2019 Half Year Announcement

Scott Technology Limited 
630 Kaikorai Valley Road 
Private Bag 1960 
Dunedin 9054 
New Zealand 
 +64 3 478 8110 
               www.scottautomation.com 
 
 
 
 
 
3 April 2019


Listed Company Relations
New Zealand Exchange Limited
PO Box 2959
Wellington


Dear Sir/Madam


COMMENTARY ON HALF YEAR REPORT TO 28 FEBRUARY 2019


The Directors are pleased to report the company has achieved revenues of $111.4 million for the six
months to 28 February 2019, an increase of 65% on the previous corresponding period (pcp) of $67.5
million. For this six month period the company’s operating EBITDA of $8.5 million increased 33% on the
pcp of $6.4 million while the net surplus before tax of $5.6 million was up 18%.

Highlights for the half year ended 28 February 2019:
6 Mths  6 Mths 

28 Feb 2019 
(Unaudited) 
28 Feb 2018 
(Unaudited)  

$000's $000's 
 
Revenue  111,426  67,472  +65% 
Operating EBITDA  8,476  6,390  +33% 
Net Surplus Before Tax  5,595  4,760  +18% 
Net Surplus After Tax attributable to 
shareholders  5,075  3,142  +62% 
 
Earnings per share (cents) 6.6 cps  4.2 cps  +57% 


The net surplus after tax attributable to shareholders increased 62% to $5.1 million, delivering earnings
per share of 6.6 cents, an increase of 57% on the 4.2 cents per share earned in the first half of last year.


Review of Operations

The benefit of recent acquisitions and our diversification strategy continues to deliver the results
expected. The company’s operations in the Americas and Europe / Asia produced strong revenue and
contribution increases. In America, the Transbotics’ automated guided vehicle business acquired last
year has been very successful in providing a base to support wider growth. In Europe, the Alvey
business, also acquired last year, is being integrated with our existing German business and has
provided growth and scale to our European operations.

Australasia manufacturing sales were up 6% although, due to heavy R&D spend and some project cost
overruns, contributions were down. One project for the meat industry suffered longer than expected
commissioning times. Two projects for the mining industry faced challenges brought on by deployment
of new advanced technology which were underestimated and has had a significant impact on this

    
 
©Scott Technology Limited | Confidential document 
 
period’s contribution. The new technologies add to our overall capability and have application into the
future. While disappointing, problems with projects are to be expected from time to time. However, with
the business now well diversified, these instances can now be absorbed by the Group.

The major factor contributing to the operating cash outflows of $9.1m during the period was an $11.4m
increase in our contract work in progress. Large fluctuations in work in progress are a normal part of
our business and have happened many times before. The current situation has been driven by the
stage of completion of several key projects and associated payment terms. Working capital
requirements for such projects changes as the projects are completed.

Final payments for businesses acquired and asset purchases, including progress payments for the
Dunedin building extensions, also utilised significant cash during the period.

The company continues to invest heavily in research and development across all markets. Where
possible, to share risk, Scott seeks to obtain support and funding for the development work undertaken.
A good example of this is the Salmon Pin Bone Removal project which has been contracted to our
customer partner as well as Government industry backed support. Government grants and tax credits
from the New Zealand and Australian governments also provide incentive to undertake and accelerate
research and development activities.

Dis-aggregation of revenues is required in this reporting period due to the introduction of new accounting
standards (NZ IFRS15). The impact has been shown in note 2 to the accounts.


Dividend

The Directors have declared an interim dividend of 4.0 cents, unchanged from 2018. The dividend will
be fully imputed, payable on 14 May 2019 and the Dividend Reinvestment Plan will apply.


Looking Ahead

We continue to see strong interest for smart automation solutions from customers across all industries
and countries. In some instances the driver is labour shortages and in others it is a need for increased
productivity, quality or safety. Global economics are not certain and we have seen disruption in multiple
markets caused by trade disputes, economic and trade sanctions, as well as European events, including
Brexit.

Despite these events, our business is seeing strong demand in most regions and we are fortunate that
our core capability of automation, robotics and vision can be applied across our regions and industries
to balance our overall workload.

A strong forward order book and sales pipeline provides confidence that we can deliver on our business
objectives. With our acquisition cycle virtually complete, our management team is focussed on
improving efficiencies and outcomes.

The company has been integrating widespread diverse business operations and processes after recent
acquisitions. With fast revenue growth (15% organic and 50% from acquisitions) the company is rapidly
changing. In addition to our efforts to streamline the business and drive operational and performance
improvements we will also focus on enhancing our service and spare parts business. This includes
further developing our after sales product and service offering to customers.


Yours faithfully




Stuart McLauchlan Chris Hopkins
Chairman Managing Director
Ph +64 3 47
7 8192 Ph +64 3 478 8110
 
 
 

    
 
©Scott Technology Limited | Confidential document 
 
About Scott 
At Scott we automate the future. The production line machinery we design and build deliver productivity gains 
and exceptional reliability to many of the world’s leading manufacturers. We also go a step beyond engineering 
production solutions to actually revolutionising entire industries – using robotics to automate manual processes 
and create genuine competitive advantage.  
 
For over 100 years Scott has looked to tomorrow and rapidly responded to shifting needs. Today, we have 
production bases in the United States, Belgium, Czech Republic, France, Germany, China, Australia and New 
Zealand, customers in 88 countries, and a real commitment to developing new technology and bringing it to 
market. Across everything we do you will discover true quality, advanced engineering and a renowned design 
aesthetic.  
 
Scott. Quality that lasts. Quality that inspires.

---

SCOTT TECHNOLOGY LIMITED
STATEMENT OF COMPREHENSIVE INCOME
For the Six Months Ended 28 February 2019
6 mths 6 mths 12 mths
28 Feb 19 28 Feb 18 31 Aug 18
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s

Revenue 111,426 67,472 181,779
Other income 1,237 840 1,568
Share of joint ventures’ net surplus 182 115 510

Raw materials, consumables used and other expenses (68,719) (39,308) (109,381)
Employee benefits expense (35,650) (22,729) (55,171)
────── ─────── ───────
OPERATING EARNINGS BEFORE INTEREST, TAX,
DEPRECIATION AND AMORTISATION
(OPERATING EBITDA) 8,476 6,390 19,801
Due diligence & acquisition costs - - (496)
────── ─────── ───────
EARNINGS BEFORE INTEREST, TAX,
DEPRECIATION AND AMORTISATION (EBITDA) 8,476 6,390 19,305

Depreciation and amortisation (2,423) (1,772) (4,225)
Finance costs (472) (71) (403)
Interest received 14 213 369
────── ─────── ───────
NET SURPLUS BEFORE TAXATION 5,595 4,760 15,046

Tax credit – research & development tax credits (Australia) 1,112 - 563

Taxation expense (1,492) (1,605) (4,837)
────── ─────── ───────
NET SURPLUS FOR THE PERIOD AFTER TAX 5,215 3,155 10,772
══════ ═══════ ═══════

Other Comprehensive Income
Cash flow hedges 370 - (370)
Translation of foreign operations 1,261 228 (1,449)
────── ────── ──────
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD NET OF TAX 6,846 3,383 8,953
══════ ══════ ══════

Net surplus for the period is attributable to:
Members of the parent entity 5,075 3,142 10,768
Non controlling interest 140 13 4
────── ─────── ───────
5,215 3,155 10,772
══════ ═══════ ═══════

Total comprehensive income is attributable to:
Members of the parent entity 6,706 3,370 8,949
Non controlling interest 140 13 4
────── ────── ──────
6,846 3,383 8,953
══════ ══════ ══════


Cents Per Ordinary Share

Earnings per share (weighted average shares on issue):
Basic 6.6 4.2 14.3
Diluted 6.6 4.2 14.3

Net tangible assets per ordinary share (at period end):
Basic 52.1 76.9 47.0
Diluted 52.1 76.9 47.0

SCOTT TECHNOLOGY LIMITED
STATEMENT OF CHANGES IN EQUITY
For the Six Months Ended 28 February 2019






Six Months Ended 28
February 2019

Fully Paid
Ordinary
Shares
(Unaudited)
$’000s


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

Non
Controlling
Interest

(Unaudited)
$’000s

Cash Flow
Hedge
Reserve
(Unaudited)
$’000s



Total
(Unaudited)
$’000s


Balance at 31 August 2018 75,647 31,335 (3,716) 51 (370) 102,947
Change in accounting policy
(refer note 2)

-

(451)

-

-

-

(451)
Net surplus for the period after
tax

-


5,075

-

140


-

5,215

Other comprehensive income
for the period net of tax

-

-

1,261

-

370

1,631
Dividends paid (6.0 cents per
share)

-

(4,554)

-

-

-

(4,554)
Issue of ordinary shares under
dividend reinvestment plan 2,590 - - - - 2,590
Balance at 28 February 2019
78,237 31,405 (2,455) 191 - 107,378






Six Months Ended 28
February 2018

Fully Paid
Ordinary
Shares
(Unaudited)
$’000s


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

Non
Controlling
Interest

(Unaudited)
$’000s

Cash
Flow Hedge
Reserve
(Unaudited)
$’000s



Total
(Unaudited)
$’000s


Balance at 31 August 2017 71,312 28,064 (2,267) 47 - 97,156
Net surplus for the period after
tax

-


3,142

-

13


-

3,155

Other comprehensive income
for the period net of tax

-

-

228

-

-

228
Dividends paid (6.0 cents per
share)

-

(4,481)

-

-

-

(4,481)
Issue of ordinary shares under
dividend reinvestment plan 2,557 - - - - 2,557
Balance at 28 February 2018
73,869 26,725 (2,039) 60 - 98,615







Twelve Months Ended 31
August 2018

Fully Paid
Ordinary
Shares
(Audited)
$’000s


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

Non
Controlling
Interest

(Audited)
$’000s

Cash
Flow Hedge
Reserve
(Audited)
$’000s



Total
(Audited)
$’000s


Balance at 31 August 2017 71,312 28,064 (2,267) 47 - 97,156
Net surplus for the period after
tax

-


10,768

-

4


-


10,772

Other comprehensive income
for the period net of tax

-


-

(1,449)

-

(370)


(1,819)
Dividends paid (10 cents per
share)

-


(7,497)

-

-


-


(7,497)

Issue of ordinary shares under
dividend reinvestment plan 4,335 - - - - 4,335
Balance at 31 August 2018
75,647 31,335 (3,716) 51 (370) 102,947

SCOTT TECHNOLOGY LIMITED
BALANCE SHEET
As at 28 February 2019
6 mths 6 mths 12 mths
28 Feb 19 28 Feb 18 31 Aug 18
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s
CURRENT ASSETS
Cash and cash equivalents - 21,682 12,473
Trade debtors 32,611 20,053 37,064
Other financial assets 271 419 1,229
Sundry debtors and prepayments 4,192 2,429 3,523
Inventories 21,130 19,214 22,825
Contract work in progress 14,448 - 3,077
Receivable from joint ventures and associates 1,516 2,224 2,315
Plant and equipment held for sale 345 345 345
─────── ────── ───────
74,513 66,366 82,851
NON CURRENT ASSETS
Property, plant and equipment 15,991 14,071 16,845
Capital work in progress 1,590 254 254
Investment in joint ventures and associates 1,109 1,232 928
Other financial assets 51 - 350
Goodwill 53,780 29,987 53,780
Deferred tax asset - 90 -
Intangible assets 14,639 10,536 15,103
─────── ─────── ───────
87,160 56,170 87,260
─────── ─────── ───────
TOTAL ASSETS 161,673 122,536 170,111
═══════ ═══════ ═══════
CURRENT LIABILITIES
Bank overdraft 5,673 - -
Trade creditors and accruals 24,119 8,680 30,322
Finance lease liabilities 185 20 187
Other financial liabilities 359 210 2,013
Employee entitlements 9,611 5,323 11,286
Provision for warranty 1,838 1,291 1,857
Payable to joint ventures 557 1,167 673
Taxation payable 610 2,152 2,738
Contract work in progress - 3,447 -
Current portion of term loans 3,996 - 3,321
Deferred settlement on purchase of business 1,504 - 6,275
─────── ─────── ───────
48,452 22,290 58,672
NON CURRENT LIABILITIES
Other financial liabilities 797 - 964
Employee entitlements 984 1,612 1,643
Finance lease liability 98 19 159
Deferred tax liability 1,060 - 1,638
Term loans 2,904 - 4,088
─────── ─────── ───────
5,843 1,631 8,492
EQUITY
Share capital 78,237 73,869 75,647
Retained earnings 31,405 26,725 31,335
Foreign currency translation reserve (2,455) (2,039) (3,716)
Cash flow hedge reserve - - (370)
──────── ──────── ────────
Equity attributable to equity holders of the parent 107,187 98,555 102,896
Non controlling interest 191 60 51
──────── ──────── ────────
TOTAL EQUITY 107,378 98,615 102,947
──────── ──────── ────────
TOTAL LIABILITIES & EQUITY 161,673 122,536 170,111
════════ ════════ ════════

SCOTT TECHNOLOGY LIMITED
STATEMENT OF CASHFLOWS
For the Six Months Ended 28 February 2019
Notes 6 mths 6 mths 12 mths
28 Feb 19 28 Feb 18 31 Aug 18
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s

CASH FLOWS FROM OPERATING ACTIVITIES

Cash was provided from/(applied to):
Receipts from operations 105,936 73,307 178,338
Interest received 14 213 369
Net GST received/(paid) (127) (230) (825)
Payments to suppliers and employees (111,180) (73,547) (172,597)
Interest paid (472) (71) (403)
Taxation paid (3,230) (2,265) (4,267)
─────── ─────── ───────
Net cash inflow/(outflow) from operating activities 3 (9,059) (2,593) 615

CASH FLOWS FROM INVESTING ACTIVITIES

Cash was provided from/(applied to):
Purchase of property, plant, equipment and intangible assets (2,929) (797) (2,434)
Sale of property, plant and equipment 525 39 21
Advance from joint ventures 683 305 420
Purchase of business (4,830) - (14,479)
────── ────── ──────
Net cash outflow from investing activities (6,551) (453) (16,472)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash was provided from/(applied to):
Repayment of borrowings (572) (18) (257)
Dividends paid (1,964) (1,924) (3,162)
Proceeds from borrowings - - 5,079
─────── ─────── ───────
Net cash inflow/(outflow) from financing activities (2,536) (1,942) 1,660
─────── ─────── ───────
Net decrease in cash held (18,146) (4,988) (14,197)

Add cash and cash equivalents at beginning of the period 12,473 26,670 26,670
─────── ─────── ───────
Balance at end of the period (5,673) 21,682 12,473
═══════ ═══════ ═══════

Comprised of:
Cash and cash equivalents/(bank overdraft) (5,673) 21,682 12,473
═══════ ═══════ ═══════

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019

1. FINANCIAL STATEMENTS

Statement of Compliance

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

These financial statements have been prepared using the same accounting policies as the previously published annual
financial statements as at 31 August 2018, except as detailed below. These interim financial statements should be read
in conjunction with the policies disclosed in the annual financial statements.

Application of NZ IFRS-15 Revenue From Contracts With Customers

The Group adopted NZ IFRS-15 Revenue from Contracts with Customers for the first time on 1 September 2018. The
Group applied NZ IFRS-15 retrospectively with the cumulative effect of applying the standard for the first time recognised
at the initial date of application (1 September 2018). Comparative figures for the period ended 28 February 2018 have
therefore not been restated.

Application of NZ IFRS-15 Revenue from Contracts with Customers, which became effective on 1 September 2018,
resulted in certain long and short term projects being treated as the sale of standard equipment. This has resulted in an
increase in revenue and expenses from operations, and an increase in net surplus before taxation for the six months
ended 28 February 2019.

The Group recognises revenue from the following major sources:
 Long term contracts;
 Standard equipment;
 Short term projects
 Service work.

Revenue recognition – long term contracts

The Group designs, manufactures and sells customised automation and robotic systems for use in a wide range of
industries under fixed-price contracts. The contract period is in excess of three months and is often in excess of twelve
months. Long term contracts contain an enforceable right to payment for performance completed to date.

Policy Revenue on long term contracts is recognised over the term of the contract period 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 revenue is the value attributed to work completed, which includes direct costs,
overhead and profit, where this is allowable under the contract. At the point at which a project is
expected to be loss making, losses would be recognised immediately in profit or loss.

A receivable is recognised and the customer is obligated to pay a fixed amount when a contractual
milestone is met. If the revenue recognised by the Group exceeds the payments, a contract asset is
recognised. If the payments exceed the revenue recognised, a contract liability is recognised.

The Group’s obligation to repair or replace faulty products under the standard warranty terms is
recognised as a provision.

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 revenue and profit to date
may also be over or under estimated.

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019

1. FINANCIAL STATEMENTS (Cont)

Revenue recognition – standard equipment

The Group manufactures and sells a range of standalone automation and robotic equipment for use in a wide range of
industries, including:

 Rock crushers, pulverisers, ringmills and reference materials under the “Rocklabs” brand for use by mining
companies and laboratories
 Bandsaw safety equipment under the “Bladestop” brand, primarily for use by meat processors
 High temperature superconductor current leads under the “HTS-110” brand
 New and refurbished industrial robots under the “RobotWorx” brand
 Spare parts and wear relating to equipment supplied by the Group

Policy Revenue is recognised in full at a point in time when control of the products has transferred, being
either when the products are shipped to or received by the customer, or installed at the customer’s
premises, depending on the terms of the contract.

A receivable is recognised when either a deposit is due on receipt of a customer’s order or when the
products are shipped to the customer, as this is the point in time that the consideration is
unconditional because only the passage of time is required before the payment is due.
The Group’s obligation to repair or replace faulty products under the standard warranty terms is
recognised as a provision.

Revenue recognition – short term projects

The Group undertakes short term projects (less than three months) for the design, manufacture and sale of customised
small scale automation and robotic systems for use in a wide range of industries under fixed-price contracts. In some
cases the short term project contracts contain an enforceable right to payment for performance completed to date.

Policy Where the short term project contract contains an enforceable right to payment for performance
completed to date, revenue for short term projects is recognised over time on the same basis as for
long term contracts (as noted above).

Where the short term project contract does not contain an enforceable right to payment for
performance completed to date, revenue for short term projects is recognised in full at a point in time
when control of the products has transferred, being either when the products are shipped to or
received by the customer, or installed at the customer’s premises, depending on the terms of the
contract. A receivable is recognised when either a deposit is due on receipt of a customer’s order or
when the products are shipped to the customer, as this is the point in time that the consideration is
unconditional because only the passage of time is required before the payment is due.

The Group’s obligation to repair or replace faulty products under the standard warranty terms is
recognised as a provision.

Revenue recognition – service work

The Group earns revenue from after sales service activities associated with the equipment manufactured and sold by the
Group, including repairs, routine or scheduled maintenance, upgrades, remote monitoring and the operation of a 24/7
helpline. Most of these activities are on an ad hoc, as required basis, while some of these activities are covered by an
agreement for services to be provided over a specified period of time.

Policy Where the service contract contains an enforceable right to payment for performance completed to
date, revenue for service is recognised over time on the same basis as for long term contracts (as
noted above).

Where there is no formal service contract (eg where the service work is being undertaken on an ad
hoc basis) or the service contract does not contain an enforceable right to payment for performance
completed to date, revenue for service work is recognised in full at a point in time when the service
is completed. A receivable is recognised when the service is completed as this is the point in time
that the consideration is unconditional because only the passage of time is required before the
payment is due.

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019

1. FINANCIAL STATEMENTS (Cont)

The Group’s obligation to repair or replace faulty products under the standard warranty terms is
recognised as a provision.


Refer to note 2 for further information on the impact of the adoption of NZ IFRS-15 on the period ended 28 February
2019.

NZ IFRS-9 (2014) Financial Instruments

Application of NZ IFRS-9 (2014) Financial Instruments, which became effective for the Group on 1 September 2018,
requires an expected credit loss model, as opposed to an incurred credit loss model under NZ IAS-39. The expected
credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at
each reporting date to reflect changes in credit risk since initial recognition. It is no longer necessary for a credit event to
have occurred before credit losses are recognised.

Under NZ IFRS-9 (2014), greater flexibility has been introduced to the types of transactions eligible for hedge
accounting, specifically broadening the types of instruments that qualify as hedging instruments and the types of risk
components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been
overhauled and replaced with the principle of an “economic relationship”. Retrospective assessment of hedge
effectiveness is also no longer required.

Impairment - Financial assets measured at amortised cost being cash and cash equivalents and trade receivables are
subject to the impairment provisions of NZ IFRS-9 (2014).

The Group applies the simplified approach to recognise lifetime expected credit losses for financial assets as required or
permitted by NZ IFRS-9 (2014). In general, the application of the expected credit loss model of NZ IFRS-9 (2014)
results in earlier recognition of credit losses and increases the amount of loss allowance recognised for those items.

Hedge Accounting - As the new hedge accounting requirements align more closely with the Group’s risk management
policies, with generally more qualifying hedging instruments and hedged items, an assessment of the Group’s current
hedging relationships indicated that they qualified as continuing hedging relationships upon application of NZ IFRS-9
(2014). Similar to the Group’s current hedge accounting policy, the Directors do not intend to exclude the forward
element of foreign currency forward contracts from designated hedging relationships.

No material impact on these financial statements has been recognised as a result of adopting this standard.

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019

2. DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS

The Group derives revenue from the transfer of goods and services over time and at a point in time in the following major
geographic manufacturing regions (segments) and revenue streams. Revenue from short term projects and service has
been combined as they are of a similar nature.

Six Months Ended Australasia Manufacturing Americas Manufacturing
28 February 2019
(Unaudited) Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s
Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s

Segment revenue 26,195 20,068 5,442 51,705 4,650 11,316 288 16,254
Inter-segment revenue 296 (1,984) 146 (1,542) - 1,694 - 1,694
Revenue from external
customers

26,491

18,084

5,588

50,163

4,650

13,010

288

17,948

Timing of revenue
recognition

- At a point in time - 18,084 5,588 23,672 - 13,010 288 13,298
- Over time 26,491 - - 26,491 4,650 - - 4,650

26,491
18,084 5,588 50,163 4,650 13,010 288 17,948


Asia & Europe Manufacturing Total

Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s
Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s

Segment revenue 31,230 2,941 9,296 43,467 62,075 34,325 15,026 111,426
Inter-segment revenue (296) 290 (146) (152) - - - -
Revenue from external
customers

30,934

3,231

9,150

43,315

62,075

34,325

15,026

111,426

Timing of revenue
recognition

- At a point in time - 3,231 9,150 12,381 - 34,325 15,026 49,351
- Over time 30,934 - - 30,934 62,075 - - 62,075

30,934 3,231 9,150 43,315 62,075 34,325 15,026 111,426

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019


2. DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS (Cont)


Six Months Ended Australasia Manufacturing Americas Manufacturing
28 February 2018
(Unaudited) Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s
Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s

Segment revenue 26,172 18,386 2,259 46,817 - 11,405 - 11,405
Inter-segment revenue (47) 24 573 550 - (24) - (24)
Revenue from external
customers

26,125

18,410

2,832

47,367

-

11,381

-

11,381

Timing of revenue
recognition

- At a point in time - 18,410 2,832 21,242 - 11,381 - 11,381
- Over time 26,125 - - 26,125 - - - -

26,125 18,410 2,832 47,367 - 11,381 - 11,381


Asia & Europe Manufacturing Total

Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s
Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s

Segment revenue 6,585 115 2,550 9,250 32,757 29,906 4,809 67,472
Inter-segment revenue 47 - (573) (526) - - - -
Revenue from external
customers

6,632

115

1,977

8,724

32,757

29,906

4,809

67,472

Timing of revenue
recognition

- At a point in time - 115 1,977 2,092 - 29,906 4,809 34,715
- Over time 6,632 - - 6,632 32,757 - - 32,757

6,632 115 1,977 8,724 32,757 29,906 4,809 67,472

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019


2. DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS (Cont)


Twelve Months Ended Australasia Manufacturing Americas Manufacturing
31 August 2018
(Audited) Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s
Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s

Segment revenue 53,416 40,010 8,575 102,001 2,473 22,945 - 25,418
Inter-segment revenue 1,189 (3,723) 1,025 (1,509) - 3,723 - 3,723
Revenue from external
customers

54,605

36,287

9,600

100,492

2,473

26,668

-

29,141

Timing of revenue
recognition

- At a point in time - 36,287 9,600 45,887 - 26,668 - 26,668
- Over time 54,605 - - 54,605 2,473 - - 2,473

54,605 36,287 9,600 100,492 2,473 26,668 - 29,141


Asia & Europe Manufacturing Total

Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s
Long
Term
Contracts
$’000s
Standard
Equipment
$’000s
Short
Term
Projects
& Service
$’000s
Total
$’000s

Segment revenue 45,624 1,396 7,340 54,360 101,513 64,351 15,915 181,779
Inter-segment revenue (1,189) - (1,025) (2,214) - - - -
Revenue from external
customers

44,435

1,396

6,315

52,146

101,513

64,351

15,915

181,779

Timing of revenue
recognition

- At a point in time - 1,396 6,315 7,711 - 64,351 15,915 80,266
- Over time 44,435 - - 44,435 101,513 - - 101,513

44,435 1,396 6,315 52,146 101,513 64,351 15,915 181,779


The Group adopted NZ IFRS-15 Revenue from Contracts with Customers for the first time on 1 September 2018. The
Group applied NZ IFRS-15 using the cumulative retrospective approach with the cumulative effect of applying the
standard for the first time recognised at the initial date of application (1 September 2018). Application of NZ IFRS-15
Revenue from Contracts with Customers, which became effective on 1 September 2018, resulted in a change in timing
of revenue recognition for certain short term projects previously recognised on a percentage of completion basis and
now being recognised at a point in time and treated as the sale of standard equipment. This has resulted in an increase
in revenue and expenses from operations, and an increase in net surplus before taxation for the six months ended 28
February 2019. The adjustments to revenue and expenses totalling a net profit increase of $451,000 were recognised in
the prior period under NZ IAS-18 and have been adjusted through opening equity to allow the later revenue recognition
in the current period to comply with the amended accounting policy under NZ IFRS-15.

The table below shows the amount by which the Statement of Comprehensive Income is affected in the current reporting
period by NZ IFRS-15 as compared to NZ IAS-18 and the related interpretations that were in effect before the change.

NZ IAS-18
28 Feb 19
(Unaudited)
$’000s
Adjustment
28 Feb 19
(Unaudited)
$’000s
NZ IFRS-15
28 Feb 19
(Unaudited)
$’000s


Revenue 109,963 1,463 111,426
Other income and share of joint ventures’ net surplus 1,419 - 1,419
Expenses from operations (103,357) (1,012) (104,369)

8,025 451 8,476

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019


3. NOTES TO THE CASHFLOW STATEMENT
6 mths 6 mths 12 mths
28 Feb 19 28 Feb 18 31 Aug 18
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s

Net surplus for the period 5,215 3,155 10,772

Adjustments for non-cash items:
Depreciation and amortisation 2,423 1,772 4,225
Net loss/(gain) on sale of property, plant and equipment (36) 6 21
Deferred tax (722) 879 1,541
Share of net surplus of joint ventures and associates (182) (115) (510)

Add/(less) movement in working capital:
Trade debtors 4,453 (2,220) (19,231)
Other financial assets - derivatives 1,257 (275) (1,435)
Sundry debtors and prepayments (669) (1,482) (2,576)
Inventories (net of IFRS-15 adjustment) 1,244 (2,942) (6,553)
Contract work in progress (11,371) 7,555 1,031
Taxation payable (2,128) (1,539) (953)
Trade creditors and accruals (6,203) (7,910) 13,732
Other financial liabilities - derivatives (1,307) 209 2,463
Employee entitlements (2,334) 95 6,089
Provision for warranty (19) (9) 557

Movements in working capital disclosed in
investing/financing activities:
Movement in foreign exchange translation reserve relating to
working capital 1,261 228 (1,449)
Working capital relating to purchase of business and
non controlling interest 59 - (7,109)
─────── ─────── ───────
Net cash inflow/(outflow) from operating activities (9,059) (2,593) 615
═══════ ═══════ ═══════



4. CONTINGENT LIABILITIES
6 mths 6 mths 12 mths
28 Feb 19 28 Feb 18 31 Aug 18
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s

Payment guarantees and performance bonds 8,791 15,068 12,432
Stock Exchange bond 75 75 75
Rental bonds 278 265 -
Maximum contract penalty clause exposure 7,417 3,181 6,979

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

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

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

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019


5. SEGMENT INFORMATION

5.1 Products and Services from which Reportable Segments Derive Their Revenues

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

 Australasia Manufacturing
 Americas Manufacturing
 Asia and Europe Manufacturing

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

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

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

5.2 Segment Revenues and Results

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


Six Months Ended Australasia Americas Asia & Europe
28 February 2019 Manufacturing Manufacturing Manufacturing Unallocated Total
(Unaudited) $’000s $’000s $’000s $’000s $’000s

Revenue 50,163 17,948 43,315 - 111,426
═══════ ═══════ ═══════ ═══════ ═══════

Operating profit/(loss) 5,473 2,778 3,180 - 11,431
Depreciation and amortisation (1,237) (77) (858) (251) (2,423)
Share of net surplus/(deficit) of joint
ventures (84) 250 16 - 182
Interest revenue - - 6 8 14
Central administration costs
and foreign exchange - - - (3,137) (3,137)
Finance costs - (4) (202) (266) (472)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) before taxation 4,152 2,947 2,142 (3,646) 5,595
Taxation expense (633) (451) (321) 1,025 (380)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) after taxation 3,519 2,496 1,821 (2,621) 5,215
═══════ ═══════ ═══════ ═══════ ═══════

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019


5. SEGMENT INFORMATION (Cont)

5.2 Segment Revenues and Results (Cont)



Six Months Ended Australasia Americas Asia & Europe
28 February 2018 Manufacturing Manufacturing Manufacturing Unallocated Total
(Unaudited) $’000s $’000s $’000s $’000s $’000s

Revenue 47,367 11,381 8,724 - 67,472
═══════ ═══════ ═══════ ═══════ ═══════

Operating profit/(loss) 7,600 716 254 - 8,570
Depreciation and amortisation (1,242) (70) (217) (243) (1,772)
Share of net deficit of joint
ventures 110 42 (37) - 115
Interest revenue 1 - 1 211 213
Central administration costs
and foreign exchange - - - (2,295) (2,295)
Finance costs (1) - - (70) (71)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) before taxation 6,468 688 1 (2,397) 4,760
Taxation expense (2,107) (185) - 687 (1,605)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) after taxation 4,361 503 1 (1,710) 3,155
═══════ ═══════ ═══════ ═══════ ═══════


Twelve Months Ended Australasia Americas Asia & Europe
31 August 2018 Manufacturing Manufacturing Manufacturing Unallocated Total
(Audited) $’000s $’000s $’000s $’000s $’000s

Revenue 100,492 29,141 52,146 - 181,779
═══════ ═══════ ═══════ ═══════ ═══════

Operating profit/(loss) 19,029 3,459 1,745 - 24,233
Fair value gain on purchase of business - - - (496) (496)
Depreciation and amortisation (2,633) (164) (941) (487) (4,225)
Share of net surplus of joint
ventures 268 240 2 - 510
Interest revenue 1 12 - 356 369
Central administration costs
and foreign exchange - - - (4,942) (4,942)
Finance costs (1) (8) (187) (207) (403)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) before taxation 16,664 3,539 (619) (5,776) 15,046
Taxation expense (4,765) (1,049) (178) 1,718 (4,274)
─────── ─────── ─────── ─────── ───────
Net profit/(loss) after taxation 11,899 2,490 (441) (4,058) 10,772
═══════ ═══════ ═══════ ═══════ ═══════


Revenue reported above represents revenue generated from external customers. Inter-segment sales were $2.1 million
for the six months ended 28 February 2019 (six months ended 28 February 2018: $0.9 million).

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

SCOTT TECHNOLOGY LIMITED
NOTES TO AND FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
For the Six Months Ended 28 February 2019

6. FINANCIAL INSTRUMENTS

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

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

Fair value of derivative financial instruments 6 mths 6 mths 12 mths
28 Feb 19 28 Feb 18 31 Aug 18
(Unaudited) (Unaudited) (Audited)
$’000s $’000s $’000s
Other financial assets - derivatives:
Foreign currency forward contracts held as effective
fair value hedges - 210 -
Foreign exchange derivatives - 145 -
Foreign exchange collar option derivatives - 64 -
Fair value hedge of open firm commitments 322 - 1,579

Other financial liabilities - derivatives:
Fair value hedge of open firm commitments - (210) -
Foreign exchange derivatives (88) - (271)
Foreign currency forward contracts held as cash flow hedges - - (513)
Interest rate swap contracts (746) - (614)
Foreign currency forward contracts held as effective fair value hedges (322) - (1,579)
─────── ─────── ───────
(834) 209 (1,398)
═══════ ═══════ ═══════

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

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

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

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

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


7. ACQUISITION ACCOUNTING

On 31 January 2019 the Company announced the purchase of certain assets of the spares and sundries part of the
Milmeq Meat Slaughter business. The sale and purchase agreement was executed in March 2019 for the purchase of
inventory, work in progress and plant for a total value of $0.3 million.

There has been no adjustments to the provisional fair values on acquisition of the Alvey and Transbotics businesses
undertaken during the year ended 31 August 2018. These figures remain provisional as at 28 February 2019.


8. SUBSEQUENT EVENTS

On 3 April 2019 the Board of Directors approved an interim dividend of four cents per share with full imputation credits
attached to be paid for the 2019 year (2018 interim dividend: four cents per share). The Dividend Reinvestment Plan
reintroduced by the Company in 2017 will apply to this payment.