Institutions value Scott Tech stake

17:00, Aug 18 2011

Scott Technology has hailed the strong investment interest from institutions willing to take a stake in its South Island-based manufacturing assets.

The institutions have come on board as some individuals sold down stakes during Scott's $9.5 million capital raising which allowed larger stakes to be bought as parcels.

The Dunedin-based company, which builds automated and robotic systems for leading appliance manufacturers, has been looking to diversify its earnings streams and develop new products – including a process to be used within the dairy industry.

Chief executive Chris Hopkins said that at present, he could not talk further on the dairy industry innovation, which had been tested.

Meanwhile, Scott welcomed the addition of new shareholders, both institutional and individuals, as a rights issue that allowed rights trading and subsequent share transfers.

As a result, Inchinnam has ceased to be a substantial shareholder in Scott Technology, reducing its shareholding to 500,000 shares.

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Inchinnam is 100 per cent owned by Ian Devereux, the former owner of Scott Technology's Rocklabs subsidiary. The Rocklabs business was acquired by Scott Technology in April 2008.

Devereux remained a consultant to Rocklabs, and intended to hold the Scott Technology shares for an indefinite period.

Hopkins said representation now included Tower Investments (7.11 per cent); Oakwood Securities, representing a group of shareholders including former chairman Graeme Marsh, (13.54 per cent), and the ACC.

"Over the last 10 years, we've had very little institutional support ... just dabbles really, so now we've got substantial institutional support, which is great.

"I believe there is also a couple of fund managers also bought in ... we're [also] led to believe there's an investor in Switzerland that's taken a reasonable shareholding."

Scott shares last traded at $1.38 within a 12-month range of $1.06 to $1.54.

Grant Williamson, of brokerage Hamilton Hindin Greene, said the company's diversification after acquisitions would likely give it a less volatile earnings stream.

"Prospects look pretty encouraging for them ... in the past they have been very reliant on the manufacture of their appliance lines, and that has meant they've had very volatile earnings – there's been one good year and then a very bad year."

The conservative company was now better positioned.

Hopkins said that despite the turmoil on world markets, the company was seeing reasonably strong demand for all products. Most of the meat-processing lines were sold within New Zealand and Australia, so were not affected by the high New Zealand dollar versus the greenback. It was also seeing growth in the industrial automation sector.

BusinessDay.co.nz