVITY
AGENTS
423
Number of Staff
Brisbane, Australia
Sydney, Australia
Perth, Australia
Auckland, New Zealand
Christchurch, New Zealand
Marion, Ohio, USA
1
26
10
47
2
25
41
12
75
87
3
1
1
39
1
2017 Revenue
$133m
GLOBAL PRESENCE
& MARKETS
2
3
Melbourne, Australia
EUROPE
10%
RUSSIA
4%
12%
37%
ASIA
2%
AFRICA
AUSTRALIA
6%
52
Shanghai, China
Qingdao, China
Dunedin, New Zealand
Santiago, Chile
Wellington, New Zealand
Kürnbach, Germany
Milan, Italy
NEW ZEALAND
2%
SOUTH AMERICA
27%
NORTH AMERICA
Dallas, Texas, USA
Vancouver, Canada
KEY
MARKETS
ACTIVITY
AGENTS
423
Number of Staff
Brisbane, Australia
Sydney, Australia
Perth, Australia
Auckland, New Zealand
Christchurch, New Zealand
Marion, Ohio, USA
1
26
10
47
2
25
41
12
75
87
3
1
1
39
1
2017 Revenue
$133m
3
4
FIVE YEAR TREND
Total Revenue
2013
$’000s
2014
$’000s
2015
$’000s
2016
$’000s
2017
$’000s
Total revenue
60,03460,31672,298112,044132,631
Net surplus before tax
7,1464,2318,10210,96514,913
Cash flow from operating
activities(1,933)1219,98716,10813,407
Net cash / (overdraft)1,327(4,888)1,28534,24426,670
Bank term loans-
8,42417,369
--
To t a l a s s e t s
58,15877,02684,445113,811126,181
Shareholders’ equity
43,75247,26550,61894,60097,156
Dividends (Cents Per Share)
Interim
2.52.52.54.04.0
Final
5.55.55.55.56.0
Special (Centenary) 2.0
----
To t a l
10.08.08.09.510.0
Employees (Number)
New Zealand
212221194197215
Australia
417708084
Asia
5051523327
Americas
134455044
Europe
1114053
To t a l
268324362400423
Geographical RevenueRevenue by Industry
2017201720172017
New Zealand
North America
Australia
South America
Asia
Russia & former states
Africa & Middle East
Other Europe
6%
27%
37%
2%
12%
4%
2%
10%
Meat processing
Industrial automation
& robotics
Appliances
Mining
Superconductors
30%
29%
20%
20%
1%
140
120
100
80
60
40
20
0
20132014201520162017
450
400
350
300
250
200
150
100
50
0
20132014201520162017
To t a l E m p l o y e e s
5
CHAIRMAN & MANAGING
DIRECTOR’S COMMENTARY
CHRIS
HOPKINS
Another Year of Achievement
This year at Scott we continued the step change
that started in 2016 as we look to build scale and
technical capability across the Group. In 2016 we
saw a lift in revenues beyond $100m and a successful
rights issue and capital raising which introduced JBS
Australia Pty Ltd as a 50.1% shareholder, while in 2017
we have increased revenues to over $130m and gained
efficiencies from resource and knowledge sharing
amongst the Group.
Scott continues to build a strong business that
operates in diversified end markets. The strength
of the Company is underpinned by diversification in
geographic markets and in the range of industries we
apply our expertise and skills to.
The year to 31 August 2017 included a full 12 months
activity from our German facility. Sales of Bladestop
technology also provided an additional boost during
the year, as did increased demand for general industrial
automation solutions.
Financial Performance
For the year ended 31 August 2017 the Company
produced a record surplus before tax of $14.9m, an
increase of 36% on the prior year surplus before tax of
$11.0m. This was achieved on total revenues of $132.6m,
which is an 18% increase on prior year. This record result
produced operating cash flows of $13.4m which helped
maintain a strong balance sheet. At balance date the
Company had $26.7m of cash in the bank with no debt
and total shareholder funds of $97.2m. This compares
to $94.6m of shareholder funds in 2016.
During the year the Company finalised and completed
the purchase of the Bladestop technology which
has performed well for the Company over the last 18
months – initially under licence and recently under
full ownership. A strong balance sheet and operating
performance provides the Company confidence to
search for suitable acquisitions that will add to our
technology portfolio or geographic reach.
Dividend
The Directors have declared an increased final dividend
of 6.0 cents per share for the year ended 31 August 2017,
payable on 28 November 2017.
When added to the interim dividend of 4.0 cents per
share paid in April 2017, the total dividend for the year
is 10.0 cents per share, an increase of 0.5 cents from
the 9.5 cents in the prior year. This dividend amount
reflects the Directors’ confidence in the future
performance of the Company. The final dividend will
be fully imputed.
The Directors have reinstated the Dividend
Reinvestment Plan and shareholders can make
new election notices for this dividend.
In late 2015 the Directors decided to suspend the
Dividend Reinvestment Plan due to the impending
Scheme of Arrangement with JBS Australia Pty Limited
and the resultant rights issue and share placement.
The Dividend Reinvestment Plan has been amended to
reflect the implementation of the Financial Markets
Conduct Act 2013.
STUART
McLAUCHLAN
ChairmanManaging Director & CEO
6
Board
Last year we welcomed three new Directors to the
Board who were initially appointed by JBS Australia
and subsequently elected by shareholders at the
2016 Annual Meeting. The new Directors have quickly
established themselves as valuable contributors to
Board activities and have brought fresh perspectives
and drive behind the Company’s strategic intent.
Health & Safety
The Company is committed to maintaining the health
and safety of our employees as they carry out their
business around the world, as well as those of our
visitors while they are on our sites.
With operations in several geographies our goal is to
implement the highest standard across all our facilities.
The benchmark we set is best practice regardless of the
country in which we operate.
Our health and safety systems continue to be effective
across all areas of the business and underpin our
objective of zero harm. Each and every day we want
our employees and visitors to be safe in every Scott
environment, and return home safely to their families.
Our Customer and Market Focus
In all Scott’s key markets there is strong interest in
automation and robotics. Our customers are looking
for ways to increase productivity, improve quality or
reduce costs. In many countries there is a shortage
of suitable workers and introducing automation
and robotics is high on the agenda for most of our
customers, although many are struggling with how
and when to implement. The key challenge for Scott
is to help guide our customers through the growing
number of technologies and options now available. The
Company continues to build on our vision and sensing
technology capability and we see this as a key platform
from which we can deliver smart automation and
mobile robotics.
Revenues from Industrial Automation showed the
largest sector increase during the year. This was
underpinned by a global increase in the search for
automation to improve throughput, productivity and
quality, and this was particularly evident by customers’
activity in our North American and Australian markets.
Revenues from Appliance Industry customers
increased as a result of a full year of production from
our German operation and a lift in New Zealand based
manufacturing output which delivered projects into the
USA, China and Australia.
We saw a gradual upswing in the Mining industry
sector which produced an increase in revenues of
18% from 2016.
Large long term capital projects accounted for 60% of
total revenues with the balance being product sales
and recurring revenues. The product sales include
standalone equipment that is sold from stock, spare
parts and wear parts (particularly for the Mining sector)
and service and upgrade work. With more equipment
established in the market, an increase in technology
provided, and the ongoing challenge faced by our
customers globally in maintaining trained automation
and robotics technicians, we expect service,
maintenance and spare parts to be an area of growth
for Scott.
Operations
Growth needs to be supported by infrastructure and
facilities and the Company has been addressing this in
areas where potential constraints exist.
During the year we moved into larger premises in
Sydney. The distance may have been short, but the
impact has been significant. We are now operating
under one roof with substantial floor space, enabling us
to lay out projects and to develop our expanding range
of technologies. The surplus space has been sublet on
a short term basis enabling us to have room for future
expansion.
The Company also recently committed to expanding
the facilities in Dunedin, with additional floor space
designed to enable us to complete multiple builds at
one time and increased space for additional engineering
skills, as well as a research and training facility.
Our machining capability is being enhanced with new
machine tools in Christchurch; while our facilities in
Ohio, USA have been refreshed. Our strategy requires
an expanded presence in North America with long
term planning underway to ensure we add the right
infrastructure in the best location.
The acquisition of the business assets of DC Ross
presented an opportunity to expand our workforce
and the available range of machine tools.
The business also opens up a small stream
of recurring revenues from fine
blanking presses supplying precision
metal formed parts. The DC Ross
tool room and tool design capability
has already enabled us to undertake
significant work for an appliance
manufacturer in Australia.
Within our Americas manufacturing
segment, RobotWorx sold 256
robots during the year, up from 235
robots in the prior year, reflecting
the increased interest
in automation.
CHAIRMAN & MANAGING
DIRECTOR’S COMMENTARY (c o n t .)
7
7
With our German operations now well established
and operating as part of the Group, we have a
strong presence in each of our key target markets.
Our primary manufacturing base is New Zealand
and Australia which is now well supported by
manufacturing in the USA, China and Germany.
This provides us flexibility to increase in-market
manufacturing, shortening lead times and provides
our customers with the confidence that we can better
meet their needs for local service and support.
During the year, we completed our first large logistics
and distribution system utilising smart vision systems
and automated guided vehicles. The system has already
proved a valuable showcase for the technology which
we expect to play an increasing role in our growth.
Scott is also working closely with the Australian
industry as it determines the best way to implement
a planned rollout of DEXA x-ray technology to
approximately 80 Ausmeat accredited meat processing
facilities. The total project is expected to be rolled out
over the next three years and opens the possibility to
utilise the x-ray rooms to drive Scott’s meat processing
automation.
We continue to focus on streamlining the business.
We have consolidated subsidiaries and wound up joint
ventures and partnerships where they have moved
past their useful life. In most cases the activities have
been absorbed within Scott’s normal trading activities.
Our milking robots project is an area of long term
research and development and Scott is currently
working with an international engineering and
technology provider to take the product to market.
Following the purchase of the Bladestop bandsaw
safety mechanism technology which we were
previously operating under licence, the Bladestop
product is now well established in Australia and New
Zealand and our sales network is being expanded to
encompass North America and Europe. Manufacturing
for Bladestop is currently concentrated in Australia
and we are looking to expand our supply chain and
evaluating manufacturing options in America and
Europe to shorten delivery times and meet customers’
service and maintenance requirements.
Research and Development
The Company’s commitment to research and
development remains strong with a focus on extending
our capability and range of technologies, in addition
to developing new applications. With leading edge
technologies, a formal process for our developments,
and an extensive reach into our key industries, Scott
is recognised as a leader and provider of advanced
technologies to industrial companies worldwide.
Dedicated staff have been appointed to manage our
development activities, including management of our
growing portfolio of Intellectual Property which now
consists of 29 inventions with 55 patents granted and a
further 48 patents pending and 8 brands trademarked
with 48 registered or pending trademarks, as well as
copyright in our designs.
8
Chris C Hopkins
Managing Director
Stuart J McLauchlan
Chairman
Build
trust and
confidence
with our internal
and external
customers, in the
way we listen, engage
and respond to their needs.
CUSTOMER
FOCUS
Add value and
understand our
customers’
perspectives and
expectations.
Innovate, be
creative and think
lean and efficient.
Be accountable
for your actions,
be positive, flexible
and open minded.
Take care of the
company and our
customers like they
were one’s own.
Act with
honour in
everything
you do.
ATTITUDE
AND
INTEGRITY
Do what
you say you will,
respect, support
others and always give
your best.
All actions and
communications
support ONE Team,
ONE Company.
TEAMS
WHO
TRUST
Empower, share
information and be
accountable.
Persist. Have
strength and act
with urgency.
Continually evaluate
and measure
progress and take
action.
Take part and share
the celebration of
change and
success.
RESULTS
MATTER
People and Process
We have introduced company values into everyday
activities and these are shown below. All staff are
encouraged to live and by, and demonstrate, our values.
The labour market is rapidly changing and recruiting the
right staff is an ongoing challenge. However, with good
growth prospects, interesting and challenging work, and
a focus on training and development, Scott is moving
toward its goal of becoming an employer of choice.
Outlook
Forward project work of approximately ten months and
a substantial pipeline of interesting sales prospects,
positions the Company well for further growth. With
most project durations less than twelve months, ten
months represents a higher than normal workload.
The forward work and sales prospects are spread
across our target industries and geographies.
Our diversification strategy which is well
advanced, not only reduces the risk associated
with an industry downturn in any one area,
but also drives organic growth.
To complement organic growth, the Company is
actively seeking suitable acquisitions. A team has been
assessing a range of opportunities but the Company
will only progress where strategic alignment is strong
and the technology adds to Scott’s current capability.
On behalf of the Company and our colleagues, we
thank the Board for their valuable support and
encouragement throughout the year. We also thank
the people at Scott for their commitment to, and
efforts towards, achieving our mission and we thank all
shareholders and other stakeholders for their support
over many years which has helped place Scott in the
strong position it is in today.
CHAIRMAN & MANAGING
DIRECTOR’S COMMENTARY (cont.)
OUR VALUES
WHO WE ARE AND WHO
WE WANT ON OUR TEAM
9
On August 4th, 1992 Keith Wanner started living the
American Dream. He combined his passion for robotics
with his vision for necessary industry improvements
to establish RobotWorx, an industrial robotic
integrator.
Initially a single-man operation which Keith Wanner
ran out of his home, RobotWorx rapidly grew to over
40 employees. Quickly realising they needed more
space for their expanding inventory and application
options, RobotWorx moved into a larger building at their
current location in Marion, Ohio in 2005. In 2014, Scott
Technology Limited purchased the RobotWorx business
providing Scott with a strategic base in its key North
American market.
Over the years, RobotWorx has played a vital role in
developing educational programmes and forming
partnerships with local schools and universities,
understanding that investing in the community is
investing in our future.
Recently, on August 4th 2017, RobotWorx celebrated
25 years of business. The momentous occasion was
celebrated by hosting an open day allowing for the local
community to join in the celebration. Marion Mayor
Scott Schertzer also attended, with both the County
Commissioners and the Marion Township declaring
August 4th, 2017 RobotWorx Day.
Also, to mark this occasion, RobotWorx has placed a 25
year old robot that was signed by all current employees
on permanent display at the RobotWorx facility. The
displayed robot will continue to serve as a reminder
that hard work, dedication and customer service pay
off to create a successful automation company.
These are values shared by all parts of the Scott Group.
ROBOTWORX
CELEBRATES 25 YEARS
Automated Guided Vehicles (AGVs) provide a cost
effective automated materials handling solution to
transport pallets, cartons and products throughout
a warehouse or manufacturing facility. AGVs can be
installed into an existing facility and are a safe and
reliable automation option. AGV automation can
complete tasks such as pallet loading and handling,
transportation of goods, pallet wrapping, tracking
of cartons and products, barcode scanning, right
through to container loading.
Features of an integrated AGV system include:
• Fully automated and integrated pallet handling
solution direct from the palletising room and
delivery of completed pallets to individual cold
storage locations.
• Ability to meet production rates with multiple
SKUs simultaneously.
CENTRALISED
ROBOTIC
PALLETISING
SYSTEM USING
AGVs
1
2
DUAL CARTON
INFEED CONVEYORS
ONE OF FOUR CARTON
PALLETISING ROBOTS
• 30 cartons per
minute, frozen
or chilled
• 4 pallet positions per robot
• Total of 16 pallet postions
• 3 cartons per pick & place cycle
RAISED FULL SYSTEM
MAINTENANCE ACCESS
PL AT F O R MS
3
10
11
• Minimises manual forklift movements.
• Can operate using either standard wooden pallets
or plastic/metal pallets.
• Minimises forklift movements which are labour
intensive and which create safety concerns due
to the number of forklift movements required.
• Delivers stacked pallets without manual
intervention to different locations for chilled/
frozen cold storage.
• Ability to process only pallets that require
wrapping through the high speed stretch
wrapping system, bypassing when not required.
• Scans each carton barcode on pallet logging and
cross checking with the inventory management
system prior to a pallet label being applied and
the pallet leaving the palletising room.
• Pallet label confirmation of stack contents with
the inventory management system prior to the
pallet leaving the palletising room.
• Ability to handle manually assembled pallets
automatically through barcode scanning, wrapping
and barcode labelling.
• Provides improved traceability of carton
movements.
• Minimises carton damage.
• Minimises building and equipment damage often
caused by forklift movements.
• Open plan layout allows easier and safer cell access
for operations and maintenance.
AGV - AUTOMATED GUIDED
VEHICLE SYSTEM
4
• Empty pallet distribution
to robot
• Full pallet handling through
scanning & wrapping
• Full pallet distribution to store
• Multi-pallet type handling
(wooden/plastic)
11
12
OUR BRANDS
Scott is a New Zealand Stock Exchange listed robotics and automation company,
established in 1913, with corporate headquarters in Dunedin, New Zealand.
Over the years, Scott has expanded its business and market reach
both organically and through acquisition, which has enabled
the Scott Group to be actively involved in a wide range of
industries and apply our expertise to many unique projects.
Today, Scott specialises in the design and
manufacture of automated and robotic
production and process machinery. We have
offshore manufacturing facilities in China,
Germany, Australia and the U.S, as well as sales
offices in Australia, China, Germany, Italy, Canada,
Chile and the U.S.
Scott operates in five key markets, all with the common
theme of high quality, Automation and Robotics.
HTS-110 became part of the Scott Group in 2011, and is a world-
leading producer of innovative magnetic solutions. HTS-110
designs and manufactures cryogen-free electromagnetic
products using high temperature superconducting (HTS) wire.
In addition, HTS-110 also manufactures and sells HTS Coils and
CryoSaver Current Leads.
Rocklabs was established in 1969 and delivers world leading
sample preparation equipment to mining customers, commercial
laboratories and research institutions. Rocklabs supplies
specialised equipment including crushers, pulverisers and sample
dividers for the mining of gold, silver, platinum and palladium, and
was acquired by Scott in 2008.
Rocklabs equipment has been exported to over 100 countries
and is also a world-leading producer of high-quality Certified
Reference Materials.
13
DC Ross is the latest addition to the Scott Group and are
world leaders in fine blanking technology, specialising in
creating fully customised, premium quality precision parts
for customers all around the globe. Acquired by Scott in
June 2017, DC Ross is well positioned to provide a strategic
advantage to the Scott Group with its renowned fine
blanking technology and high production capacity,
as well as its existing customer base.
RobotWorx was acquired by Scott in 2014 and celebrated 25
years in business in 2017. Specialising in the refurbishment
and integration of new and used industrial robots, parts and
robotic systems, RobotWorx’ custom integration expertise
has firmly established the business as a leader in the
industrial robotics field.
RobotWorx specialises in developing custom work cells
to match customer specific application criteria, often
requiring the integration of multiple manufacturers’ robots
with both new and reconditioned options. RobotWorx has
completed thousands of successful robotic installations
for applications ranging from welding to palletising since its
establishment in 1992.
BladeStop is the market leader in safety band saws and a fast
growing part of the Scott Group. BladeStop will stop the blade
within 9 milliseconds, significantly reducing operator injury,
especially when combined with its GloveCheck capabilities. There
is an ever increasing focus on safety in the meat processing
industry and BladeStop is able to offer peace of mind to all
processors and their operators.
BladeStop was fully commercialised in 2015 and has continually
improved its technology while expanding its range. BladeStop
now offers a range of band saw sizes to suit almost all meat
processing applications, from small scale butcheries and
supermarkets to large scale heavy carcass processing.
14
BOARD OF DIRECTORS
CORPORATE GOVERNANCE
BCom, CA, CF Inst D
Dunedin
Appointed Director 2001
Chris Hopkins joined the Donaghys Group, which included Scott Technology Ltd, in
1994 as Corporate Services Manager. In 1996, he assumed responsibility for finance
and administration for Scott Technology Ltd and oversaw the transition to a public
listed company in 1997. He was appointed a Director of Scott Technology Ltd in August
2001 and Managing Director in 2006. Chris Hopkins is also an independent Director of
Oakwood Group Limited.
CHRIS
HOPKINS
Managing Director and CEO
BSc
Dunedin
Appointed Director 2007
Chris Staynes commenced his career in 1973, gaining experience in product design and
production engineering. He advanced his career from senior product design engineer,
to product engineering manager and lastly to General Manager for a local appliance
manufacturer from 1980 until his retirement in 2006. Chris Staynes is also a Councillor and
Deputy Mayor of Dunedin City.
CHRISTOPHER
S TAY N E S
Independent Director
Mark Waller was Chief Executive and Managing Director of EBOS Group Limited from
1987 to 30 June 2014, and was appointed Chairman of that company in October 2015.
Mark Waller was the recipient of the Leadership Award in the 2014 INFINZ Industry
Awards and the Chief Executive of the Year Award at the Deloitte Top 200 Business
Awards in 2011.
BCom, FACA, FNZIM
Christchurch
Appointed Director 2004
MARK
WALLER
Independent Director
BCom, FCA(PP), CF Inst D
Dunedin
Appointed Director 2007
STUART
McLAUCHLAN
Chairman and
Independent Director
Stuart McLauchlan is a Senior Partner of GS McLauchlan & Co, Business Advisors
and Accountants, a prominent businessman and company director. Stuart
McLauchlan is a Director of Scenic Circle Hotels Ltd, Dunedin Casinos Ltd, AD
Instruments Pty Ltd, Ngai Tahu Tourism Ltd and several other companies. He is
also Chairman of the NZ Sports Hall of Fame, Chairman of Dunedin International
Airport Ltd, Chairman of Pharmac, Chairman of UDC Finance Ltd, Chairman of
Otago Community Hospice and a Council Member of the University of Otago.
15
Andre Nogueira is President and Chief Executive Officer of JBS USA, the North American and Australian
subsidiary of JBS SA, and the second largest global food company, being appointed on 1 January 2013. JBS USA
also holds a majority interest in Pilgrim’s Pride, the second largest poultry company in the U.S. Andre Nogueira
began his career with JBS in 2007, serving as Chief Financial Officer through 2011. He then served as CEO of JBS
Australia throughout 2012. Prior to working for JBS, Andre Nogueira worked for Banco do Brasil in corporate
banking positions in the U.S. and Brazil. Andre Nogueira currently serves on the Pilgrim’s Pride Corporation
Board of Directors, the North American Meat Institute (NAMI) Board of Directors, the NAMI Executive
Committee and Rabobank’s North American Agribusiness Advisory Board. He has an MBA from Funcado Don
Cabral, a Master’s in Economics from Brasilia University, a B.A. in Economics from Federal Fluminese University,
and has completed the Chicago Booth Advanced Management Program.
Greeley, Colorado, USA,
Appointed Director 2016
ANDRE
NOGUEIRA
Director
Brent Eastwood was appointed Chief Executive Officer of JBS Australia in September 2012. Prior to this he was
Chief Operating Officer for JBS Australia (Northern). Brent Eastwood has extensive international experience
in business leadership, and the sales and marketing of animal protein. He has worked in executive roles within
JBS USA including Head of JBS Trading Worldwide, Vice-President Beef Sales USA and President of JBS Carriers
USA. His prior experience in Australia included time with JBS’ predecessor company, Australia Meat Holdings, as
General Manager of AMH Trading Division for five years, eight years in meat trading with the DR Johnson Group
and three years as CEO of the ConAgra Trade Group in Sydney. Brent Eastwood entered the meat industry in
New Zealand in 1984 and spent five years in management roles including Production, Quality Assurance, Cold
Storage, Operations and Payroll.
BRENT
EASTWOOD
Director
Brisbane, Australia
Appointed Director 2016
Edison Alvares has over 20 years experience in major companies within Brazil and on a global scale. He holds
an Economics degree and Business Administration degree, and concluded his Executive Master of Business
Administration (EMBA) in 2015 at Queensland University of Technology (QUT). His area of expertise is Finance
and Controlling. For the past nine years Edison Alvares has led the Finance and Administration team of JBS
Australia, from the first stages of JBS’ ownership and expansion in 2007, through to the consolidated business
today of over 13,000 employees and revenue in excess of AU$7b. Prior to joining JBS in 2005 in Brazil, he was
employed in finance and controlling roles within the telecommunications and capital goods sectors.
EDISON
ALVARES
Director
Brisbane, Australia
Appointed Director 2016
John Berry is a Director and Head of Corporate and Regulatory Affairs, of JBS Australia Pty Limited.
John Berry has been involved in the Australian Meat Industry for over 18 years, and has responsibility for
industry, government and corporate relations activities within the JBS Australia business. He has also
had responsibility for mergers, legals and environmental operations. He possesses a Bachelor of Business
Finance and Masters of Business Administration.
JOHN
BERRY
Alternate Director for
Andre Nogueira, Brent Eastwood
& Edison Alvares
Brisbane, Australia
Appointed Alternate
Director 2017
16
CORPORATE GOVERNANCE (cont.)
The corporate governance processes set out in
this statement do not materially differ from the
principles set out in the NZSX Corporate Governance
Best Practice Code. This statement follows the nine
principles published by the Securities Commission and
reports on how Scott Technology Limited seeks to
comply with these principles.
1. ETHICAL STANDARDS
The Board has developed and implemented a code of
conduct which contains expectations and policies for
Directors and employees carrying out their duties.
The code of conduct covers such matters as:
• Obeying the applicable laws and regulations
governing our business conducted worldwide;
• Being honest, fair and trustworthy in all activities
and relationships;
• Avoiding all conflicts of interest between work
and personal affairs;
• Striving to create a safe workplace and to protect
the environment;
• Through leadership at all levels, sustain a culture
where ethical conduct is recognised, valued and
exemplified by all employees; and
• Details raising integrity concerns and the
procedure for dealing with these.
The code of conduct was approved by the Board at its
June 2004 meeting and has been made available to all
staff. The Board monitors compliance with the code of
conduct on a regular basis.
2. BOARD COMPOSITION AND ROLE
The Board is elected by the Shareholders of Scott
Technology Limited. At each annual meeting at least
one third of the Directors retire by rotation. The
process for the appointment of Directors is detailed
in the Company’s constitution. The Board currently
comprises three non-executive independent Directors
(Stuart McLauchlan (Chair), Mark Waller, and Chris
Staynes), three Directors representing JBS Australia
Pty Limited (Andre Nogueira, Brent Eastwood and
Edison Alvares) who are not independent Directors
and one Executive Director (Chris Hopkins) who is not
an independent Director. John Berry is an Alternate
Director for Andre Nogueira, Brent Eastwood and
Edison Alvares. Each of the Directors brings a broad
range of skills, knowledge and experience to the Board.
Responsibility for the day to day management of
the Company has been delegated to the Managing
Director/Chief Executive and his management team.
The Board of Directors maintains effective control
over the Company, as well as monitoring executive
management. The Directors formally meet a minimum
of six times throughout the year, plus additional
meetings as required, and oversee all matters of
corporate governance, development of long term
strategic plans, financial management, reporting
to shareholders and regulatory compliance.
Continuing professional development is encouraged
for all Directors.
3. BOARD COMMITTEES
The Board has formally constituted committees,
being the Audit, Remuneration and Nomination, and
Treasury committees. These committees enhance its
effectiveness in key areas whilst still retaining Board
responsibility.
Audit Committee
The Audit Committee overviews internal controls
and financial reporting and reviews the Company’s
financial accounts, in conjunction with the Company’s
auditors. It reviews the annual and interim reports
prior to approval by the Board and deals with
the appointment of external auditors. The Audit
Committee comprises Mark Waller (Chair), Stuart
McLauchlan, Chris Staynes, Edison Alvares and Chris
Hopkins. Other Directors are welcome to attend Audit
Committee meetings.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee
is comprised of the independent non-executive
Directors, with Stuart McLauchlan as its Chair.
The purpose of the committee is to ensure that the
Company’s Directors and senior executives are fairly
rewarded for their individual contributions to the
Company’s overall performance. Due to the size and
level of activity of this committee, it also includes
the role of recommending Director appointments
to the Board.
Treasury Committee
The Treasury Committee overviews the Company’s
treasury practices, including foreign exchange cover
and short term cash investments. The Treasury
Committee comprises Stuart McLauchlan (Chair), Chris
Hopkins, Edison Alvares and Greg Chiles, the Group’s
Chief Financial Officer.
4. REPORTING AND DISCLOSURE
Numerous safeguards are in place to ensure the
integrity and quality of financial statements given to
Directors. This includes an effective system of internal
controls to ensure reliable financial reporting.
The Board Audit Committee and external auditors have
a pivotal role in ensuring the integrity of the publicly
released financial documents.
17
In addition to the annual report and interim results,
continuous disclosure to the New Zealand Stock
Exchange forms part of the reporting and disclosure
of the Group. As part of these continuous disclosure
obligations, there are formal procedures, including
the Chairman’s approval for the public release of
Company information.
5. REMUNERATION
The Remuneration and Nomination Committee sets
the remuneration of Directors, both Executive and
Non-Executive. Remuneration and other benefits paid
to Directors are disclosed on page 21.
The Company recognises the need to provide
competitive remuneration to attract and retain high
calibre executives and Directors.
6. RISK MANAGEMENT
The Board is responsible for the Company’s system of
internal controls. A review of potential risks is carried
out annually to determine a risk profile and to approve
an appropriate response. The Board also considers the
recommendations made by external auditors and acts
on these accordingly. Processes are in place to identify,
monitor and manage risks.
7. AUDIT
The Board, through the Audit Committee, ensures the
quality and independence of the external audit process
is maintained. To maintain auditor independence, the
audit partner will be rotated at intervals not exceeding
five years. Audit fees and other services,
primarily tax advice and other assurance services,
performed by Deloitte are disclosed in Note A1 of the
financial statements.
8. SHAREHOLDER RELATIONS
The Company maintains an up to date website
(scottautomation.com) providing a description of its
business and financial statements for previous years.
It also distributes or makes available the half yearly
and annual reports to all shareholders and interested
parties. All shareholders are encouraged to attend the
annual meeting. The Company’s auditors, along with
the Board, attend the annual meeting for formal and
informal interaction with shareholders.
9. STAKEHOLDER INTERESTS
Staff are recognised as a key stakeholder in the
Group. The Company seeks to create and maintain a
positive supporting environment for them to work
in. The Directors have established an employee share
purchase scheme which operates periodically to
encourage staff to participate in the ownership of
the Company. Customers’ interests are catered for by
sharing customer specific information via a private
login to the Scott website.
ATTENDANCE
The following table shows attendances at the Board
and committee meetings during the year ended 31
August 2017.
Board
Health and Safety
CommitteeAudit Committee
Remuneration
Committee
Eligible to
AttendAttended
Eligible to
AttendAttended
Eligible to
AttendAttended
Eligible to
AttendAttended
S McLauchlan
66662211
M Waller
65652211
C Staynes
65652211
C Hopkins
666622
--
A Nogueira
6262
----
B Eastwood
656511
--
E Alvares
656521
--
J Berry (alternate)222211
--
18
DIRECTORS’ INTERESTS
FOR THE YEAR ENDED 31 AUGUST 2017
Directors’ Shareholding as at 31 August 2017
Beneficially
Owned
Held by
associated persons
Non-beneficially
held * (jointly)
201720162017201620172016
C C Hopkins**
54,526127,7615,609,4105,534,41017,77917,779
S J McLauchlan
375,096375,096
--
17,77917,779
M B Waller
90,56290,562
----
C J Staynes
228,375228,375
----
A Nogueira----
37,415,05837,415,058
B Eastwood----
37,415,05837,415,058
E Alvares----
37,415,05837,415,058
J Berry (alternate)
----
37,415,058
-
74 8,559821,7945,609,4105,534,410
* The non-beneficially held shares that are held jointly by C C Hopkins and S J McLauchlan are in their
capacity as trustees for the Scott Technology Employee Share Purchase Scheme. The non-beneficially
held shares that are jointly attributed to A Nogueira, B Eastwood, E Alvares and J Berry are in their
capacity as Directors representing JBS Australia Pty Limited.
** 5,500,000 associated persons shares are in C C Hopkins’ capacity as a Director of Oakwood
Group Limited
Directors’ Share Dealings
The details of disclosures by Directors of acquisitions or disposals of shares Directors held a relevant
interest in were:
Number of Shares
Acquired/(Disposed)Date
Consideration Paid
$’000s
C C Hopkins (beneficially) 1,765 12 Dec 20164
C C Hopkins (beneficially) (75,000)13 Apr 2017
-
C C Hopkins (associated person) 75,000 13 Apr 2017
-
Use of Company Information
There were no notices from Directors regarding the use of Company information.
19
DIRECTORS’ INTERESTS
FOR THE YEAR ENDED 31 AUGUST 2017
Disclosures of Interest by Directors
The following are general disclosures of interest given by Directors of the Company under section 140 of the
Companies Act 1993:
C J Staynes
Councillor Dunedin City Council
Chairman Cargill Enterprises
Director Cancer Society Otago & Southland
Branch
Director Otago Chamber of Commerce &
Industry
Director Wine Freedom Ltd
Tr u s t e e 4Trades Apprenticeship Training
Tr u s t
Tr u s t e e O S M A Tr u s t
Trustee Otago Museum Trust Board
C C Hopkins
Chairman Robotic Technologies Ltd
Chairman NS Innovations Pty Ltd
Director Applied Sorting Technologies Pty
Ltd
Director Oakwood Group Ltd
Director QMT General Partner Ltd
Director QMT Machinery Technology
(Qingdao) Co Ltd
Director Rocklabs Ltd
Director Rocklabs Automation Canada Ltd
Director Scott Automation Ltd
Director Scott Automation & Robotics Pty
Ltd
Director Scott LED Ltd
Director Scott Separation Technology Ltd
Director Scott Systems International Inc
Director Scott Systems (Qingdao) Co Ltd
Director Scott Technology Australia Pty Ltd
Director Scott Technology Euro Ltd
Director Scott Technology NZ Ltd
Director Scott Technology USA Ltd
Trustee Scott Technology Employee Share
Purchase Scheme
Shareholder Penfold Transmission Ltd
A Nogueira
Chief Executive JBS USA
Director Cattle Production Systems Inc
Director Gold’N Plump Farms, LLC
Director Gold’N Plump Poultry, LLC
Director JBS Canada Partners, Inc
Director JBS Carriers, Inc
Director JBS Finco, Inc
Director JBS Green Bay, Inc
Director JBS Live Prok, LLC
Director JBS Packerland, Inc
Director JBS Plainwell, Inc
Director JBS Souderton, Inc
Director JBS Tolleson, Inc
Director JBS USA Finance, Inc
Director JBS USA Food Company
Director JBS USA Food Company Holdings
Director JBS USA Leather, Inc
Director JFC LLC
Director Miller Bros Co, Inc
Director Mopac of Virginia, Inc
Director Pilgrim’s Pride Corporation
Director Pilgrim’s Pride, LLC
Director Poppsa 3, LLC
Director Poppsa 4, LLC
Director S&C Resale Company
Director Skippack Creek Corporation
Director Swift & Company International
Sales Corporation
Director Swift Beef Company
Director Swift Brands Company
Director Swift Pork Company
Director JBS Food Canada ULC
Director TO-RICOS Distribution Ltd
Director TO-RICOS Ltd
Director North American Meat Institute
Member Rabobank’s North American
Agribusiness Advisory Board
20
S J McLauchlan
Chairman Compass Agribusiness
Management Ltd
Chairman Dunedin International Airport Ltd
Chairman Otago Community Hospice
Chairman Pharmac
Chairman UDC Finance Limited
Chairman University of Otago Foundation
Studies Ltd
Council Member University of Otago
Partner /
Director GS McLauchlan & Co Ltd
Director Analogue Digital Instruments Group
Director BPAC Clinical Solutions
Management Ltd
Director Cargill Hotel 2002 Ltd
Director Dunedin Casinos Ltd
Director Dunedin City Council Subsidiaries
Director Energy Link Limited
Director Extra Eight Ltd
Director Ngai Tahu Tourism Ltd
Director QMT Machinery Technology
(Qingdao) Co Ltd
Director Scenic Circle Hotels & Subsidiaries
Director Scott Technology NZ Ltd
Director University of Otago Holdings Ltd
Board Member Otago Southland Employers
Association
Board Member NZ On Air
Trustee Scott Technology Employee Share
Purchase Scheme
M B Waller
Chairman Ebos Group Ltd & Associated
Companies
E Alvares
Director JBS Australia Pty Ltd & Associated
Companies
Director Andrews Meat Industries Pty Ltd
Director J & F Australia Pty Ltd
Director JBS (Bejing) Co Ltd
Director JBS Holdings Hong Kong Co Ltd
Director Premier Beehive NZ
B Eastwood
Chief Executive JBS Australia Pty Ltd and
& Director Associated Companies
Director Afoofa Development Pty Ltd
Director Andrews Meat Industries Pty Ltd
Director Enunga Enterprises Pty Ltd
Director J & F Australia Pty Ltd
Director JBS Holdings Hong Kong Co Ltd
Director Premier Beehive NZ
Director Primo Moraitis Fresh Pty Ltd
Director SPM Fresh 2013 Pty Ltd
Director SPM Fresh Holdings Pty Ltd
Member Business Council of Australia
Member Minister Ciobo (The Australian
Federal Government Trade, Foreign
Investment and Tourism Minister)
Advisory Board
Member Rabobank Australia Agribusiness
Advisory Board
J K Berry
(alternate for A Nogueira, B Eastwood & E Alvares)
Director JBS Australia Pty Ltd & Associated
Companies
Director Andrews Meat Industries Pty Ltd
Director Australian Meat Processor
Corporation
Director Premier Beehive NZ
DIRECTORS’ INTERESTS
FOR THE YEAR ENDED 31 AUGUST 2017
& Director
21
DIRECTORS’ INTERESTS
FOR THE YEAR ENDED 31 AUGUST 2017
Remuneration of Directors
During the year ended 31 August 2017, the total remuneration and other benefits attributed to the Directors of
the Company were as follows:
Directors’ Fees
$’000s
Directors’
Salary
$’000s
Other
Remuneration
& Benefits
(S h o r t Te r m)
$’000s
Other
Remuneration
& Benefits
(L o n g Te r m)
$’000s
C C Hopkins*-
380328284
S J McLauchlan
92
---
M B Waller
55
---
C J Staynes
46
---
A Nogueira**----
B Eastwood**----
E Alvares**----
J Berry (alternate)**
----
* Denotes an Executive Director who receives a salary
** Remuneration and meeting costs of Directors representing JBS Australia Pty Limited are paid directly
by the JBS Group of Companies.
Directors’ Indemnity & Insurance
The Company has made insurance arrangements covering risks arising out of acts or omissions of Directors and
officers in their capacity as such.
Gender Composition
The gender composition of the Directors, Officers and Senior Management of the Company as at 31 August was:
2017
Male
2017
Female
2016
Male
2016
Female
Directors (excluding alternate)7
-
7
-
Executive Officers
8272
Senior Management
9393
245235
Donations
The Company made donations of less than $1,000 during the year (2016: $11,000).
22
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors are responsible for the preparation,
in accordance with New Zealand law and generally
accepted accounting practice, of financial statements
which present fairly, in all material respects, the
consolidated financial position of Scott Technology
Limited and its subsidiaries (“the Group”) as at
31 August 2017 and the results of their operations
and cash flows for the year ended 31 August 2017.
The Directors consider that the financial statements
of the Group have been prepared using accounting
policies appropriate to the Group circumstances,
consistently applied and supported by reasonable
and prudent judgments and estimates, and that all
applicable New Zealand equivalents to International
Financial Reporting Standards have been followed.
The Directors have responsibility for ensuring that
proper accounting records have been kept which
enable them to ensure that the financial statements
comply with the Companies Act 1993 and the Financial
Markets Conduct Act 2013.
The Directors have responsibility for the maintenance
of a system of internal control designed to provide
reasonable assurance as to the integrity and reliability
of financial reporting. The Directors consider that
adequate steps have been taken to safeguard the
assets of the Group and to prevent and detect fraud
and other irregularities.
The Directors present the financial statements
of Scott Technology Limited for the year ended
31 August 2017.
These financial statements are dated 12 October 2017
and are signed in accordance with a resolution of the
Directors made pursuant to section 461(1)(b) of the
Financial Markets Conduct Act 2013.
For and behalf of the Directors
Chris C Hopkins
Managing Director
Stuart J McLauchlan
Chairman
23
FINANCIAL REPORT
Statement of Comprehensive Income 24
Statement of Changes in Equity 25
Balance Sheet 26
Statement of Cash flows 27
Notes to the Financial Statements 28
Summary of Accounting Policies 28
A. Financial Performance 30
A1. Income and Operating Expenses 30
A2. Income Taxes 31
A3. Segment Information 33
B. Assets 36
B1. Trade Debtors 36
B2. Inventories 37
B3. Contract Work In Progress 37
B4. Property, Plant and Equipment 38
B5. Goodwill 39
B6. Intangible Assets 41
B7. Research and Development Costs 42
B8. Commitments for Expenditure 42
C. Capital & Funding 43
C1. Share Capital 43
C2. Earnings & Net Tangible Assets Per Share 43
C3. Bank Facilities 44
C4. Trade Creditors & Accruals 45
C5. Leases 45
C6. Derivatives 46
C7. Employee Benefits 48
C8. Provision for Warranty 48
C9. Share Based Payment Arrangements 48
D. Risk Management 49
D1. Financial Instruments 49
E. Group Structure & Subsidiaries 56
E1. Acquisition of Business 56
E2. Subsidiaries 57
E3. Investments Accounted for
Using the Equity Method
59
E4. Related Party Transactions 61
F. Other Disclosures 62
F1. Notes to the Cash Flow Statement 62
F2. Contingent Liabilities 64
F3. Key Management Personnel Compensation 64
F4. Subsequent Events 64
Additional Stock Exchange Information 65
Audit Report 66
CONTENTS
KEY
Accounting PolicyKey judgements and other judgements made
24
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 AUGUST 2017
Note
2017
$’000s
2016
$’000s
Revenue
A1132,631112,044
Other income
A12,5992,471
Share of joint ventures’ net surplus
E3220378
Raw materials, consumables used & other expenses
(77,340)(66,579)
Employee benefits expense
(40,143)(34,920)
Depreciation & amortisation
B4, B6(2,987)(1,74 4)
Finance costs
(67)(685)
NET SURPLUS BEFORE TAXATION
A1
14,91310,965
Taxation expense
A2
(4,648)(2,831)
NET SURPLUS FOR THE YEAR AFTER TAX
10,2658,134
Other Comprehensive Income/(Deficit)
Items that may be reclassified to profit or loss:
Translation of foreign operations
(607)(201)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET OF TAX
9,6587,933
Net surplus for the year after tax is attributable to:
Members of the parent entity (used in the calculation of earnings per share)
9,8907,485
Non controlling interests
375649
10,2658,134
Total comprehensive income is attributable to:
Members of the parent entity
9,2837,284
Non controlling interests
375649
9,6587,933
2017
Cents Per
Share
2016
Cents Per
Share
Earnings per share (weighted average shares on issue):
Basic
C213.213.3
Diluted
C213.213.3
Net tangible assets per ordinary share (at year end):
Basic
C273.582.2
Diluted
C273.582.2
25
FOR THE YEAR ENDED 31 AUGUST 2017
STATEMENT OF CHANGES IN EQUITY
Note
Fully Paid
Ordinary
Shares
$’000s
Retained
Earnings
$’000s
Foreign
Currency
Translation
Reserve
$’000s
Non
Controlling
Interests
$’000s
To t a l
$’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 (9.50 cents per share)
-
(4,320)
- -
(4,320)
Issue of ordinary shares under JBS
Australia Pty Ltd Scheme of Arrangement
C1 40,597 - - - 40,597
Share issue costs
C1
(228)
- - -
(228)
Balance at 31 August 2016
71,312 24,279 (1,660) 669 94,600
Net surplus for the year after tax -
9,890
-
375 10,265
Other comprehensive income for
the year net of tax
- - (607) - (607)
Dividends paid (9.50 cents per share)
-
(7,095)
- -
(7,095)
Acquisition of minority interest in
subsidiary
- 990 - (997) (7)
Balance at 31 August 2017
71,312 28,064 (2,267) 47 97,156
26
BALANCE SHEET
AS AT 31 AUGUST 2017
Note
2017
$’000s
2016
$’000s
CURRENT ASSETS
Cash and cash equivalents
26,67034,244
Trade debtors
B1
17,83315,833
Other financial assets
C6
1441,377
Sundry debtors
9471,125
Inventories
B216,27212,343
Contract work in progress
B34,108
-
Receivable from joint ventures
E41,9091,393
Plant and equipment held for sale
345
-
68,22866,315
NON CURRENT ASSETS
Property, plant and equipment
B414,24912,831
Capital work in progress
319
-
Investment in joint ventures
E31,118923
Other financial assets
C6
-
99
Goodwill
B529,98729,911
Deferred tax asset
A29691,603
Intangible assets
B611,3111,698
Receivable from joint ventures
E4
-
431
57,95347,496
TOTAL ASSETS
126,181113,811
CURRENT LIABILITIES
Trade creditors and accruals
C416,5908,364
Finance lease liabilities
C53032
Other financial liabilities
C61521
Employee entitlements
C74,2724,006
Provision for warranty
C81,3001,100
Taxation payable
3,6911,912
Payable to joint ventures
E4547346
Contract work in progress
B3
-
1,137
26,43117,418
NON CURRENT LIABILITIES
Other financial liabilities
C6
-
99
Employee entitlements
C7, C92,5681,639
Finance lease liabilities
C5
2655
2,5941,793
EQUITY
Share capital
C171,31271,312
Retained earnings
28,06424,279
Foreign currency translation reserve
(2,267)(1,660)
Equity attributable to equity holders of the parent
97,10993,931
Non controlling interests
47669
TOTAL EQUITY
97,15694,600
TOTAL LIABILITIES & EQUITY
126,181113,811
27
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 AUGUST 2017
Note
2017
$’000s
2016
$’000s
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from / (applied to):
Receipts from operations
126,908
118,880
Interest received
664
299
Net GST paid
(65) (372)
Payments to suppliers and employees
(111,365) (100,463)
Interest paid
(67) (773)
Taxation paid
(2,668) (1,463)
Net cash inflow from operating activities
F1
13,407 16,108
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from / (applied to):
Purchase of non controlling interest in subsidiary
(550)
-
Purchase of property, plant, equipment and intangible assets
(12,976) (2,984)
Sale of property, plant and equipment
337 481
Net advances from/(to) joint ventures (293) 1,593
Purchase of business
(375) (880)
Repayment of advance to Employee Share Purchase Scheme
2 2
Net cash outflow from investing activities
(13,855) (1,788)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from / (applied to):
Repayment of borrowings
(31) (17,410)
Dividends paid
(7,095) (4,320)
Issue of share capital, net of issue costs
-
40,369
Net cash inflow/(outflow) from financing activities (7,126) 18,639
Net increase/(decrease) in cash held
(7,574) 32,959
Add cash and cash equivalents at start of period
34,244 1,285
Balance at end of period
26,670 34,244
Comprised of:
Cash and bank balances
26,670 34,244
28
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SUMMARY OF ACCOUNTING POLICIES
Statement of Compliance
The consolidated financial statements presented are
those of Scott Technology Limited (“Company”) and its
subsidiaries (“Group”).
The Company is a profit oriented entity, registered
in New Zealand under the Companies Act 1993. The
Company is an FMC reporting entity for the purposes
of the Financial Markets Conduct Act 2013 and its
annual financial statements comply with these Acts.
The Group’s principal activities are the design,
manufacture, sales and servicing of automated and
robotic production lines and processes for a wide
variety of industries in New Zealand and overseas.
The financial statements have been prepared in
accordance with Generally Accepted Accounting
Practice (“GAAP”) and, for the purposes of complying
with GAAP, it is a for profit entity. They comply with
New Zealand equivalents to International Financial
Reporting Standards (“NZ IFRS”) and other applicable
financial reporting standards as appropriate for
profit oriented entities. The financial statements
also comply with International Financial Reporting
Standards (“IFRS”).
The financial statements were authorised for issue by
the Board of Directors on 12 October 2017.
Basis of Preparation
The financial statements have been prepared on the
basis of historical cost except for the revaluation of
certain financial instruments.
Cost is based on the fair value of the consideration
given in exchange for assets.
Accounting policies are selected and applied in a
manner which ensures that the resulting financial
information satisfies the concepts of relevance and
reliability, thereby ensuring that the substance of the
underlying transactions or other events is reported.
The accounting policies set out below have been
applied in preparing the financial statements for
the year ended 31 August 2017 and the comparative
information presented in these financial statements
for the year ended 31 August 2016.
There have been no changes in accounting policy
during the year.
The information is presented in thousands of New
Zealand dollars, which is the functional currency of the
Company and the presentation currency of the Group.
Critical Judgements, Estimates and Assumptions
In the application of NZ IFRS the Directors are required
to make judgements, estimates and assumptions
about carrying values of assets and liabilities that
are not readily apparent from other sources. The
estimates and associated assumptions are based on
historical experience and various other factors that
are believed to be reasonable under the circumstance,
the results of which form the basis of making the
judgements. Actual results may differ from these
estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the
estimate is revised if the revision affects only that
period or in the period of the revision and future
periods if the revision affects both current and future
periods.
Judgements made by the Directors in the application
of NZ IFRS that have significant effects on the financial
statements and estimates with a significant risk of
material adjustments in the next year include:
• Estimating the percentage of completion for long
term construction contracts (note A1)
• Goodwill impairment (note B5)
Significant Accounting Policies
The principal accounting policies applied in the
preparation of the financial report are set out within
the particular note to which they relate. These policies
have been consistently applied unless otherwise
stated.
Consolidation of Subsidiaries
The consolidated financial statements incorporate
the financial statements of the Company and entities
controlled by the Company and its subsidiaries.
Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from
its involvement with the investee; and
• has the ability to use its power to affect its
returns.
The Group financial statements are prepared by
combining the financial statements of all the entities
that comprise the Group, being the Company and its
subsidiaries as defined by NZ IFRS-10 “Consolidated
Financial Statements”. Consistent accounting policies
are employed in the preparation and presentation of
the Group financial statements.
29
SUMMARY OF ACCOUNTING POLICIES (cont.)
Accounting policies of subsidiaries are consistent with
the policies of the Group.
All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
On acquisition, the assets and liabilities and contingent
liabilities of a subsidiary are measured at their fair
values at the date of acquisition. Any excess of
the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as
goodwill. Any deficiency of the cost of acquisition
below the fair values of the identifiable net assets
acquired (i.e. discount on acquisition) is credited to
profit and loss in the period of acquisition.
The results of subsidiaries acquired or disposed of
during the year are included in the Group Statement
of Comprehensive Income from the effective date of
acquisition or up to the effective date of disposal, as
appropriate.
Standards & Interpretations Effective in the
Current Period
In the current year the Group adopted all mandatory
new and amended Standards and Interpretations.
None of the new and amended standards had a
material impact on the amounts recognised in these
financial statements.
Standards & Interpretations in Issue not yet Adopted
The Group has reviewed all standards and
interpretations to existing standards in issue not yet
adopted, with the exception of:
• NZ IFRS 15 Revenue from Contracts with
Customers which is effective for the financial
year ending 31 August 2019. NZ IFRS 15 was issued
on 3 July 2014 and establishes principles for
reporting useful information about the nature,
amount, timing and uncertainty of revenue and
cash flows arising from an entity’s contracts
with customers. Although the Group has made
progress in its implementation of NZ IFRS 15, it
is not yet possible to make reliable estimate of
the impact of the new standard on the Group’s
financial statements as the Group is required to
implement significant changes to its systems and
processes across the Group in order to collect
the new data requirements, as well as compile
historical comparatives.
• NZ IFRS 9 Financial Instruments is effective for
annual periods beginning on or after 1 January
2018. NZ IFRS 9 addresses the classification,
measurement and recognition of financial assets
and financial liabilities and relaxes the current
NZ IAS 39 requirements for hedge accounting.
Although the Group has made progress in its
implementation of NZ IFRS 9, it is not yet possible
to make reliable estimate of the impact of the
new standard on the Group’s financial statements.
The Group expects to report more detailed
information, including estimated quantitative
financial effects in its 2018 financial statements
and intends to apply the standard from the period
ending 31 August 2019.
• NZ IFRS 16 Leases is effective for periods
beginning on or after 1 January 2019. NZ IFRS
16 sets out the principles for the recognition,
measurement, presentation and disclosure of
leases. Although the Group has made progress
in its implementation of NZ IFRS 16, it is not yet
possible to make reliable estimate of the impact
of the new standard on the Group’s financial
statements. The Group expects to report
more detailed information, including estimated
quantitative financial effects in its 2018 financial
statements and intends to apply the standard for
the period ending 31 August 2020.
Except for the three standards specified above,
the Group does not expect the standards and
amendments in issue and not yet adopted will have a
material impact on the financial statements.
Goods & Services Tax & Value Added Tax (“GST”)
All items in the Balance Sheet are stated exclusive of
GST, with the exception of receivables and payables,
which include GST. All items in the Statement of
Comprehensive Income are stated exclusive of GST.
Cash flows are included in the cash flow statement
on a net basis. The GST component of cash flows
arising from investing and financing activities which is
recoverable from, or payable to, the taxation authority
is classified as operating cash flows.
Foreign Currencies
The individual financial statements of each group
entity are presented in the currency of the primary
economic environment in which the entity operates
(its functional currency). For the purpose of the
consolidated financial statements, the results and
position of each group entity are expressed in New
Zealand dollars, which is the functional currency of
the Company and the presentation currency for the
consolidated financial statements.
In preparing the financial statements of each individual
group entity, transactions in currencies other than the
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
30
SUMMARY OF ACCOUNTING POLICIES (cont.)
entity’s functional currency (foreign currencies) are
recognised at the rates of exchange prevailing at the
dates of the transactions. At the end of each reporting
period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing
at that date. Non-monetary items carried at fair
value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when
the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a
foreign currency are not retranslated.
For the purposes of presenting these consolidated
financial statements, the assets and liabilities of the
Group’s foreign operations are translated into New
Zealand dollars using exchange rates prevailing at the
end of each reporting period. Income and expense
items are translated at the average exchange rates
for the period, unless exchange rates fluctuate
significantly during that period, in which case the
exchange rates at the dates of the transactions
are used. Exchange differences arising, if any, are
recognised in other comprehensive income and
accumulated in equity (and attributed to non-
controlling interests as appropriate).
SECTION A – FINANCIAL PERFORMANCE
A1. INCOME & OPERATING EXPENSES
Revenue Recognition – Long Term Projects
Policy
Profit on long term contracts is accounted
for using the percentage of completion
method. At balance date an assessment
is made of the percentage of completion
and costs associated with the work done
to date relative to the total forecast cost
to complete. Included in sales is the value
attributed to work completed, which includes
direct costs, overhead and profit.
At the point at which a project is expected to
be loss making, losses would be recognised
immediately in profit or loss.
Judgement
The estimation of percentage of completion
relies on the Directors estimating future time
and costs to complete long term contracts. If
the actual time and costs incurred to
complete the long term contracts differ from
the estimates completed by management,
the Directors could be over or under
estimating the percentage of completion on
the project, and consequently sales and profit
to date may also be over or under estimated.
Revenue Recognition – Sale of Goods & Other Revenue
Policy
Revenue is recognised when the significant
risks and rewards of ownership of the goods
have passed to the buyer or when services
are provided.
Government Grants
Policy
Government grants are not recognised until
there is reasonable assurance that the Group
will comply with the conditions attaching to
them and that the grants will be received.
Government grants are recognised as other
income over the periods necessary to match
them with the costs for which they are
intended to compensate, on a systematic
basis. Government grants that are receivable
as compensation for expenses or losses
already incurred or for the purpose of giving
immediate financial support to the Group
with no future related costs are recognised
in profit or loss in the period in which they
become receivable.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
2017
$’000s
2016
$’000s
(a) Revenue
Revenue from long term projects
81,28267,704
Sale of goods
40,20034,545
Other revenue (including service and short term projects)
11,14 99,795
132,631112,044
(b) Other income
Fair value gain on purchase of business (refer Note E1)936
-
Government grants related to research and development
9262,172
Interest received
664299
Gain on sale of property, plant and equipment
73
-
2,5992,471
31
SECTION A – FINANCIAL PERFORMANCE (cont.)
A1. INCOME & OPERATING EXPENSES (c o n t .)
2017
$’000s
2016
$’000s
(c) Operating expenses
The surplus is stated after c harging:
Auditor’s remuneration - audit of financial statements
151121
- other assurance services
911
- taxation services
1924
The auditor of the Group is Deloitte Limited.
Directors’ fees
193205
Superannuation scheme contributions
2,2751,345
Fair value losses on firm commitments
11,0 51
Leasing and rental costs
1,3911,222
Foreign exchange losses-
27
Unrealised fair value losses on foreign exchange derivatives-
155
Loss on disposal of property, plant and equipment-
215
Impairment of net assets (QMT Machinery Technology (Qingdao) Co Ltd)
-
449
and after crediting:
Fair value gains on derivatives held as fair value hedges
11,0 51
Foreign exchange gains
269
-
Unrealised fair value gains on foreign exchange derivatives
143
-
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
A2. INCOME TAXES
(a) Income tax recognised in net surplus
Policy
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of
the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been
enacted or substantively enacted by reporting date. Current tax for current and prior periods is
recognised as a liability (or asset) to the extent it is unpaid (or refundable).
The prima facie income tax expense on pre-tax accounting profit from operations
reconciles to the income tax expense in the financial statements as follows:
2017
$’000s
2016
$’000s
Net surplus before tax
14,91310,965
Income tax expense calculated at 28% (2016: 28%)
4,1753,070
Non-deductible expenses
439244
Under/(over) provision of income tax in previous year
34(483)
Taxation expense
4,6482,831
Represented by:
Current tax
4,4472,213
Deferred tax
201618
4,6482,831
Prima Facie Tax Rate
The prima facie tax rate used in the above reconciliation is the corporate tax rate of 28% payable by New Zealand
corporate entities on taxable profits under New Zealand tax law for the 2017 income tax year.
32
SECTION A – FINANCIAL PERFORMANCE (cont.)
A2. INCOME TAXES (c o n t .)
(b) Deferred Tax Balances
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
Opening
Balance
$’000s
Charged to
Income
$’000s
Acquisition
of Subsidiary/
Business
$’000s
Closing Balance
$’000s
2017
Gross deferred tax assets:
Trade debtors
129 25
-
154
Inventories
336 (130)
-
206
Other financial assets
(65) 225
-
160
Employee entitlements
1,073 300
-
1,373
Provisions
370 429
-
799
Ta x l o s s e s
905 (371) 5 539
2,748 478 5 3,231
Gross deferred tax liabilities:
Property, plant and equipment
1,145 679 349 2,173
Intangible assets
- -
89 89
1,145 679 438 2,262
1,603 (201) (433) 969
Opening Balance
$’000s
Charged to
Income
$’000s
Closing Balance
$’000s
2016
Gross deferred tax assets:
Trade debtors
98 31 129
Inventories
165 171 336
Employee entitlements
804 269 1,073
Provisions
364 6 370
Ta x l o s s e s
2,283 (1,378) 905
3,714 (901) 2,813
Gross deferred tax liabilities:
Property, plant and equipment
1,186 (41) 1,145
Prepayments
307 (307)
-
Accruals
-
65 65
1,493 (283) 1,210
2,221 (618) 1,603
(c) Imputation credit account balances
2017
$’000s
2016
$’000s
Imputation credits available to shareholders
2,567 2,385
Policy
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary
differences arising from differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets
are recognised to the extent that it is probable that sufficient taxable amounts will be available against which
deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax
assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial
recognition of assets and liabilities (other than as a result of a business combination) which affects neither
taxable income nor accounting profit.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively
enacted at reporting date. Deferred tax is charged or credited to profit or loss, except when it relates to items
charged or credited to other comprehensive income or directly to equity, in which case the deferred tax is also
dealt with in other comprehensive income or in equity.
33
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION A – FINANCIAL PERFORMANCE (cont.)
A3. SEGMENT INFORMATION
Policy
The Group has adopted NZ IFRS-8 Operating Segments. NZ IFRS-8 requires operating
segments to be identified on the basis of internal reports about components of the Group
that are regularly reviewed by the chief operating decision maker (the Board) in order to
allocate resources to the segments and to assess its performance.
The Group’s Board allocates resources and assesses performance of the Group by
manufacturing base, therefore under NZ IFRS-8 the Group’s reportable segments are:
• Australasia manufacturing
• Americas manufacturing
• Asia and Europe manufacturing
Australasia is reported as a single segment due to the integrated nature of customers,
management, 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,
management, manufacturing and sales activities across Asia and Europe.
Segment Revenues & 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.
2017
Australasia
Manufacturing
$’000s
Americas
Manufacturing
$’000s
Asia & Europe
Manufacturing
$’000s
Unallocated
$’000s
To t a l
$’000s
Revenue
99,846 17,055 15,730
-
132,631
Segment profit
19,309 2,068 (509)
-
20,868
Fair value gain on purchase of
business (refer Note A1) - - - 936 936
Depreciation and amortisation
(2,267) (155) (197) (368) (2,987)
Share of net surplus of joint
ventures 175 44 1 - 220
Interest revenue
1
-
2 6 61 664
Central administration costs - - -
(4,721) (4,721)
Finance costs
(4)
- -
(63) (67)
Net surplus before taxation
17,214 1,957 (703) (3,555) 14,913
Taxation expense
(5,031) (670) 19 1,034 (4,648)
Net surplus after taxation
12,183 1,287 (684) (2,521) 10,265
34
SECTION A – FINANCIAL PERFORMANCE (cont.)
A3. SEGMENT INFORMATION (c o n t .)
2016
Australasia
Manufacturing
$’000s
Americas
Manufacturing
$’000s
Asia & Europe
Manufacturing
$’000s
Unallocated
$’000s
To t a l
$’000s
Revenue
88,151 15,355 8,538
-
112,044
Segment profit
18,362 881 (1,092)
-
18,151
Impairment of net assets - -
(449)
-
(449)
Depreciation and amortisation
(1,150) (150) (141) (303) (1,74 4)
Share of net surplus of joint
ventures 250 120 8 - 378
Interest revenue
5
-
2 292 299
Central administration costs - - -
(4,985) (4,985)
Finance costs
(346) (241) (2) (96) (685)
Net surplus before taxation
17,121 610 (1,674) (5,092) 10,965
Taxation expense
(4,599) (110) 469 1,409 (2,831)
Net surplus after taxation
12,522 500 (1,205) (3,683) 8,134
Revenue reported above represents revenue generated from external customers. Inter-segment
sales, which are eliminated on consolidation, were $7.9 million for the year ended 31 August 2017
(2016: $1.4 million).
The accounting policies of the reportable segments are the same as the Group’s accounting
policies. Segment profit represents the profit earned by each segment without allocation of
central administration costs and investment revenue.
Industry Information
The Group focuses its marketing on five principal industries: appliances, meat processing, mining,
high temperature superconductor products and other industrial automation, including robotics.
The Group’s revenue from external customers by industry is detailed below:
2017
$’000s
2016
$’000s
Appliances
26,30820,181
Meat processing
39,58138,875
Mining
26,4 6122,357
High temperature superconductor products
1,7473,335
Other industrial automation, including robotics
38,53427,296
132,631112,044
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
35
The Group holds $12.1 million of non-current assets in geographical areas outside of New Zealand,
the country of domicile (2016: $2.9 million).
Information About Major Customers
Sales to the Group’s largest single customer, who is from the Australasia Manufacturing segment
and the Meat industry, accounted for approximately 10.6% of total Group sales (2016: Australasia
Manufacturing segment and the Meat Industry 10.1%).
Geographical Information
The Group operates in eight principal geographical areas. The Group’s revenue from external customers
by geographical location (of the customer) is detailed below:
2017
$’000s
2016
$’000s
New Zealand (country of domicile)8,26717,548
North America, including Mexico
35,61431,979
Australia and Pacific Islands
49,63238,833
South America
3,2155,043
Asia
15,9879,155
Russia and former states
4,9552,468
Africa and Middle East
2,3271,478
Other Europe
12,6345,540
132,631112,044
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION A – FINANCIAL PERFORMANCE (cont.)
A3. SEGMENT INFORMATION (c o n t .)
36
SECTION B – ASSETS
B1. TRADE DEBTORS
Policy
Trade debtors are initially recognised at fair value and are subsequently measured at
amortised cost using the effective interest rate method. Appropriate allowances for
estimated irrecoverable amounts are recognised in profit or loss when there is objective
evidence that the asset is impaired. The allowance recognised is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows
discounted at the effective interest rate computed at initial recognition.
2017
$’000s
2016
$’000s
Trade debtors
18,57416,285
Allowance for doubtful debts (i)
(741)(452)
17,83315,833
Credit Period
The credit period on sales of goods ranges from 30 to 120 days depending on the terms negotiated by the customer
for large contracts. No interest is charged on the trade debtors.
(i) Allowance for doubtful debts
Balance at beginning of financial year
452350
Impairment loss recognised on trade debtors
289102
Balance at end of financial year
741452
Recoverability
In determining the recoverability of trade debtors, the Group considers any change in the credit quality of the trade
debtor from the date credit was initially granted up to the reporting date. The Directors believe that there is no
further credit provision required in excess of the allowance for doubtful debts. All doubtful debts are aged beyond
90 days (2016: all aged beyond 90 days).
(ii) Past due but not impaired
Included in the Group’s trade debtors are debtors with a carrying amount of $3,101,000 (2016: $4,762,000) which are
past due at the reporting date for which the Group has not provided as there has not been a significant change
in credit quality and the amounts are considered recoverable.
2017
$’000s
2016
$’000s
Ageing of past due but not impaired:
30 – 60 days9812,588
60 – 90 days
1,0891,034
90 days +
8311,140
2,9014,762
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
37
SECTION B – ASSETS (cont.)
B2. INVENTORIES
Policy
Inventories are valued at the lower of cost and net realisable value. Costs, including an
appropriate portion of fixed and variable overhead expenses, are assigned to inventories by
the method most appropriate to the particular class of inventory, with the majority being
valued on a first-in-first-out basis. Net realisable value represents the estimated selling price
for inventories less all estimated costs of completion and costs necessary to make the sale.
2017
$’000s
2016
$’000s
Raw materials
3,1582,687
Work in progress
4161,288
Finished goods
12,6988,368
16,27212,343
Write downs
The cost of inventories recognised as an expense during the year includes $320,000 (2016: $ Nil)
in respect of write downs of inventory to net realisable value
B3. CONTRACT WORK IN PROGRESS
Policy
Contract work in progress is recorded as an accumulation of the costs incurred to date,
including overhead, plus any recognised profit less amounts received or receivable by way
of progress payments on each particular contract
2017
$’000s
2016
$’000s
Costs incurred and estimated earnings
on uncompleted contracts
110,372 116,557
Progress claims received or receivable
(106,264) (117,694)
4,108 (1,137)
Represented by:
Sales recognised to be recovered by invoices
22,761 16,178
Contracts invoiced in advance of sales recognised
(18,653) (17,315)
4,108 (1,137)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
38
SECTION B – ASSETS (cont.)
B4. PROPERTY, PLANT & EQUIPMENT
Policy
All items of Property, Plant and Equipment are stated at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly attributable to the acquisition of the item.
In the event that settlement of all or part of a purchase consideration is deferred, cost is
determined by discounting the amounts payable in the future to their present value as at the date
of acquisition.
Depreciation is calculated on a straight line basis so as to write off the net cost of the asset over
its expected useful life to its estimated residual value. The following estimated useful lives are
used in the calculation of depreciation:
Buildings - 40 years
Plant, equipment & vehicles - 1–13 years
Freehold Land
at Cost
$’000s
Freehold
Buildings
at Cost
$’000s
Plant, Equipment
& Vehicles at Cost
$’000s
To t a l
$’000s
Gross carrying amount
As at 31 August 20152,1336,38920,02528,547
Acquisitions through business combinations--
802802
Additions
2965912,0972,984
Disposals--
(3,003)(3,003)
As at 31 August 2016
2,4296,98019,92129,330
Acquisitions through business combinations--
1,6311,631
Additions-
851,6591,74 4
Disposals
--
(1,483)(1,483)
As at 31 August 2017
2,4297,06521,72831,222
Accumulated depreciation & impairment
As at 31 August 2015
-
1,55715,52217,079
Disposals--
(2,307)(2,307)
Depreciation expense
-
1991,5281,727
As at 31 August 2016
-
1,75614,74316,499
Disposals--
(1,220)(1,220)
Depreciation expense
-
2161,4781,694
As at 31 August 2017
-
1,97215,00116,973
Net book value
As at 31 August 2016
2,4295,2245,17812,831
As at 31 August 20172,4295,0936,72714,249
Aggregate depreciation allocated, whether recognised as an expense or as part
of the carrying amount of other assets during the year:
2017
$’000s
2016
$’000s
Freehold buildings
216199
Plant, equipment and vehicles
1,4781,528
1,6941,727
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
39
SECTION B – ASSETS (cont.)
B5. GOODWILL
Policy
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable
tangible and identifiable intangible assets, liabilities and contingent liabilities of the subsidiary
recognised at the time of acquisition of a business or subsidiary. Goodwill is initially recognised as
an asset at cost and is subsequently measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-
generating units expected to benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the recoverable amount of the cash-
generating unit is less than the carrying amount of the unit, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets
of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment
loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of
the profit or loss on disposal.
2017
$’000s
2016
$’000s
Gross carrying amount
Balance at beginning of financial year
29,91129,758
Additional amounts recognised from business
combinations occurring during the period (refer Note E1)
76153
Balance at end of financial year
29,98729,911
There has been no impairment recognised during the year or in prior periods.
Judgement
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-
generating units to which goodwill has been allocated. The value in use calculation requires the
Directors to estimate the future cash flows, particularly in relation to future project wins and
market conditions, expected to arise from the cash-generating unit and a suitable discount rate in
order to calculate present value.
Allocation of Goodwill to Cash-Generating Units
The Group’s cash-generating units are:
• Australasia manufacturing
• Americas manufacturing
• Asia and Europe manufacturing
Australasia is reported as a single cash-generating unit due to the integrated nature of customers,
management, manufacturing, sales and financing activities across New Zealand and Australia.
Asia and Europe is reported as a single cash-generating unit due to the integrated nature of customers,
management, manufacturing and sales activities across Asia and Europe.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
40
SECTION B – ASSETS (cont.)
B5. GOODWILL (c o n t .)
Goodwill has been allocated for impairment testing purposes to the cash-generating units:
2017
$’000s
2016
$’000s
Australasia manufacturing
24,0 5123,975
Americas manufacturing
5,4225,422
Asia and Europe manufacturing
514514
29,98729,911
Australasia Manufacturing
The recoverable amount of the Australasia Manufacturing cash-generating unit is determined based on a value
in use calculation which uses cashflow projections based on financial budgets and forecasts covering a five-year
period, and using Scott Technology’s approximate weighted average cost of capital as the discount rate.
The discount rate used is 11%.
Cashflow projections during the budget and forecast period for the Australasia Manufacturing cash-generating
unit are also based on historical gross margins during the budget and forecast period and a constant rate of
revenue and materials price inflation during the budget period of 3% reflecting a growing global demand for
automation and robotics and consistent with past experience. Cashflows beyond that five year period have been
extrapolated using a steady 2% p.a. growth rate. Management believes that any reasonably possible change in the
key assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to
exceed the aggregate recoverable amount of the Australasian Manufacturing cash-generating unit.
Americas Manufacturing
The recoverable amount of the Americas Manufacturing cash-generating unit is determined based on a value in use
calculation which uses cashflow projections based on financial budgets and forecasts covering a five-year period,
and using Scott Technology’s approximate weighted average cost of capital as the discount rate. The discount rate
used is 11%.
Cashflow projections during the budget and forecast period for the Americas Manufacturing cash-generating unit
are also based on historical gross margins during the budget and forecast period and a constant rate of revenue
and materials price inflation during the budget period of 3% reflecting a growing global demand for automation
and robotics and consistent with past experience. Cashflows beyond that five year period have been extrapolated
using a steady 2% p.a. growth rate. Management believes that any reasonably possible change in the key
assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to exceed
the aggregate recoverable amount of the Americas Manufacturing cash-generating unit.
Asia & Europe Manufacturing
The recoverable amount of the Asia and Europe Manufacturing cash-generating unit is determined based on a
value in use calculation which uses cashflow projections based on financial budgets and forecasts covering a
five-year period, and using Scott Technology’s approximate weighted average cost of capital as the discount
rate. The discount rate used is 11%.
Cashflow projections during the budget and forecast period for the Asia and Europe Manufacturing cash-
generating unit are also based on historical gross margins during the budget and forecast period and a constant
rate of revenue and materials price inflation during the budget period of 2% reflecting historic inflation rates.
Cashflows beyond that five year period have been extrapolated using a steady 2% p.a. growth rate. Management
believes that any reasonably possible change in the key assumptions on which the recoverable amount is based
would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the Asia and
Europe Manufacturing cash-generating unit.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
41
SECTION B – ASSETS (cont.)
B6. INTANGIBLE ASSETS
Policy
Intangible assets with finite useful lives that are acquired separately are carried at cost less
accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a
straight line basis over their estimated useful lives. Intangible assets with indefinite useful lives
that are acquired separately are carried at cost less accumulated impairment losses.
Intangible assets that are acquired in a business combination and recognised separately from
goodwill are initially recognised at fair value at the acquisition date (which is regarded as their
cost). Subsequent to initial recognition, intangible assets acquired in a business combination
are recognised on the same basis as intangible assets that are acquired separately.
Bladestop
Technology
At Cost
$’000s
URLs
at Cost
$’000s
Non-
compete
at Cost
$’000s
HTS
Technology
at Cost
$’000s
Centrifuge
Technology
at Cost
$’000s
To t a l
$’000s
Gross carrying amount
As at 31 August 2015 & August 2016
-
1,49269271
-
1,832
Acquisitions through business
combinations----338338
Additions
10,568
----
10,568
As at 31 August 2017
10,5681,4926927133812,738
Accumulated amortisation and
impairment
As at 31 August 2015
--
1998
-
117
Amortisation expense
--
116
-
17
As at 31 August 2016
--
20114
-
134
Amortisation expense
1,261
-
12561,293
As at 31 August 2017
1,261
-
2113961,427
Net book value
As at 31 August 2016
-
1,49249157
-
1,698
As at 31 August 20179,3071,4924813233211,311
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
42
SECTION B – ASSETS (cont.)
B6. INTANGIBLE ASSETS (c o n t .)
Assets
Intangible assets comprise:
• Bladestop bandsaw safety technology purchased in October 2016 which is being amortised over a
remaining useful life at the time of purchase of eight years.
• Domain names (URLs) and a non-compete arrangement resulting from the purchase of the RobotWorx
business. Intangible assets associated with the RobotWorx non-compete arrangement are being
amortised over a fifteen year period, while intangible assets related to the URLs are indefinite life
intangibles as the rights to the URLs are held indefinitely and are assessed for impairment annually.
• Intellectual property associated with current leads and flux pumps which were largely acquired on
the purchase of HTS-110 Limited and are being amortised over a remaining useful life at the time of
purchase of eight years.
• Centrifuge technology used in the honey and fish oil industry purchased through the acquisition of the
other joint venture partners’ interests in Scott Separation Technology Limited in May 2017 and is being
amortised over a remaining useful life at the time of purchase of thirteen years.
The amortisation expense has been included in the line item “depreciation and amortisation” in the
Statement of Comprehensive Income.
B7. RESEARCH AND DEVELOPMENT COSTS
Policy
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An asset arising from development (or from the development phase of an internal project)
is recognised if, and only if, all of the following are demonstrated:
• The technical feasibility of completing the asset so that it will be available for use or sale
• The intention to complete the asset and use or sell it
• The ability to use or sell the asset
• How the asset will generate probable future economic benefits
• The availability of adequate technical, financial and other resources to complete the
development and to use or sell the asset
• The ability to measure reliably the expenditure attributable to the asset during the
development
B8. COMMITMENTS FOR EXPENDITURE
2017
$’000s
2016
$’000s
Commitments for future capital expenditure for purchase
of plant and equipment
1399
In June 2017 Scott Technology Limited announced plans to extend the building and associated facilities at
630 Kaikorai Valley Road, with the expectation that it would nearly double the available floor space. As at 31
August 2017 preliminary designs and exploratory groundwork was still to be completed and no construction
contract had been quoted or signed.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
43
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION C – CAPITAL & FUNDING
C1. SHARE CAPITAL
Policy
Equity instruments issued by the Group are recorded at the proceeds received (net of issue costs).
2017
Number
2016
Number
2017
$’000s
2016
$’000s
Fully paid ordinary shares at
beginning of financial year 74,680,754 45,473,890 71,312 30,943
Issue of shares under JBS Australia
Pty Ltd Scheme of Arrangement - 29,206,864 - 40,597
Less share issue costs
- - -
(228)
Balance at end of financial year
74,680,754 74,680,754 71,312 71,312
2016 Scheme of Arrangement
Under the 2016 JBS Australia Pty Ltd Scheme of Arrangement:
• 27,231,246 new shares were issued to JBS Australia Pty Ltd for $1.39 per share;
• 1,975,618 new shares were issued to existing shareholders who participated in the rights issue at $1.39
per share; and
• 10,183,812 existing shares were transferred from existing shareholders to JBS Australia Pty Ltd at $1.39
per share.
All shares have equal voting rights and participate equally in any dividend distribution or any surplus on the
winding up of the Group.
C2. EARNINGS & NET TANGIBLE ASSETS PER SHARE
2017
Cents
Per Share
2016
Cents
Per Share
Earnings per share from continuing operations
Basic
13.213.3
Diluted
13.213.3
Net tangible assets per ordinary share
Basic
73.582.2
Diluted
73.582.2
44
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION C – CAPITAL & FUNDING (cont.)
C2. EARNINGS & NET TANGIBLE ASSETS PER SHARE (cont.)
2017
$’000s
2016
$’000s
Net surplus for the year used in the calculation of basic and
diluted earnings per share from continuing operations9,8907,485
Net tangible assets (excluding goodwill, intangible assets
and deferred tax)54,88961,388
2017
#’000s
2016
#’000s
Weighted average number of ordinary shares used in the
calculation of basic and diluted earnings per share from
continuing operations74,68156,327
Ordinary shares at year end used in the calculation of net
tangible assets per ordinary share (Note C1)74,68174,681
C3. BANK FACILITIES
Policy
Borrowings are recorded initially at fair value, net of transaction costs.
Subsequent to initial recognition, borrowings are measured at amortised cost with any difference
between the initial recognised amount and the redemption value being recognised in the profit or loss
over the period of the borrowings using the effective interest rate method.
Borrowings
The Group has a working capital facility from ANZ Bank New Zealand Limited with a total limit of $500,000 (2016:
$500,000). As at 31 August 2017 the amount used was $Nil (2016: $Nil).
The Group has a financial guarantee facility and a trade performance bond facility from ANZ Bank New Zealand
Limited with a total limit of $10,700,000 (2016: $10,700,000) and from Bank of China with a total limit of $152,000
(2016: $Nil). As at 31 August 2017 the amount used was $7,786,000 (2016: $6,146,000). Refer note F2, Contingent
Liabilities.
The Group has secured credit card facilities from:
• For New Zealand - ANZ Bank New Zealand Limited with a total limit of $750,000 (2016: $750,000). As at 31
August 2017 the total amount used was $61,000 (2016: $76,000).
• For Australia – Australia and New Zealand Banking Group Limited with a total limit of $220,000 (2016: $Nil). As at
31 August 2017 the total amount used was $178,000 (2016: $Nil).
• For USA – PNC Bank with a total limit of $139,000 (2016: $Nil). As at 31 August 2017 the total amount used was
$59,000 (2016: $Nil).
The total amount used is included in trade creditors and accruals.
Security
The bank facilities from ANZ Bank New Zealand Limited are secured by general security agreements over all the
present and after acquired property of Scott Technology Limited and its subsidiaries, and therefore all property,
plant and equipment assets are pledged as security for these facilities. The bank facilities from ANZ Bank New
Zealand Limited are also secured by mortgages over the 630 Kaikorai Valley Road, Dunedin and 10 Maces Road,
Christchurch properties.
45
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION C – CAPITAL & FUNDING (cont.)
C4. TRADE CREDITORS & ACCRUALS
Policy
Trade creditors are initially measured at fair value and subsequently measured at amortised
cost using the effective interest rate method.
2017
$’000s
2016
$’000s
Trade creditors
10,8664,466
Accruals
5,7243,898
16,5908,364
Te r m s
All trade creditors are current and paid within the terms agreed with individual suppliers.
C5. LEASES
Operating Leases
Policy
Operating lease payments are recognised as an expense on a straight line basis over the lease
term, except where another systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
Non Cancellable Operating Lease Payments
Operating leases relate to vehicles, printers and manufacturing and warehouse facilities with original
lease terms of between six months to six years. All operating lease contracts contain market review
clauses in the event that the Group exercises its option to renew. The Group has an option to purchase
the leased property used for the RobotWorx business.
2017
$’000s
2016
$’000s
No longer than 1 year 1,9 411,151
Longer than 1 year and not longer than 2 years1,6851,151
Longer than two years and not longer than 5 years
2,6241,572
Longer than 5 years
39926
6,6493,900
46
SECTION C – CAPITAL & FUNDING (cont.)
C5. LEASES (cont.)
Finance Leases
Policy
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other leases are
classified as operating leases.
Group Entity as Lessor
Amounts due from finance leases are recorded as receivables. Finance lease receivables
are initially recognised at amounts equal to the present value of the minimum lease
payments receivable plus the present value of any unguaranteed residual value
expected to accrue at the end of the lease term. Finance lease payments are allocated
between interest revenue and reduction of the lease receivable over the term of the
lease in order to reflect a constant periodic rate of return on the net investment
outstanding in respect of the lease.
Group Entity as Lessee
Assets held under finance lease are initially recorded at their fair value or, if lower, at
amounts equal to the present value of the minimum lease payments, each determined
at the inception of the lease. The corresponding liability to the lessor is included in the
Balance Sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease
obligations so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged directly against income.
Finance leased assets are depreciated on a straight line basis over the estimated useful
life of the asset or the lease term, whichever is shorter.
C6. DERIVATIVES
Policy
Derivatives are initially recognised at fair value on the date the derivative contract is
entered into and are subsequently re-measured to their fair value at each reporting
date. The resulting gain or loss is recognised in profit or loss unless the derivative is
designated and effective as a hedging instrument, in which event, the timing of the
recognition depends on the nature of the hedge relationship.
The Group entity designates certain derivatives as hedges of the fair value of firm
commitments (fair value hedge) or as hedges of forecast future sales (cash flow
hedge). Open firm commitments reflect contractual agreements to provide goods to
customers at an agreed price denominated in a foreign currency on specified future
dates.
Fair Value Hedge
Changes in fair value of derivatives that are designated and qualify as fair value hedges
are recorded in profit and loss immediately, together with any changes in the fair value
of the firm commitment that is attributable to the hedged risk.
Hedge accounting is discontinued when the hedge instrument expires, or is sold,
terminated, exercised, or no longer qualifies for hedge accounting. The carrying
amount of the firm commitment at that time continues to be recognised as a firm
commitment until the forecast transaction ultimately impacts profit or loss.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
47
SECTION C – CAPITAL & FUNDING (cont.)
C6. DERIVATIVES (cont.)
Cash Flow Hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash
flow hedges are recognised in other comprehensive income and accumulated as a separate component
of equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss, and is included in the other expenses line.
Amounts recognised in the hedging reserve are reclassified from equity to profit or loss (as a
reclassification adjustment) in the periods when the hedged item is recognised in profit or loss, in the
same line as the recognised hedged item.
However, when the forecast transaction that is hedged results in the recognition of a non-financial
asset or a non-financial liability, the gains and losses previously recognised in the hedging reserve are
reclassified from equity and included in the initial measurement of the cost of the asset or liability (as a
reclassification adjustment).
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging
instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any
cumulative gain or loss recognised in the hedging reserve at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is
no longer expected to occur, the cumulative gain or loss that was recognised in the hedging reserve is
recognised immediately in profit or loss.
2017
$’000s
2016
$’000s
Assets
At fair value:
Foreign currency forward contracts held as effective
fair value hedges1620
Foreign exchange collar option derivatives-
479
Foreign exchange derivatives
143377
1441,476
Represented by:
Current financial assets
1441,377
Non current financial assets
-
99
1441,476
Liabilities
At fair value:
Fair value hedge of open firm commitments
1620
Represented by:
Current financial liabilities
1521
Non current financial liabilities
-
99
1620
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
48
SECTION C – CAPITAL & FUNDING (cont.)
C7. EMPLOYEE BENEFITS
Policy
Provision is made for benefits accruing to employees in respect of wages and salaries, annual
leave, long service leave and sick leave when it is probable that settlement will be required and
they are capable of being measured reliably.
Provision made in respect of employee benefits expected to be settled within 12 months are
measured at their nominal values using the remuneration rate expected to apply at the time of
settlement.
Provisions made in respect of employee benefits which are not expected to be settled within 12
months are measured at the present value of the estimated future cash outflows to be made by
the Group in respect of services provided by employees up to reporting date.
C8. PROVISION FOR WARRANTY
Policy
The provision for warranty claims represents the present value of the Directors’ best estimate
of the future outflow of economic benefits that will be required under the Group’s twelve
month warranty programme for certain equipment. The estimate has been made on the basis
of historical warranty trends and may vary as a result of new materials, altered manufacturing
processes or other events affecting product quality.
2017
$’000s
2016
$’000s
Balance at beginning of financial year
1,100750
Additional provisions recognised
550820
Reductions arising from payments
(350)(470)
Balance at end of financial year
1,3001,100
Obligation
The provision for warranty reflects an obligation for after sales service work in relation to completed
contracts and products sold to customers. The provision is expected to be utilised within two years of
balance date, however this timing is uncertain and dependent upon the actual level of after sales service
work required.
C9. SHARE BASED PAYMENT ARRANGEMENTS
Policy
For cash-settled share-based payments, a liability is recognised for the goods or services
acquired, measured initially at the fair value of the liability. At the end of each reporting period
until the liability is settled, and at the date of settlement, the fair value of the liability is
remeasured, with any changes in fair value recognised in profit or loss for the year.
Details of Arrangement
The Group has a long term bonus scheme for certain executives and senior employees of the Group. In
accordance with the terms of the plan, executives and senior employees who remain in employment
with the Group at the vesting dates will be granted a cash incentive based on the movement in Scott
Technology Limited’s share price from the beginning of the scheme to the vesting date. The fair value of
the scheme is measured at year end with reference to the share price. At balance date there is a liability
of $1,420,000 included in employee entitlements in the balance sheet. The impact of the movement in the
liability on profit for the year was $790,000 and is included in employee benefits expense. No shares or
share options in Scott Technology Limited are issued under the plan.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
49
SECTION D – RISK MANAGEMENT
D1. FINANCIAL INSTRUMENTS
Policy
The Group enters into derivative financial instruments to manage its exposure to foreign
exchange rate risk.
Impairment of Financial & Non Financial Assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial
assets are impaired where there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated future cash flows of the
investment have been impacted.
Objective evidence of impairment could include:
• Significant financial difficulty of the issuer or counterparty; or
• Default or delinquency in interest or principal payments; or
• It becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be
impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of
impairment for a portfolio of receivables could include the Group’s past experience of collecting payments,
an increase in the number of delayed payments in the portfolio past an average credit period, as well as
observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial
assets with the exception of trade receivables, where the carrying amount is reduced through the use
of an allowance for doubtful debts. When a trade receivable is considered uncollectible, it is written off
against the allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account.
Changes in the carrying amount of the allowance account are recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, the previously recognised
impairment loss is reversed through profit or loss to the extent that the carrying amount of the
investment at the date the impairment is reversed does not exceed what the amortised cost would have
been had the impairment not been recognised.
At each balance sheet date, the Group reviews the carrying amounts of its non financial tangible and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). Goodwill is tested for impairment annually. Where
the asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been adjusted.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
50
SECTION D – RISK MANAGEMENT (cont.)
D1. FINANCIAL INSTRUMENTS (cont.)
Impairment of Financial & Non Financial Assets (cont.)
If the recoverable amount of an asset (cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised in profit or loss immediately, unless the asset is carried at fair value, in
which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating
unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the
increased carrying amount does not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an
impairment loss is recognised as income immediately unless the asset is carried at fair value, in which case
the reversal of the impairment loss is treated as a revaluation increase. Impairment losses in relation to
goodwill are not reversed.
Financial Risk Management Objectives
The Group’s finance function provides services to the business, co-ordinates access to domestic and
international financial markets and monitors and manages the financial risks relating to the operations of
the Group through internal risk reports which analyse exposures by degree and magnitude of risks. These
risks include market risk (including currency risk and fair value interest rate risk), credit risk, liquidity risk
and cash flow interest rate risk.
The Group seeks to minimise the effects of these risks by using derivative financial instruments to
hedge certain of these risk exposures. The use of financial derivatives is governed by the Group’s policies
approved by the Board of Directors, which provide written principles on foreign exchange risk, interest
rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments and the
investment of excess liquidity. Compliance with policies and exposure limits is reviewed on a continuous
basis. The Group does not enter into or trade financial instruments, including derivative financial
instruments, for speculative purpose.
Capital Risk Management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going
concern while maximising the return to stakeholders through the optimisation of the debt and equity
balance. The Group’s overall strategy remains unchanged from 2016.
The capital structure of the Group consists of equity attributable to equity holders of the parent,
comprising issued capital and retained earnings.
The Group has sufficient liquid assets to fund the operational assets. To the extent that additional
working capital funding is required the Group has bank facilities available as disclosed in note C3. Where
the Group requires funding for a significant capital acquisition, separate funding facilities are established,
provided the Directors consider that the Group has adequate equity to support these facilities.
Market Risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange
rates. The Group enters into a variety of derivative financial instruments to manage its exposure to
foreign currency risk, including forward foreign exchange contracts to hedge the exchange rate risk
arising on the export of manufactured products.
There has been no change to the Group’s exposure to market risks or the manner in which it manages and
measures the risk.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
51
SECTION D – RISK MANAGEMENT (cont.)
D1. FINANCIAL INSTRUMENTS (cont.)
Foreign Currency Risk Management
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange
rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising
forward foreign exchange contracts. The carrying amounts in New Zealand Dollars of the Group’s foreign
currency denominated monetary assets and monetary liabilities at the reporting date are as follows:
Assets Liabilities
2017
$’000s
2016
$’000s
2017
$’000s
2016
$’000s
United States Dollar
13,1699,6182,8101,143
Euros
2,5421,2551,974710
Australian Dollar
8,4607,4924,9561,239
Japanese Yen
78
--
Great Britain Pound
11153616
Chinese RMB
797337931373
Canadian Dollar
-
40
--
24,97618,86510,7073,481
Forward Foreign Exchange Contracts
It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign
currency payments and receipts. The Group also enters into forward foreign exchange contracts to manage
the risk associated with anticipated sales and purchase transactions.
The following table details the forward foreign currency (FC) contracts outstanding as at reporting date:
Average
Exchange Rate
Foreign
Currency
NZ$
Contract Value Fair Value
201720162017
FC’000s
2016
FC’000s
2017
$’000s
2016
$’000s
2017
$’000s
2016
$’000s
Foreign currency forward
contracts held as effective
fair value hedges
Sell United States Dollars
Less than 3 months0.72040.6498 79 1,215 110 1,870 (1) 188
3 to 6 months0.69990.6822 1,275 754 1,822 1,105 35 58
6 to 12 months0.69210.6735 823 136 1,189 202 34 12
1 to 2 years
-
0.6311
-
597
-
946
-
99
2,177 2,702 3,121 4,123 68 357
Sell Euros
0 to 3 months0.6 5110.5835 118 69 181 118 (16) 11
3 to 6 months0.6461
-
59
-
91
-
(8)
-
177 69 272 118 (24) 11
Sell Australian Dollars
Less than 3 months0.90590.8828 1,400 240 1,545 272 1 22
3 to 6 months0.90480.9055 1,470 2,895 1,625 3,197 2 186
6 to 12 months0.93300.9053
1,444 700 1,548 773 (46) 44
4,314 3,835 4,718 4,242 (43) 252
8,111 8,483 1 620
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
52
SECTION D – RISK MANAGEMENT (cont.)
D1. FINANCIAL INSTRUMENTS (cont.)
Average
Exchange Rate
Foreign
Currency
NZ$ Contract
Value Fair Value
201720162017
FC’000s
2016
FC’000s
2017
$’000s
2016
$’000s
2017
$’000s
2016
$’000s
Foreign exchange derivatives
Sell United States Dollars
Less than 3 months0.69720.66592,4593,1663,5274,75486367
3 to 6 months0.6843
-
573
-
837
-
35
-
6 to 12 months0.7012
-
1,820
-
2,595
-
39
-
4,8523,1666,9594,754160367
Sell Australian Dollars
Less than 3 months0.93460.9160525192
562210(17)10
7,5214,964143377
Foreign exchange collar option
derivatives
Group has the right (but not the
obligation) above the exchange
rate to:
Sell United States Dollars
Less than 3 months
-
0.6700
-
4,000
-
5,970
-
439
Sell Canadian Dollars
Less than 3 months
-
0.8900
-
600
-
674
-
40
Group has the obligation below
the exchange rate to:
Sell United States Dollars
Less than 3 months
-
0.5918
-
8,000
-
13,518
--
Sell Canadian Dollars
Less than 3 months
-
0.8545
-
1,200
-
1,404
--
-
21,566
-
479
The fair value of foreign exchange contracts outstanding is recognised as other financial assets/liabilities.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
53
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION D – RISK MANAGEMENT (cont.)
D1. FINANCIAL INSTRUMENTS (cont.)
Forward Foreign Exchange Contracts
The Group is mainly exposed to the United States Dollar, the Australian Dollar, the Chinese Renminbi
and the Euro.
The following table details the Group’s sensitivity to a 10% increase and decrease in the New Zealand
Dollar against the relevant foreign currencies. 10% represents management’s assessment of the
reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding
foreign currency denominated monetary items and adjusts their translation at the period end for a 10%
change in foreign currency rates. A positive number below indicates an increase in profit and equity
where the New Zealand Dollar weakens 10% against the relevant currency.
US Dollar
Impact
Euro
Impact
Australian Dollar
Impact
Chinese RMB
Impact
2017
$’000s
2016
$’000s
2017
$’000s
2016
$’000s
2017
$’000s
2016
$’000s
2017
$’000s
2016
$’000s
Impact on profit or loss and equity:
10% increase in New Zealand Dollar (340) (225) (57) (55) (294) (604) (13) (4)
10% decrease in New Zealand Dollar 340 225 57 55 294 604 13 4
These movements are mainly attributable to the exposure to outstanding foreign currency bank
accounts, receivables, payables and derivatives at year end in the Group.
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange
risk as the year end exposure does not reflect the exposure during the year.
Credit Risk Management
In the normal course of business, the Group incurs credit risk from trade receivables and transactions
with financial institutions. The Group has a credit policy which is used to manage this exposure to
credit risk, including requiring payment prior to shipping to high credit risk countries and customers,
the use of Export Credit Office financing facilities and customer credit checks. The Group, as a result of
the industries in which they operate, can be exposed to significant concentrations of credit risk from
trade receivables and counterparty risk with the bank in relation to the outstanding forward exchange
contracts. They do not require any collateral or security to support financial instruments as these
represent deposits with, or loans to, banks and other financial institutions with high credit ratings.
At year end the amount receivable from the five largest trade debtors is $3,827,000 (2016: $7,478,000).
The maximum credit risk of on balance sheet financial instruments is their carrying amount.
The carrying amount of financial assets recorded in the financial statements, which is net of
impairment losses, represents the Group’s maximum exposure to credit risk without taking account of
the value of any collateral obtained.
54
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION D – RISK MANAGEMENT (cont.)
D1. FINANCIAL INSTRUMENTS (cont.)
Liquidity & Interest Rate Risk Management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built
an appropriate liquidity risk management framework for the management of the Group’s short, medium
and long-term funding and liquidity management requirements. The Group manages liquidity risk by
maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and
liabilities. Included in Note C3 are details of additional undrawn facilities that the Group has at its disposal
to further reduce liquidity risk.
There is no reasonable movement in interest rates that could have a material impact on the
financial statements.
The following table details the Group’s remaining undiscounted contractual maturity for its non
derivative financial liabilities. The tables below have been drawn up based on the undiscounted cash
flows of financial liabilities based on the earliest date on which the Group can be required to pay.
The tables include both interest and principal cash flows.
Weighted
Average
Effective
Interest
Rate
%
On
Demand
$’000s
Less
than
1 Ye ar
$’000s
1-2
Ye ar s
$’000s
2-3
Ye ar s
$’000s
3-5
Ye ar s
$’000s
5+
Ye ar s
$’000s
To t a l
$’000s
2017 Financial Liabilities
Finance lease liabilities
3.47%
-
311287
-
58
Payable to joint ventures--
547
----
547
Trade creditors & accruals-
16,590
-----
16,590
16,5905781287
-
17,195
2016 Financial Liabilities
Finance lease liabilities
3.88%
-
35301115
-
91
Payable to joint ventures--
346
----
346
Trade creditors & accruals-
8,364
-----
8,364
8,364381301115
-
8,801
The Group has access to financing facilities, of which the total unused amount is $4.4 million at the
balance sheet date, (2016: $5.7 million). The Group expects to meet its other obligations from operating
cash flows and proceeds of maturing financial assets.
55
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION D – RISK MANAGEMENT (cont.)
D1. FINANCIAL INSTRUMENTS (cont.)
Fair Value Measurements Recognised in the Balance Sheet
The following table provides an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 on the degree to which fair value is observable:
The fair values of financial assets and financial liabilities are determined as follows:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets
for identical assets and liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices); and;
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable inputs).
The fair value of forward exchange contracts and options is based on their quoted market price, if
available. If a quoted market price is not available, then fair value is estimated by discounting the
difference between the contractual forward price and the current forward price for the residual
maturity and options of the contract using a market rate of interest.
Level 1
$’000s
Level 2
$’000s
Level 3
$’000s
To t a l
$’000s
2017
Financial assets at fair value through profit and loss
Foreign currency forward contracts held as effective fair
value hedges
- 1 - 1
Foreign exchange derivatives -
143
-
143
Financial liabilities at fair value through profit and loss
Fair value hedge of open firm commitments
-
(1)
-
(1)
-
143
-
143
2016
Financial assets at fair value through profit and loss
Foreign currency forward contracts held as effective fair
value hedges
- 620 - 620
Foreign exchange derivatives -
377
-
377
Foreign exchange collar option derivatives -
479
-
479
Financial liabilities at fair value through profit and loss
Fair value hedge of open firm commitments
-
(620)
-
(620)
-
856
-
856
Fair Value
The fair value of financial instruments not already measured at fair value approximates
their carrying value.
56
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION E – GROUP STRUCTURE & SUBSIDIARIES
E1. ACQUISITION OF BUSINESS
Business Acquired
NamePrincipal ActivityDate of Acquisition
Proportion of Shares /
Assets Acquired
Cost of Acquisition
$’000s
DC Ross
Precision metal
stamping
30 June 2017100%375
Scott Separation
Technology Limited
(Acquired other joint
venture partners’ shares)
Centrifuge
technology
22 May 201750%433
Analysis of Assets & Liabilities Acquired
DC Ross Scott Separation Technology
Book
Value
$’000s
Fair Value
Adjustment
$’000
Fair
Value on
Acquisition
$’000s
Book
Value
$’000s
Fair Value
Adjustment
$’000s
Fair
Value On
Acquisition
$’000s
Total Fair
Value on
Acquisition
$’000s
Assets & Liabilities
Inventories & other
current assets - 37 37 95 - 95 132
Plant & equipment
375 1,248 1,623 19 (11) 8 1,631
Intangible assets - - -
338
-
338 338
Deferred tax
-
(349) (349) 5 (89) (84) (433)
Total assets & liabilities
375 936 1,311 457 (100) 357 1,668
(Fair value gain)/
goodwill on acquisition (936) 76 (860)
Cost of acquisition
375 433 808
Cost of Acquisition
The cost of acquisition of the DC Ross business was fully paid in cash. The cash outflow on acquisition
was $375,000.
No cash was paid for the acquisition of Scott Separation Technology Limited. The cost of acquisition was
represented by Scott Technology Limited’s existing equity in ($24,000) and advances to ($409,000) this
previous joint venture company.
Fair Value Gain Arising on Acquisition
The inventories, plant and equipment of the DC Ross business were purchased from DC Ross’ receivers for
an agreed total value which was less than market value, resulting in a fair value gain on acquisition. The fair
value gain on acquisition is reported in the Statement of Comprehensive Income.
Goodwill Arising on Acquisition
The consideration paid for the acquisition of the remaining 50% of the shares in Scott Separation
Technology Limited effectively included amounts in relation to the benefit of expected synergies, current
product development and knowhow. These benefits are not recognised separately from goodwill as
the future economic benefits arising from them cannot be readily measured and they do not meet the
definition of identifiable intangible assets.
57
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION E – GROUP STRUCTURE & SUBSIDIARIES (cont.)
E1. ACQUISITION OF BUSINESS (c o n t .)
Impact of Acquisition on the Results of the Group
Given that DC Ross was acquired from its receivers and Scott Separation Technology Limited is a very
small business and was an acquisition of the other joint venture partners’ shares, disclosure has not
been made of the full year revenue or profit as if both acquisitions had been effected at 1 September
2016 as doing so would not be a fair representation of the performance of the combined Group on an
annualised basis.
E2. SUBSIDIARIES
Name of EntityBalance Date
Country of
Incorporation
Ownership
Voting
2017 %
Interests
& Rights
2016 %
Parent Entity
Scott Technology Limited (i)31 August
New Zealand
New Zealand Trading Subsidiaries
Scott Technology NZ Limited (ii)31 August
New Zealand
100100
HTS-110 Limited (iii) (***)31 August
New Zealand-
100
Scott Automation Limited (iv)31 August
New Zealand
100100
Scott Technology USA Limited (v)31 August
New Zealand
100100
QMT General Partner Limited (vi)31 August
New Zealand
9393
QMT New Zealand Limited Partnership (vii)31 August
New Zealand
9292
Scott Milktech Limited (viii) (***)31 March (*)
New Zealand-
61
Scott Separation Technology (ix)31 August
New Zealand
10050
New Zealand Non Trading Subsidiaries
Scott LED Limited
31 August
New Zealand
100100
Rocklabs Limited
31 August
New Zealand
100100
Overseas Subsidiaries
Scott Technology Australia Pty Ltd (x)31 August
Australia
100100
Applied Sorting Technologies Pty Ltd (xi)31 August
Australia
100100
Scott Automation & Robotics Pty Ltd (xii)31 August
Australia
100100
QMT Machinery Technology (Qingdao) Co Limited (xiii)31 December (**)
China
7070
Scott Systems International Incorporated (xiv)31 August
USA
100100
Scott Systems (Qingdao) Co Limited (xv)31 December (**)
China
9595
Scott Technology GmbH (xvi)31 December (**)
Germany
100100
(*) Determined by agreement between the shareholders on incorporation.
(**) Determined by local regulatory requirements.
(***) Amalgamated with Scott Technology NZ Limited on 31 March 2017
58
SECTION E – GROUP STRUCTURE & SUBSIDIARIES (cont.)
E2. SUBSIDIARIES (cont.)
New Zealand Trading Subsidiaries
(i) Scott Technology Limited is the ultimate parent entity of the Group. It is an investment holding
company and owns all properties.
(ii) Scott Technology NZ Limited is the main trading company for New Zealand operations, including
the design and manufacture of automated and robotic systems (under the “Scott” brand), the
service and upgrade of Scott equipment worldwide (under the “Scott Service International”
brand), the manufacture and sale of automated laboratory sampling equipment for the mining
industry (under the “Rocklabs” brand) and development, design and manufacture of high
temperature superconductor equipment (under the “HTS-110” brand).
(iii) HTS-110 Limited developed, designed and manufactured high temperature superconductor
equipment. In 2015 these operations were transferred to Scott Technology NZ Limited and the
company was amalgamated with Scott Technology NZ Limited on 31 March 2017.
(iv) Scott Automation Limited’s principal activity is the design and manufacture of
automation systems.
(v) Scott Technology USA Limited is a financing subsidiary for the USA businesses, as well as owning a
number of domain names (URLs) associated with the RobotWorx business.
(vi) QMT General Partner Limited is the general partner for the QMT New Zealand Limited Partnership
and directly owns 1% of QMT New Zealand Limited Partnership.
(vii) QMT New Zealand Limited Partnership is an investment holding entity and owns 75% of QMT
Machinery Technology (Qingdao) Co Limited.
(viii) Scott Milktech Limited’s principal activity was the development of automated solutions for
the dairy industry. Scott Technology Limited acquired the shares of the minority shareholder in
January 2017 and then the company was amalgamated with Scott Technology NZ Limited on 31
March 2017.
(ix) Scott Separation Technology Limited develops and markets patented centrifuge technology
with particular application to the honey and fish processing industries.
Overseas Subsidiaries
(x) Scott Technology Australia Pty Limited is a holding company for Australian activities.
(xi) Applied Sorting Technologies Pty Limited’s principal activity was the manufacture and sale of
x-ray and sorting technology. These activities are now conducted through Scott Automation &
Robotics Pty Limited.
(xii) Scott Automation & Robotics Pty Limited is the main trading company for Australia operations,
including the business of Machinery Automation and Robotics which was acquired on 31 January
2015.
(xiii) QMT Machinery Technology (Qingdao) Co Limited is a general engineering business located in
Qingdao, China. The woodworking lathes and parts business has ceased and the automation
engineering business has been transferred to Scott Systems (Qingdao) Co Limited. Remaining
net assets have been impaired as disclosed in Note A1.
(xiv) Scott Systems International Incorporated’s principal activity is in North America for the sale
of robot systems under the RobotWorx brand and undertaking sales and service for the wider
Group.
(xv) Scott Systems (Qingdao) Co Limited is a general engineering business located in Qingdao, China.
(xvi) Scott Technology GmbH designs and manufactures automation systems and is located in
Kurnbach, Germany.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
59
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
SECTION E – GROUP STRUCTURE & SUBSIDIARIES (cont.)
E3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Interests in Joint Ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about the relevant activities require unanimous consent of
the parties sharing control.
The results and assets and liabilities of joint ventures are incorporated in these consolidated financial
statements using the equity method of accounting. Under the equity method a joint venture is initially
recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise
the Group’s share of the profit or loss and other comprehensive income of the joint venture. In assessing the
Group’s share of the profit or loss or other comprehensive income of the joint venture, the Group’s share of
any unrealised profits or losses on transactions between Group companies and the joint venture is eliminated.
Dividends or distributions received from a joint venture reduce the carrying amount of the investment in that
joint venture in the Group financial statements. When the Group’s share of losses of a joint venture exceeds the
Group’s interest in that joint venture, the Group discontinues its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal or constructive obligations or made payments
on behalf of the joint venture.
An investment in a joint venture is accounted for using the equity method from the date on which the investee
becomes a joint venture until the date it ceases to be a joint venture. On acquisition of the investment in a joint
venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable
assets and liabilities of the investee is recognised as goodwill, which is included within the carrying value of the
investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the
cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the
investment is acquired.
Ownership Interest Carrying Value
Name of Entity
Country
of Incorporation
2017
%
2016
%
2017
$’000s
2016
$’000s
Joint Ventures
Robotic Technologies Limited (i)
New Zealand
5050983807
Scott Technology Euro Limited (ii)
Ireland
50507877
NS Innovations Pty Limited (iii)
Australia
5050
--
Scott Separation Technology Limited (iv)(*)
New Zealand
10050
-
26
Scott Technology S.A. (v)
Chile
50505088
Rocklabs Automation Canada Limited (vi)
Canada
5050
7(75)
Balance at end of financial year
1,118923
(*) Now reported as a subsidiary under Note E2.
(i) Scott Technology Limited’s joint venture with Silver Fern Farms Limited, Robotic Technologies Limited
(RTL), was formed in October 2003 and has a balance date of 31 August. RTL’s principal activity is the
marketing and development of (primarily) lamb meat processing equipment and the management of the
intellectual property associated with these developments. Scott Technology Limited’s share of RTL’s net
surplus was $176,000 (2016: $264,000).
(ii) Scott Technology Euro Limited (STEL) is a European sales agency for Scott Technology Limited and is
a joint venture between Scott Technology Limited and Industrial Process Solution of Italy. STEL was
formed in 2009 and has a balance date of 31 August. Scott Technology Limited’s share of STEL’s net
surplus was $1,000 (2016: share of net surplus $8,000).
60
SECTION E – GROUP STRUCTURE & SUBSIDIARIES (cont.)
E3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (cont.)
(iii) NS Innovations Pty Limited (NSIL) is a joint venture between Scott Technology Limited and Northern Co-
Operative Meat Company Limited of Australia. NSIL was formed in August 2009 and has a balance date of
30 June, in line with Australian tax rules. NSIL’s principal activity was the marketing and development of
(primarily) beef meat processing equipment and the management of the intellectual property associated
with these developments. NSIL is no longer operating and is in the process of being wound up. Scott
Technology Limited’s share of NSIL’s net deficit was $Nil (2016 share of net deficit: $14,000).
(iv) Scott Separation Technology Limited (SSTL) was a joint venture between Scott Technology Limited
and private individuals. SSTL was formed in December 2011 and has a balance date of 31 A u g u s t . S S T L’ s
principal activity is the marketing and development of patented centrifuge technology which has
particular application to the honey and fish processing industries. Scott Technology Limited acquired
its joint venture partners’ shareholdings in May 2017 and it is now reported as a wholly owned subsidiary.
Scott Technology Limited’s share of SSTL’s net deficit up to acquiring the joint venture partners’
shareholdings was $1,000 (2016: share of net surplus $Nil).
(v) Scott Technology S.A. (STSA) is a joint venture between Scott Technology Limited and Canadian private
company STG Holdings Limited. STSA commenced trading in June 2014 and has a balance date of
31 August. STSA is a sales agency for mining equipment in the Americas and is based in Chile. Scott
Technology Limited’s share of STSA’s net deficit was $38,000 (2016: share of net surplus $154,000).
(vi) Rocklabs Automation Canada Limited (RAC) is a joint venture between Scott Technology Limited and
Canadian private company STG Holdings Limited. RAC commenced trading in 2013 and has a balance date
of 31 August. RAC is a sales agency for mining equipment in North America. Scott Technology Limited’s
share of RAC’s net surplus was $82,000 (2016: share of net deficit $34,000).
Carrying value of equity accounted investments:
2017
$’000s
2016
$’000s
Balance at beginning of financial year
923 545
Share of net surplus
220 378
Sale of interest in joint venture
(25)
-
Balance at end of financial year
1,118 923
Summarised statement of comprehensive income of joint
ventures from continuing operations: Joint Ventures
2017
$’000s
2016
$’000s
Income
12,136 14,542
Expenses
(11,696) (13,786)
Net surplus and total comprehensive income
440 756
Group share of net surplus
220 378
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
61
SECTION E – GROUP STRUCTURE & SUBSIDIARIES (cont.)
E3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (cont.)
Summarised balance sheets of joint ventures:
Joint Ventures
2017
$’000s
2016
$’000s
Current assets
3,937 3,864
Non current assets
1,731 2,149
Current liabilities
(2,049) (1,216)
Non current liabilities
(1,349) (2,914)
Net assets
2,270 1,883
Group share of net assets
1,135 942
RTL, STEL, NSIL, STSA and RAC do not have any contingent assets, contingent liabilities or commitments for
capital expenditure. The Group is not jointly and severally liable for any of the joint ventures’ liabilities.
E4. RELATED PARTY TRANSACTIONS
Group Companies
The Group owns 50% of Robotic Technologies Limited (RTL), 50% of NS Innovations Pty Limited (NSI), 50% of
Scott Technology Euro Limited (STEL), 50% of Scott Separation Technology Limited (SSTL) up to 31 May 2017,
70% of QMT Machinery Technology (Qingdao) Co Limited (QMT), 50% of Scott Technology S.A. (STSA) and 50%
of Rocklabs Automation Canada Limited (RAC).
Joint Ventures
2017
$’000s
2016
$’000s
Project work undertaken by the Group for RTL
8,095 12,767
Administration, sales and marketing fees charged by the Group to RTL
173 230
Sales revenue received by RTL from the Group
8,875 9,689
Advance (from)/to RTL (to)/from Scott Technology (371) 431
Administration fees charged by the Group to STEL
6 6
Commission received by STEL from the Group
199 185
Advance from STEL to Scott Technology
(176) (346)
Project work undertaken by the Group for SSTL
2 254
Advance from Scott Technology to SSTL -
479
Advance from Scott Technology to NSI -
11
Project work undertaken by the Group for STSA
1,466 759
Advance from Scott Technology to STSA
1,223 840
Project work undertaken by the Group for RAC
1,583 170
Advance from Scott Technology to RAC
686 63
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
62
SECTION E – GROUP STRUCTURE & SUBSIDIARIES (cont.)
E4. RELATED PARTY TRANSACTIONS (c o n t .)
Advances
Advances to Group companies are unsecured, interest free and repayable on demand.
Directors
C C Hopkins and S J McLauchlan are trustees of the Scott Technology Employee Share Purchase Scheme.
The balance of the interest free advance owing to the scheme at 31 August 2017 was $4,000 (2016:
$2,000). During the year no shares vested with employees and no shares (2016: 1,164 shares) which had
not vested with employees were disposed of at market value. As at 31 August 2017 17,779 (31 August
2016: 17,779) shares were being held on trust which had vested with the Trustees upon the resignation of
employees during the period of the Scheme and are available for sale. These shares have been treated as
equity under share capital.
Substantial Shareholders
C C Hopkins is a Director of Oakwood Group Limited, which owns Oakwood Securities Limited, a
substantial shareholder of Scott Technology Limited. C C Hopkins has received Directors’ fees of $17,000
from Oakwood Group Limited during the year (2016: $17,000).
JBS Australia Pty Limited owns a 50.1% shareholding in Scott Technology Limited. The Group has
recognised sales to JBS Companies of $3.2 million (2016: $307,000 since acquisition date of 14 April 2016)
and has made purchases from JBS Companies of $2.5 million (2016: $9,000 since acquisition date).
SECTION F – OTHER DISCLOSURES
F1. NOTES TO THE CASH FLOW STATEMENT
Policy
The Statement of Cash flows is prepared exclusive of GST, which is consistent with the method
used in the Statement of Comprehensive Income.
Definition of terms used in the Statement of Cash flows:
• Cash includes cash on hand, demand deposits, and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to
an insignificant risk of change in value, net of bank overdrafts.
• Operating activities include all transactions and other events that are not investing or
financing activities.
• Investing activities are those activities relating to the acquisition and disposal of
current and non-current investments and any other non-current assets.
• Financing activities are those activities relating to changes in the equity and debt
capital structure of the Group and those activities relating to the cost of servicing the
Group’s equity.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
63
SECTION F – OTHER DISCLOSURES (cont.)
F1. NOTES TO THE CASH FLOW STATEMENT (cont.)
2017
$’000s
2016
$’000s
Net surplus for the year
10,265 8,134
Adjustments for non-cash items:
Depreciation and amortisation
2,987 1,74 4
Net loss/(gain) on sale of property, plant and equipment (73) 215
Deferred tax
201 618
Share of net surplus of joint ventures and associates
(220) (378)
Impairment of net assets (QMT Machinery Technology (Qingdao) Co Ltd)
-
449
Fair value gain on purchase of business
(936)
-
Add / (less) movement in working capital:
Trade debtors
(2,000) 79
Other financial assets – derivatives
1,332 172
Sundry debtors
174 (18)
Inventories
(3,929) (927)
Contract work in progress
(5,245) 4,185
Taxation payable
1,779 750
Trade creditors and accruals
8,228 (510)
Other financial liabilities – derivatives
(619) (17)
Employee entitlements
1,195 1,987
Provision for warranty
200 350
Movements in working capital disclosed in
investing/financing activities:
Working capital relating to purchase of business and non controlling
interest 675 (75)
Movement in foreign exchange translation reserve relating to working
capital (607) (201)
Impairment of net assets (QMT Machinery Technology (Qingdao) Co Ltd)
-
(449)
Net cash inflow from operating activities
13,407 16,108
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
64
SECTION F – OTHER DISCLOSURES (cont.)
F2. CONTINGENT LIABILITIES
2017
$’000s
2016
$’000s
Payment guarantees and performance bonds
7,7116,071
Stock Exchange bond
7575
Maximum contract penalty clause exposure
1,5011,431
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
becoming increasingly common in international contractual agreements. There is a clearly defined sequence
of events that needs to occur before penalty clauses are imposed.
F3. KEY MANAGEMENT PERSONNEL COMPENSATION
The compensation of the Directors and executives, being the key management personnel of the entity,
is set out below:
2017
$’000s
2016
$’000s
Short term benefits - employees
2,5352,200
Short term benefits – executive Director
708533
Short term benefits – non-executive Directors
193216
Long term benefits – employees
604614
Long term benefits – executive Director
284279
4,3243,842
F4. SUBSEQUENT EVENTS
Dividend
On 12 October 2017 the Board of Directors approved a final dividend of six cents per share with full imputation
credits attached to be paid for the 2017 year (2016: five and a half cents per share).
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2017
65
Substantial Shareholders
Names of substantial security holder
Number of shares in which a relevant interest
was held as at 15 September 2017
1. JBS Australia Pty Limited37,415,058
2. Oakwood Securities Limited5,500,000
The total number of issued voting securities of the company as at 15 September 2017 was
74,680,754 ordinary shares.
Distribution of Shares by Holding Size# of Shareholders% of TotalNumber% of Total
1 - 1,00068326.15347,5230.46
1,001 - 5,0001,11042.502,901,5883.89
5,001 - 10,00039315.042,906,8693.89
10,001 - 50,00035313.516,779,3649.08
50,001 - 100,000371.422,544,8103.41
100,001 and over
361.3859,200,60079.27
Total and percentage
2,612100.0074,680,754100.00
Twenty Largest Shareholders as at 15 September 2017Shares% of Total
1. JBS Australia Pty Limited37,415,05850.10
2. New Zealand Central Securities Depository Limited5,595,5937.49
3. Oakwood Securities Limited5,500,0007.36
4. Russell John Field & Anthony James Palmer (JI Urquart Family A/C)2,000,0002.68
5. JB Were (NZ) Nominees Limited 1,591,4922.13
6. Forsyth Barr Custodians Limited (1-33 A/C)720,0170.96
7. Leveraged Equities Finance Limited519,2470.70
8. Jarden Custodians Limited479,9820.64
9. Jack William Allan & Helen Lynette Allan425,0000.57
10. Rosebery Holdings Limited375,0960.50
11. Kenneth William Wigley313,5120.42
12. Custodial Services Limited (4 A/C)303,13 90.41
13. FNZ Custodians Limited292,9490.39
14. Opito Investments Pty Ltd280,0000.37
15. Margaret Ann Ring & Richard Arthur Prevett270,0000.36
16. Graham William Batts and Roger Norman Macassey248,0530.33
17. Forsyth Barr Custodians Limited220,8900.30
18. Investment Custodial Services Limited208,7110.28
19. Harry McMillan Hearsay Salmon200,0000.27
20. Michael Walter Daniel, Nigel Geoffrey Burton and Michael Murray Benjamin
200,0000.27
57,158,73976.53
Employee Remuneration
Remuneration and other benefits of $100,000 per annum or more, received or receivable by employees in their
capacity as employees were:
Salary RangeNumber of EmployeesSalary RangeNumber of Employees
$100,000 - $110,000
$100,000 - $110,00022$210,001 - $220,0002
$110,001 - $120,00018$240,001 - $250,0002
$120,001 - $130,00015$250,001 - $260,0001
$130,001 - $140,00014$280,001 - $290,0001
$140,001 - $150,00010$330,001 - $340,0001
$150,001 - $160,0009$340,001 - $350,0001
$160,001 - $170,0007$350,001 - $360,0001
$170,001 - $180,0008$370,001 - $380,0001
$180,001 - $190,0006$420,001 - $430,0001
$190,001 - $200,0001$440,001 - $450,000 1
$200,001 - $210,0001$490,001 - $500,0001
ADDITIONAL STOCK EXCHANGE INFORMATION
FOR THE YEAR ENDED 31 AUGUST 2017
66
AUDIT REPORT
INDEPENDENT AUDITOR’S REPORT TO THE
SHAREHOLDERS OF SCOTT TECHNOLOGY LIMITED
Opinion
We have audited the consolidated financial statements of Scott Technology Limited and its
subsidiaries (the ‘Group’), which comprise the consolidated balance sheet as at 31 August 2017,
and the consolidated statement of comprehensive income, statement of changes in equity
and statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements, on pages 24 to 64, present
fairly, in all material respects, the consolidated financial position of the Group as at 31 August
2017, and its consolidated financial performance and cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards
(‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and
International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and
Assurance Standards Board and the International Ethics Standards Board for Accountants’
Code of Ethics for Professional Accountants, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Other than in our capacity as auditor and the provision of taxation advice and other assurance
services, we have no relationship with or interests in the Company or any of its subsidiaries.
These services have not impaired our independence as auditor of the Company and Group.
Audit materiality
We consider materiality primarily in terms of the magnitude of misstatement in the financial
statements of the Group that in our judgement would make it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced (the
‘quantitative’ materiality). In addition, we also assess whether other matters that come to our
attention during the audit would in our judgement change or influence the decisions of such a
person (the ‘qualitative’ materiality). We use materiality both in planning the scope of our audit
work and in evaluating the results of our work.
We determined materiality for the Group financial statements as a whole to be $700,000.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
67
Key audit matterHow our audit addressed the key audit matter
Recognition of Profit on Long Term
Projects
The Group’s most significant revenue
stream relates to long term projects
for customers in various industries.
Revenue and profit on long term
projects are accounted for based
on management’s estimate of the
percentage of completion of the
individual contracts as detailed in
note A1.
There is a significant level of judgement
involved in the recognition of revenue
and profit on long term projects
driven by a number of occurrences
throughout the life of the project
requiring estimation and contract
conditions differing between projects.
For these reasons, we have identified
this area as a key audit matter.
Goodwill and Indefinite Life Intangible
Assets Impairment Assessment
As at 31 August 2017, there are
$30.0million (2016: $29.9million) of
goodwill and $1.5m (2016: $1.5m) of
indefinite life intangible assets (U R L’ s)
included on the balance sheet of the
Group as detailed in notes B5 and B6.
The balance is held across three cash
generating units.
In accordance with NZ IAS 36, the
Group is required to complete an
impairment test related to goodwill
annually. The assessment of value in
use is performed using a discounted
cash flow calculation.
This calculation is subjective, and
requires the use of judgement,
primarily in respect of:
• Forecast cash flows, particularly in
relation to future project wins and
market conditions; and
• Discount rates.
We have assessed a key audit matter in
relation to the significant judgements
and estimates required in preparing
the value in use model.
Our procedures included, among others:
• Assessment of controls – Assessing the group’s processes and
controls around preparation/calculation of the percentage of
completion.
• Lookback procedures – For a sample of projects in place at
the end of the prior year, we compared current year actual
information to prior year forecasts to assess the reliability of the
forecast cost to complete determined by management.
• Testing of contract revenue – For a sample of contracts, we have
performed the following procedures:
- Assessed whether the key estimates made by management
reflect the terms and conditions of the contract;
- Evaluated cost to complete forecasts by challenging
management’s key assumptions and comparing revenue
recognition calculations to project cost forecasts prepared
by project managers;
- Obtained evidence of scope variations and claims and
verified that these have not been included in management’s
determination of revenue recognition until agreed with the
customer;
- Tested contract costs incurred during the year to validate
the costs and assess whether they have been applied to
contracts appropriately.
We considered whether the Group’s methodology for assessing
impairment is compliant with NZ IAS 36: Impairment of Assets. We
focused on testing and challenging the suitability of the models and
reasonableness of the assumptions used by the Group in conducting
their impairment reviews.
Our procedures included, among others:
• Assessment of controls – Assessing the group’s processes and
controls around the value in use calculation.
• Cash generating units – We assessed management’s
determination of cash generating units and our understanding of
the Group’s business and operating environment.
• Past performance – We assessed the reasonableness of forecast
figures by looking at historical performance against past
forecasts.
• Use of specialists – We used our internal valuation experts to
assist in our evaluation of the reasonableness of the discount
rates applied by the Group through consideration of the relevant
risk factors for each CGU or impairment model, the cost of
capital for the Group, and market data on comparable businesses.
• Integrity check – We tested the mathematical accuracy of the
models.
• Sensitivity analysis – We evaluated the sensitivity analysis
performed by management to consider the extent to which a
change in one or more of the key assumptions could give rise to
impairment in the goodwill.
68
Other information
The directors are responsible on behalf of the Group for the other information. The other information
comprises the information in the Financial Report that accompanies the consolidated financial
statements and the audit report, and the Annual Report, which is expected to be made available to us
after the date of the audit report.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
Our responsibility is to read the other information and consider whether it is materially inconsistent with
the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If so, we are required to report that fact. We have nothing to report in this regard.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the directors and consider further appropriate actions.
Directors’ responsibilities for the consolidated financial statements
The directors are responsible on behalf of the Group for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as
the directors determine is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible on behalf of the Group
for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs and ISAs (NZ) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is
located on the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1
This description forms part of our auditor’s report.
Restriction on use
This report is made solely to the Company’s shareholders, as a body. Our audit has been undertaken so
that we might state to the Company’s shareholders those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company’s shareholders as a body, for our audit work,
for this report, or for the opinions we have formed.
Michael Wilkes, Partner
for Deloitte Limited
Christchurch, New Zealand
12 October 2017
69
DIRECTORY
PARENT COMPANY
Registered Office
Scott Technology Limited
630 Kaikorai Valley Road
Dunedin 9011
New Zealand
t +64 3 478 8110
Mailing Address
Scott Technology Limited
Private Bag 1960
Dunedin 9054
New Zealand
Website
scottautomation.com
Chairman & Independent Director
Stuart McLauchlan
Independent Directors
Christopher Staynes
Mark Waller
Directors Representing JBS Australia Pty
Ltd (not Independent Directors)
Andre Nogueira
Brent Eastwood
Edison Alvares
John Berry (Alternate Director)
Managing Director/CEO
Chris Hopkins
Chief Financial Officer
& Company Secretary
Greg Chiles
REGIONAL CONTACTS
Australia
Clyde Campbell
t +61 425 259 270
e ccampbell@scottautomation.com
Europe
Luciano Schiavi
t +39 345 393 1722
e l.schiavi@scotttechnology.com
Americas
Tony Joyce
t +1 740 692 5086
e t.joyce@scotttechnology.com
Asia
Ken Snowling
t +49 151 7437 5544
e k.snowling@scotttechnology.com
PROFESSIONAL SERVICES
Share Registry
Link Market Services Ltd
PO Box 91976
Auckland 1142
t +64 9 375 5998
f +64 3 375 5990
e enquiries@linkmarketservices.co.nz
Bankers
ANZ Bank New Zealand Ltd
Solicitors
Gallaway Cook Allan
Auditor
Deloitte
scottautomation.com
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.