Scott Technology Annual Meeting 2017

Managing Director’s Address
2017

Thank you Mr Chairman, and before I formally second the motion I
would like to review the performance and results of the company,
present an operational overview, outline our research and
development, the opportunities and ambitions for the company, then
conclude with a brief outlook.

Key Highlights of 2017
The highlights reflect a positive year which reflects the benefits of our
diversification and acquisition strategy. Scott’s revenues increased
18% to $133 million. We continued to deliver strong operating cash
flows, and we enter the new year with cash reserves of $26 million.
Our German business acquired in 2016, contributed a full 12 months
and in October last year we converted our Bladestop licence to a full
ownership model. We acquired the Bladestop licence as part of the
acquisition of MAR in January 2015. The licence included an option to
purchase which we exercised to enable us to accelerate Bladestop
business plans.

All these activities delivered a net profit before tax of $15 million, an
increase of 35% on the prior year and this has been reflected in the
increased dividend.

Industrial Automation & Robotics sector grew by an impressive 41%
year on year. Underpinning this was a full 12 months of Scott
Germany and an increase in customers seeking robotic solutions as an
answer to labour shortages around the globe.

Appliances were up 30% year on year, again boosted by a full 12
months of Germany and several large projects completed for China
and the USA.

Sales to the Mining sector were up 18%, reflecting an upswing across
multiple geographies.

Revenues over a 10 year period recorded compound annual growth
rate of 20% and 35% over the past three years.

Over the past 10 years we achieved a five-fold increase in revenues
since 2008. The table graphically demonstrates the effectiveness of
our diversification from two industrial sectors in 2008 through to the
current width and depth of our markets in 2017.

Over 10 years, net profit after tax had a compound annual growth rate
of 57% and a three year rate of 42%.

Over the past five years our share price has followed our fortunes,
which has steadily risen since 2014. We have indicated on the chart
the dates JBS came on board as an investor and shareholder.

Operational Review
People are an important part of our business. Employing people
comes with many responsibilities, not the least of which is their safety
and health at work. Our objective is to ensure we provide a safe
working environment which does no harm and our people get to go
home at the end of the day healthy and safe.

This requires a commitment by all to safety at work. This starts with
the staff and is reinforced by management and the Board of Directors.

At Scott we spend much time and effort ensuring that our health and
safety systems and processes are world class and are applied at all our
locations around the world to the same standard, whether our people
are in New Zealand, Australia, America, China or Europe.

Employee health and safety committees, management and the Board
of Directors, are active each and every day in monitoring the
effectiveness of our systems.

Europe
In Germany our team of highly skilled engineers design and build
factory automation systems, primarily for the whitegoods industry.
We also serve other industries in the metal forming and
manufacturing sectors. Germany is also becoming a support base for
meat processing activities – both Bladestop and advanced boning
room automation. Ken Snowling is our Regional Director in Europe.
Unfortunately he is not able to be here today to join us but the good

news is that he has been busy negotiating contracts that will keep us
busy through 2018 and into 2019. A slow start to the year with excess
capacity impacted on the contribution from Europe. However, a new
sales team and a growing reputation in Europe has enabled us to
secure major new contracts. These were won in a competitive tender
and are for global manufacturers - both repeat and new customers.

China
Cathy Smart, General Manager, leads a very motivated and dedicated
team of engineers. We achieved a major milestone in 2017 with the
redesign and build of a complete appliance production line for a major
customer in China with the team very proud of their achievements –
and rightly so. The dedication and commitment of the team was
extraordinary. The 34 metre long press and clinching line was
completed in six and a half months, which is a record for Scott.

Australia
A region of substantial growth for Scott over the past few years. Clyde
Campbell is our Regional Director for Australia and was the former
owner of Machinery Automation & Robotics that Scott acquired in
early 2015. Clyde continues to build the capability and skills of the
team in Australia and to expand our product range and our system
offerings to customers. These efforts have been rewarded with a
growing portfolio of projects and customers.

A significant milestone was achieved during the year with the
completion of a first robotic palletiser with automated guided vehicles
(AGV’s) in a meat processing facility. AGV’s and backend logistics,
such as palletising, carton storage and retrieval systems, is targeted as
a key growth area for Scott in the coming years.

Scott USA
Tony Joyce, Regional Director for the Americas, looks after our
RobotWorx business, as well as Scott’s factory automation systems
supplied to the Appliances and Meat Processing sectors.

The team based in Marion, Ohio sold and delivered over 250 robots
and many Bladestops during the year.

Scott encourages families and local communities to be involved with
our business and share in our success. As part of RobotWorx’ 25 years
celebration, the city of Marion recognised our contribution and
named August 4, 2017 as ‘RobotWorx Day’.

New Zealand
Our operations encompasses:
Business Development & Innovation – led by Barbara Webster.

Achievements during the year included delivering a 400MHz NMR
magnet, built with superconducting wire – the first ever 9.4 Tesla
magnet used in NMR applications to a major pharmaceutical company
in the USA and is our sixth magnet into Germany – used for Neutron
and x-ray experiments.

Appliance manufacturing – led by Alan Prince in Christchurch.

All our facilities were extremely busy during the year. We are
fortunate that we are able to subcontract out through extreme peaks.
As an example, a project for a major appliance manufacturer in the US
had a team of 23 designers working on it - of which five were
subcontractors. At the same time we were also using design resources
from Germany to assist on other projects.

Our factory automation systems are becoming further advanced with
the wider adoption of advanced imaging and sensing and the use of
six axis industrial robots.

Laboratory Sample Preparation in Auckland – led by Mike Lynn

Within our Rocklabs business we achieved a 30% improvement in
sales for Standard equipment, for Spare parts and for Reference
Materials.

In a first for the Scott Group, an eCommerce platform is to be
launched in January for Reference Materials.

We are venturing into a new sector following a successful bid to design
a laboratory solution for a large aggregate quarry in Norway.

Meat Processing here in Dunedin – led by Andrew Arnold

During the year we acquired the business of DC Ross Limited, which
had a small tool room and fine blanking press operations. This is a
useful add-on to both capability and capacity for our Dunedin
operations.

As noted by the Chairman, we plan to extend our building here in
Dunedin. With ongoing growth we are short of office space for our
engineers and floor space for building and testing our systems. The
factory will be doubled in size to provide an additional 1500 m2 of
floor space. The offices will also be extended along the building’s
eastern side. Fortunately, in the original plans for this site Scott’s
former Managing Director, Graham Batts, with much foresight,

positioned the building such that expansion was possible. So with this
it is very fitting that Graham has returned to Scotts to assist and
supervise this building expansion.

To complete our Executive team we have Casey Jenkins, responsible
for Marketing and Kate Logan, responsible for leading our HR team,
along with Greg Chiles, our CFO.

R&D
Research and development is vitally important for Scott. Annually we
spend between 5 and 10% of total revenues with the final amount
driven by the potential and customer interest in the technologies we
develop. We focus more on the ‘D’, the ‘development’ and we prefer
our development projects to be demand driven, or wanted, by our
customers before we commence. In addition we seek quick outcomes
and the shortest path to commercialisation. Often this involves a
collaborative approach where we our customer invests in the process
and / or the prototype.

Having a customer on board ensures that our new technologies have
the specifications, features and return on investment required to
become a commercial success.

Not all our developments are successful and for this reason we partner
with New Zealand and Australian Government agencies for R&D
funding with the balance of activity funded by ourselves and / or our
customers.

Our growth over the past five years has been driven as much by an
expansion of our product offerings delivered through our R&D as it
has from acquisition and geographic spread.

Our strategy has been to develop technologies in New Zealand and
Australia using the high skill base and innovative and creative thinking,
prove them in market with a friendly customer, and then take them to
the world.

Listed on this slide is a list of key developments and technologies
worked on over the past year.

And On this slide is a list of new products that are ready for, or in the
process, of being commercialised.

[Video]

Opportunities and Ambitions
Our growth ambitions are driven by significant opportunities and the
fact that we are over capitalised and need to grow.

Organic growth will be delivered through geographic expansion and
from an expanded product range produced by our R&D programme.

To achieve our goals, additional growth will need to come from
acquisitions. We have taken a proactive approach to acquisitions over
the past 18 months. We have analysed and reviewed in excess of 30
companies, read many Information Memorandums and visited many
companies but have been selective in our search and ruthless in our
evaluation.

As of today we continue to work on a number of prospects. These are
work in progress and we do not anticipate completing any in the very
near term. Scott has a clear strategy and management are looking to
execute within that strategy as set by the Board.

I would now like to outline key short to medium term growth
opportunities.

• Bladestop – The time to commercialise is now - driven by
competitors who are fast followers of our technology. Leveraging
off our success in Australia we are building a strong sales pipeline
in New Zealand, US and Europe. We are continuing to build

distribution networks beyond our own resources and to develop
the product offering.

• Our Meat Automation technology has gathered momentum over
the past few years. The technology was more than 10 years in the
making but has come of age in the last two to three years. Across
New Zealand and Australia we have now delivered 11 automated
lamb boning systems.

But lamb is a small global market, primarily constrained to New
Zealand, Australia and Ireland. The much bigger markets are Beef,
Pork and Poultry. Scott started preparatory work on Beef
technologies several years ago. This work has recently accelerated
with encouragement and investment by the Australian industry
and new shareholder, JBS. In addition, we have commenced early
stage development work for both Poultry and Pork. These markets
exist primarily in North America and Europe.

• DEXA – ‘Dual Energy X-Ray Absorptiometry’. This technology is one
step beyond x-ray. Our x-ray rooms can be run in DEXA mode to
not only provide cut lines for our automation, but also for carcass
measurement, primarily meat fat and bone ratio – or lean meat
yield. This has recently captured interest in Australia with the
industry announcing plans widely to adopt carcass measurement
systems. Australian interest is well supported by $150 million
industry funding to roll out DEXA to all Ausmeat accredited
facilities.

• Meat Processing is not our only industry – although it often sounds
like it. A quiet achiever for Scott is our Mining sector and we have
a range of technologies that have been developed and are ready
for commercialisation.

Robofuel is our robotic refuelling station which complements
autonomous mining strategies being adopted by the global mining
companies.

Our innovative robotic idler change enables maintenance and
changing of idlers on minesite conveyor belts without stopping the
conveyor or production. In the mining environment uptime is
critical and our technologies deliver value by assisting to maintain
production uptime.

Outlook
Forward project work of around 10 months puts us in a strong position
to deliver growth. Our sales pipeline is as strong as ever and our
diversification strategy continues to deliver across geographies and
across industries.

Our strong balance sheet puts us in a unique position to complete an
acquisition, to expand our technology offering and to broaden our
geographic reach.

All of us at Scott, our staff, suppliers, shareholders, have a lot to be
proud of. I would like to recognise the contribution made by all
stakeholders. I especially extend my sincere thanks and

congratulations to all the Scott team who have contributed to deliver
year on year success. There is enormous pride in what we achieve.
Everyday our goal is to deliver better systems and technology that
improve productivity and safety for our customers.

Finally, I would like to sincerely thank Stuart for his guidance and
counsel. The new Board has laid down the challenge to the Scott team
to stay focused on the task at hand.

I would also like to personally acknowledge and thank Chris Staynes
for his contribution and service to Scott during his time on the Board.

I now formally second the motion moved by the Chairman that the
Annual Report, including the Directors Report, Financial Statements
and Audit Report of Scott Technology Limited for the year ended 31
August 2017 be adopted.


Thank you.

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Annual Meeting 2017
Managing Directors Address 

Scott Annual Meeting 2017
Outline
Performance & ResultsOperational ReviewResearch & DevelopmentOpportunities & AmbitionsOutlook

Performance highlights ‐Results
In the year to 31 August 2017 we :
Achieved revenues of $133m –
up 18% 
on 2016 
Delivered operating cashflowsof $13m with cash reserves of $26mHad a full 12 months contribution from our operations in German
y and 
converted our Bladestoplicence to a full ownership model
Delivered Net Profit Before Tax of $15m –
up 35% 
on 2016
Increased annual dividend by 0.5c to 10 cents

Revenues ‐Industry Movements 2016 to 2017
132,631 
‐
1,588 
112,044 
11,238 
6,127 
4,104 
 ‐
 20,000 40,000 60,000 80,000
 100,000 120,000 140,000 160,000
2016 sales Other industrial
automation
Appliances
Mining Meat processing High temperature
superconductors
2017 sales

•
Industrial Automation & Robotics 
+41% 
yoy
–
a full 12 months of Germany
–
more customers seeking robotic solutions to labour concerns
•
Appliances 
+30% 
yoy
–
a full 12 months of Germany
–
several large projects for China and the USA
•
Meat Processing 
+2%
yoy
–
activity consolidated following a 256% increase last year
–
expanding resources for the next phase of growth
•
Mining 
+18%
–
mining upcycle swing across all geographies
Revenues ‐Industry Movements 2016 to 2017

Ten year revenue growth profileCAGR:  Compound annual growth rate
‐2,00002,0004,0006,0008,00010,00012,00014,00016,00018,000
0
20,00040,00060,00080,000
100,000120,000140,000
FY08 FY09 FY10 FY11 FY12
FY13 FY14 FY15 FY16 FY17
35%
21%
20%
Revenue
5 year CAGR
3 year CAGR
Rocklabs
Apr 08
Bladestop
Oct 16
MAR
Jan 15
RobotWorx
May 14
JBS buys 50.1%
Apr 16
10 year CAGR
EBITDA
Sales to 
JBS: 
$3.2m

Ten year divisional revenue breakdown
April 2016
JBS acquires 50.1% at $1.39 per share
Aug BD
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Accum growth
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Meat processing
5
5
6
6
8
8
11
39
40
40
Industrial
2
1
1
5
5
7
29
27
39
39
Mining
9
12
19
28
34
29
14
17
22
26
17
Appliances
16
12
22
16
16
17
29
14
20
26
10
HTS products
2
3
2
2
2
3
2
2
Other
6
3
3
1
1
2
1
1
Total
25 31 4759676362 73114 134
108
JBS sales
0.3
3.2
Acquisitions
Rocklabs
RobotWorx
MAR
Bladestop
Apr-08
May-14
Jan-15
Oct-16
Revenue CAGR
1 year
3 year
5 year
Max.
Mining
18%
25%
-2%
10%
Appliances
30%
39%
12%
10%
Meat processing
2%
90%
50%
30%
HTS products
-48%
-8%
3%
-5%
Industrial
41%
16%
63%
43%
TOTAL
17%
35%
21%
20%

Ten year Net Profit After Tax growth profileCAGR:  Compound annual growth rate (Revenue)
‐2,000
0
2,0004,0006,0008,000
10,000
FY08 FY09 FY10 FY11 FY12
FY13 FY14 FY15 FY16 FY17
42%
16%
57%
10 year CAGR
5 year CAGR
3 year CAGR
Rocklabs
Apr 08
Bladestop
Oct 16
MAR
Jan 15
RobotWorx
May 14
JBS buys 50.1%
Apr 16

Share price performance and gross returns
Gross return (share price and dividends)
Based on a $3.70 share price (23rd Nov 2017)
1 year
3 year
5 year
Since Aug 2015
Scott
87% 156%
73%
180%
Share price
$2.10 $1.65 $2.54
$1.39
Dividends
10.0c 27.5c 45.5c
19.5c
1 year
3 year
5 year
NZSE
20%
53% 108%
Out/under performance
67% 102% -34%
$1.00$1.50$2.00$2.50$3.00$3.50$4.00
Nov 12 Mar 13 Jul 13 Nov 13 Mar 14 Jul 14 Nov 14 Mar 15 Jul 15 Nov 15 Mar
 16 Jul 16 Nov 16 Mar 17 Jul 17
August 2015
JBS deal announced
Gross return
180%
April 2016
JBS deal approved and 
completed

Scott Annual Meeting 2017
Outline
Performance & ResultsOperational ReviewResearch & DevelopmentOpportunities & AmbitionsOutlook

XXX

Operations –Health & Safety
CommitmentbyalltosafetyatworkSystemsandProcessesMonitoringeffectivenessResultsmatter

Operations –Europe

Operations –Asia

Operations ‐Australia

Operations ‐Australia

Operations –Americas 

Operations –The Americas

Operations –New Zealand

Operations –New Zealand

Operations –New Zealand

Operational Overview –New Zealand

Executive Team

Scott Annual Meeting 2017
Outline
Performance & ResultsOperational ReviewResearch & DevelopmentOpportunities & AmbitionsOutlook

R&D Spend between 5% and 10% of total revenuesDemand pull, quick outcomes and collaborative approachIncludes:
AGV'sRobotics generally Inc. Collaborative and mobile roboticsLED automouldingScott Dairy –milking robotsVirtual RealityAdvanced vision and sensing technologies
•
DEXA & MEXA (Hyperspectral, 3D time of flight, NMR)
Research & Development

Operations –New productsCommercialisation 
RoboFuelXrayPrimalMiddlesystemMachineDiagnostictoolsandreporting200MHzNMRMagnetsChineBonemachineHammermillRoboticIdlerchangeBeefRibCutting

2017 ProjectsINSERT 2 Min video

Scott Annual Meeting 2017
Outline
Performance & ResultsOperational ReviewResearch & DevelopmentOpportunities & AmbitionsOutlook

Opportunities and Ambitions
SCOTT is overcapitalised and needs to grow 
Organic Growth 
•
Expand and improve on current activities
•
Ongoing Investment in R&D:
•
Maintenance ‐to maintain competitive edge
•
Development ‐to create new opportunities
Acquisitions 
•
Complementary to existing business 
(Geography/technology/skills/markets)

key product drivers in the short to medium term –market opportunities for :•
Bladestop
Key Product Drivers / Market Opportunities

key product drivers in the short to medium term –market opportunities for :•
Bladestop
•
Increasing adoption ofmeat automation technology:
•
Lamb in Australasia
•
Started with Beef in Australia
•
Development work in Pork and Poultry in USA and Europe
Key Product Drivers / Market Opportunities

key product drivers in the short to medium term –market opportunities for :•
Bladestop
•
Increasing adoption ofmeat automation technology:
•
Lamb in Australasia
•
Started with Beef in Australia
•
Development work in Pork and Poultry in USA and Europe
•
DEXA –Australia developments and wider interest
Key Product Drivers / Market Opportunities

key product drivers in the short to medium term –market opportunities for :•
Bladestop
•
Increasing adoption ofmeat automation technology:
•
Lamb in Australasia
•
Started with Beef in Australia
•
Development work in Pork and Poultry in USA and Europe
•
DEXA –Australia developments and wider interest
•
Mining technology developments
–
robofuel
–
Robotic idler change
Key Product Drivers / Market Opportunities

Scott Annual Meeting2017
Outline
Performance & ResultsOperational ReviewResearch & DevelopmentOpportunities & AmbitionsOutlook

Outlook ‐2017
Market Overview
:
Forwardprojectwork–10MonthsSubstantialsalespipelineDiversificationStrongbalancesheettoleverageoff

Thank you
Scott Annual Meeting 2017

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Chairman’s Address

The financial year to 31
st
August 2017 produced an after
tax profit of $10.2 million on revenue of $133 million.
This result was made possible by the diversification in
our geographic markets and the range of industries the
company applies its expertise and skills to.

I must also make mention of the highly skilled and
motivated workforce employed by Scott.

As has been the custom, I am able to announce today
the successful procurement of multiple appliance
systems orders totalling $17.5 million to be
manufactured in our German, China and New Zealand
sites. We have also secured a $3.5 million order from
the United States for an X-Ray Pork Primal Cutting
system.

These orders, along with other recent orders for mining
systems and robotic welding cells, maintains a very full
order book across our business units.

Scott Technology is committed to a strong health and
safety culture and management systems. The Board of
Directors’ Health & Safety Sub Committee met six times
during the year.

As the principal duty holder and Person Conducting a
Business or Undertaking (PCBU) Scott Technology has
adopted a risk based approach. Key areas of focus
include operating standards, contractor management
risk based reviews, employee engagement and
enhancing employee capabilities.

Due to the increased sales in the meat sector, the
Directors have endorsed the almost doubling in size of
the Dunedin manufacturing facility. The plans are at an
advanced stage with a start planned early in the new

year. This will be a great confidence boost for Dunedin
with the recent loss of manufacturing jobs in city.

This is on top of the recent employment of the DC Ross
staff by Scott.

Our contribution to the New Zealand economy was
$124 million of export earnings, which is 93.7% of our
revenues. The majority of our New Zealand sales are to
export generating companies, further increasing the
foreign currency earned for the country.

I commented last year on the change of leadership in
the United States and the hope this new administration
would continue to liberalise trade flows around the
world for the benefit of all nations and their citizens.

Unfortunately, we have now witnessed a withdrawal by
the United States from this leadership position allowing
China to now take this lead. Overhanging this are the

dark clouds of a trade war initiated by the United States
threatening to invoke tariffs against their trading
partners. Due to Scott’s geographic diversification with
manufacturing facilities in China, the United States and
Europe we are well placed if this plays out in the future.

Due to the ageing of the world’s population and the
accelerating reduction in the number of workers
available to participate in the workforce, the enquiries
being received by Scott for our automation solutions is
at an all time high.

In order for Scott to keep ahead of its competitors we
are always looking at new technologies around the
globe.

As a consequence of JBS investing in Scott we have
surplus cash of approximately $26 million. The
management team has been focussed on finding
acquisitions that will add to the capability of the various

technologies currently offered by Scott. The Directors
have set very strict criteria around this and to date there
have been in excess of thirty opportunities looked at,
with most not meeting the threshold. The opportunities
that are still being considered are either technologies
that will enhance, or be disruptive.

Chris Staynes, who has served as a Director of the
company for ten years has decided to retire and has not
offered himself for reappointment.

I would like to thank Chris for his contribution to the
company which has coincided with a period of great
change and growth. I have always valued Chris’ input at
Directors meetings, especially his considerable
engineering background.

I would like to thank Chris Hopkins and all of the Scott
employees for another very exciting year which has
seen substantial growth in the performance of the

company. The number of employees now exceeds 430
around the globe, all dedicated and hard working.

To my fellow Directors, thank you once again for your
support and guidance during the year. We have enjoyed
and value the contribution from our new Directors –
Andre, Brent, Edison and John, who bring their skill sets
to the Board table.

Finally, to our owners, I would like to thank you all for
your continued support which has again been rewarded
with an increased dividend of 10.0 cents per share. This
shows the confidence of your Directors in the future
growth and delivery of increased shareholder value
from the strategies that are being implemented by our
management team.

I now formally move the Annual Report, including the
Directors Report, Financial Statements and the Audit
Report of Scott Technology for the year ending 31
st

August 2017, be adopted and I invite our Managing
Director, Chris Hopkins, to address you and to second
the motion.

Thank you.