Listed Dunedin company Scott Technology's profit margins have been squeezed by competition and the high New Zealand dollar, prompting a 9% revenue decline, but a strong forward order book and no debt bodes well for the remainder of the year.
Scott's revenue for its half year to February was down 9% at $26.81 million, with earnings before tax up 5% and similarly, after-tax profit up 5.6% at $2.19 million. Scott repeated last year's 2.5c per share dividend. Its shares were unchanged yesterday at $2.50.
Scott chairman Stuart McLauchlan said maintaining target profit margins had been ''challenging'', given the competitive environment for most of Scott's products, in combination with the higher value of the New Zealand dollar.
''[However] the company's forward workload is strong and includes project work for several appliance manufacturers, including one of our largest projects in US dollar terms, which were secured during this reporting period,'' he said in a statement.
He said Scott maintained a strong balance sheet, with no long-term debt and had net working capital of $16.59 million at the end of the half year.
Mr McLauchlan gave no specific financial guidance for the full-year result but said Scott was working closely with several key customers to convert opportunities into contracted, profitable work.
''In addition to a near-term focus on [profit] margins, we are also looking longer term by seeking to obtain recurring revenue streams,'' he said.
In reference to its electromagnet business and fledgling robotic milking machine (HTS-110 and Scott Milktech), Mr McLauchlan said Scott was ''essentially in the marketing investment phase''.
The milking system, which automatically places milking cups on cows in a rotary dairy shed, is scheduled for release late this year.
Scott's spending on research and development during the half year was more than $2.8 million, the costs of which, historically, it wrote off.
