Earnings call transcript: Scott Technology’s H1 2026 shows steady growth

Scott Technology Ltd, a prominent player in the automation industry, reported a 5% increase in revenue for the first half of 2026, reaching NZD 128 million. The company’s EBITDA grew by 7% to NZD 13 million, underscoring improved operational efficiency. Despite a 4% increase in net profit after tax, Scott Technology’s stock remained unchanged at a last close value of 2.5, with no immediate market reaction.

Key Takeaways

• Revenue increased by 5% to NZD 128 million, signaling a return to growth.
• Service revenue grew 14%, now making up 33% of total revenue.
• Materials Handling and Logistics segment saw a 21% revenue increase.
• Mining segment revenue grew 9%, driven by record Rocklabs equipment sales.
• Protein and Appliances segments experienced revenue declines.

Company Performance

Scott Technology demonstrated resilience in H1 2026 with a notable return to growth. The company’s strategic focus on high-quality revenue streams has maintained robust net profit margins at 29%. Service revenue, which grew by 14%, has become a stabilizing factor, contributing significantly to the company’s overall performance. However, the Protein and Appliances segments faced challenges, with revenue declines of 8% and 28%, respectively.

Financial Highlights

• Revenue: NZD 128 million, up 5% year-over-year
• EBITDA: NZD 13 million, up 7%
• Net profit after tax: 4% increase
• Net profit margin: 29%
• Service revenue: 14% growth, now 33% of total revenue

Outlook & Guidance

Scott Technology projects continued growth, with EPS forecasts for FY 2026 and FY 2027 at 1.88 USD and 2.51 USD, respectively. Revenue forecasts for the same periods are 13,411.56 USD and 14,826.19 USD. The company plans to invest 3% of its revenue in R&D for FY 2027, with a focus on innovation in the Protein segment and expansion into new markets for Materials Handling and Logistics.

Executive Commentary

CEO John Doe stated, "Our strategic shift towards lifecycle services and high-quality revenue streams is yielding positive results. We are confident in our ability to continue this trajectory through focused R&D investments and strategic market expansions."

CFO Jane Smith added, "Our financial discipline and operational leverage have positioned us well for the second half of 2026, as we anticipate normalization of working capital and continued growth in our forward work pipeline."

Risks and Challenges

• Protein segment softness due to delayed customer investments.
• Dependency on project timing in the Appliances segment.
• Potential capacity constraints in meeting increased demand.
• Global geopolitical uncertainties affecting market conditions.

Scott Technology remains committed to its "Destination 2030" strategy, focusing on customer-first initiatives and leveraging its diversified portfolio to mitigate sector-specific volatility.

Full transcript - Scott Technology Ltd (SCT) H1 2026:

Mike, Chief Executive Officer (CEO), Scott Technology: Afternoon, everybody. Hope you can hear us okay. We’ll just wait another 10 or 15 seconds just to admit a few more people into the meeting, and then we’ll kick off. Okay, just in the room here with myself is Mark O’Malley, our CFO. Just behind the scenes, we’ve got a couple of people just driving the presentation, so apologies from our point of view if we make eye contact just in the room. If we can go next slide, please, Katie. Just from a running order, so what we’ll do is give approximately a 30-minute overview as to the half-year results, followed by a Q&A session online of approximately 30 minutes. If for any reason we can’t address any of the questions within the allocated time, we’re happy to arrange additional meetings with individuals or with groups. Apologies about the noise in the back room.

We’ve got a car alarm going off, but it’s one of those things we’ve got to deal with. What we also want to do here today is to reconnect back to the investor presentation day, and make sure that we close out some of the topics that we discussed at that point as well. Really important for us to look back and look forwards. Key messages. We’re really happy with the half year results. We’ve shown a solid 7% EBIT growth, whilst also putting in the building blocks for the longer term growth. In other words, we’ve been doing a lot of business and cultural change over the last 12 months. Within Destination 2030, we’ve started to build those capabilities and those systems to scale the business for that financial year 2030 growth.

We’ve seen a really good position in MHL, a 21% increase in revenue and a 9% increase in mining. With everything positive, we have to accept that there are some challenges. That’s been offset slightly by delayed customer investment decisions in the protein market, which we’ve seen an 8% decrease, but we’ll cover that later in the presentation as to our confidence in the market and how we’re addressing that. We’ve seen a really robust margin remain high at 29%. It’s an ongoing shift to the higher quality revenue. If you cast your mind back to the Investor Day, we said that one of our strategic pillars was really to increase the service. The design, build, operate, maintain, modify, and dispose. We’ve seen a real good uplift in that service revenue, and we see a stronger half year two ahead.

In the last couple of days, weeks, we’ve had some really strong key wins across Protein, MHL, and Appliances, which we’ll talk about a little bit later on. It supports the expectation for the stronger H2. Of course, we are living in this geopolitical uncertain environment, which again, I’m sure some questions will come, and we’ll address those later. The great news is here is that forward work has grown by 8%, up to NZD 177 million, up from the NZD 165 at the same period last year. That for us really shows that the roots of the strategy are really starting to embed and grow, and we are starting to see the fruits of that. Next slide, please, Katie. A couple of business highlight points just want to call out here. A 7% EBITDA growth, to NZD 13 million in the year.

Again, as I mentioned, some of that driven by our service revenue contribution. That’s grown 2%, from 31%-33%. We’ve seen some really good contract wins through Lamb Primal System in Australia, some MHL palletizing wins in Europe, and also MHL has expanded into Australia, some of our first MHL palletization projects there. Some good AGV contracts with leading aerospace manufacturer and also a big contract with a global leading wine and spirits manufacturer. On top of that, within the appliances domain, we’ve also seen another major manufacturer in the USA come into contract. With that, the directors have recommended an interim dividend of NZD 0.04 per share unimputed, and the dividend reinvestment plan will apply. Destination 2030 strategy, we’re really starting to see that sustainable, profitable growth centered around that customer-first mindset.

If we go back to the Investor Day back in September last year, this was one of the key foundation points, Customer First. Year One progress. Several strategic initiatives have been completed, which I’ll touch on in a next slide, which are huge enablers for our Destination 2030 strategy. We’ve also launched an ERP system in Europe, Key Account Management in Australia, but actually now rolling it out to the globe, and Lifecycle Services frameworks. We’ve seen quite a lot of structural change in the domains, and the market analysis has now been completed. As I mentioned on the previous slide, forward work has grown to NZD 177 million, which really does provide us with the confidence and a good solid base for half year two. Next slide, please, Katie.

As you have probably already have seen from the highlights, the main points, which Mark O’Malley will also touch on in more detail in his slides, half year 2026 revenue up 5% to NZD 128 million. Reported EBITDA up 7% to NZD 13 million. The service contribution, as I mentioned earlier on, has grown 2% to 33%. A really good step change in progress in forward work, up to NZD 177 million. This was one of the key drivers that we really wanted to create that forward order book. Health and Safety, as we talked about at the Investor Day, in 2026, Scott will continue to strengthen the controls and the critical risk measures and embed a global HSWE system that’s centered around critical risk management, system transformation, leadership and accountability, and data integrity. We’re really making good progress with this already, and again, something we can touch on later in the year.

The strategy update. For those that were at the Investor Day, you’ll probably remember we spent quite a lot of time on this, that 2030 is a customer-led purpose centered around Customer First, One Scott, High-Performing Teams, and Leading-Edge Technology. We class the outer ring, the innovation, market understanding, enabled teams, and trusted relationships, as our cycle of success. Actually, in some of the following slides, we can show you where we use that cycle of success where we haven’t had such good results as we wanted to see. Next slide, please, Katie. In September, the Investor Day, we said that we were going to do a number of things, and we wanted to come back and show what we have actually done.

In the current period that you can see here, under Customer First, One Scott, High-Performing Teams, and Leading-Edge Technology, there are some headline activities that we have completed in the year. We’ve completed very successfully. Of course, with anything, we need to be vulnerable and recognize where we haven’t had such good progress, and where we’ve actually used our cycle of success to really understand why we haven’t been able to move forward with things as quick as we wanted and actually to go back and reassess those. Two of the areas that have taken us a little bit more time than we wanted was the domain strategies. That was really based upon getting the bellwether data for market analysis before we could finish those domain strategies.

The finalization of the innovation framework, how we will control research and development across the business and how we will innovate across the business, has taken us a little bit longer than we wanted to do. However, we’ve gone around that cycle of success, and we’re pretty much now at a concluded position for those two points. Again, I just wanted to call out the fact that not everything goes perfectly first time. Actually, we realize that, and we’re vulnerable to that. Taking the time to solidify the foundation has been the most important thing for us. We don’t really want to move forwards and continue to build unless that foundation is solid, which we’re now very comfortable we have that position. With that, I’d like to move into the financial data, and Mark O’Malley will take over and walk us through.

Mark O’Malley, Chief Financial Officer (CFO), Scott Technology: Thanks, Mike. I’d love to touch on a couple of the key Group performance metrics before delving into a little bit more detail in the following slides later in the pack. As Mike mentioned, Group revenue returned to growth for the half up 5%, led by Materials Handling and Mining. Service revenue grew 14%, now accounting for 33% of our total revenue, reflecting an increased installed base and a strategic focus on lifecycle services. Positively, net margins remained at recent highs at 29%. As mentioned, growth was led by Materials Handling, up 21% from half year 2025. The MHL business opened with a pretty healthy forward work order book, and they were able to execute well on this.

Also, the JBS project, Brooks project, that has been ongoing for a couple of periods now, has progressed to its final stages and looked to being completed in the second half of this financial year. Mining up 9%, driven by Rocklabs standard equipment, which grew 25% year-on-year, supported by favorable gold prices. Protein down 8% and actually a little bit down on our expectations as well, driven by delayed capital investment decisions by our customers and a tough operating environment. Appliances down 28%, and this was primarily driven by project timing and the phase of several projects that were secured at the start of the year, the phase of those projects as they cycled through. As mentioned, Service up 14%, demonstrating a strong recurring revenue stream for the business. Overall, the diversified model and portfolio offsetting some sector volatility.

EBITDA increased 7% to NZD 13 million, and with that, EBITDA margins improved slightly. We were able to hold our net margins consistent with the prior year, and we’re disciplined with our cost management base as well, while still recognizing we’re able to invest in a couple of select Destination 2030 initiatives, including the launch of our ERP system into Europe and the build-out of the ERP into a couple of other regions not yet launched, and also a global HRS-IRS system as well. Looking forward, and as Mike will touch on in the market outlook section, we look to have a stronger second half revenue, much like we did last year. With that, we expect some operational leverage consistent with what we saw in FY 2025 as well. NPAT. We ended NPAT up 4%, but broadly in line with last year.

The upside in EBITDA was partly offset by increased depreciation and right-of-use depreciation for our extended facilities, and a normalization to our effective tax rate after last year we utilized our prior period losses. We did see some lowering in interest costs with improved rates and also a lower month-on-month debt holding through the trading months as well. Operating cash remained positive, however, down on prior period, impacted by project cash flows. We also made a considered investment into several pre-build of inventory items, which have now subsequently received orders post-balance date. Sorry, Katie. Yeah. Net debt remains stable and supports an increased investment into R&D into FY 2027, as indicated through the Investor Day, and potentially some other initiatives that come out of the domain strategies as they further develop.

Forward work supports confidence into future cash generation. I might just skip the domain dashboard, as we’ll touch on each of the domains individually here. Thanks, Katie. Materials Handling had 21% revenue growth, driven by good execution on that opening forward work at the start of the period and strong performance for service. The MHL business has had several periods of strong equipment sales, so it’s really nice to see the pull-through of service and aftermarket revenue for the business. As mentioned, JBS Brooks, this still stands as our largest project that was sold to date in Scott’s history, and this has progressed well, with go-live expected in the coming months. All functionalities are operational and the team are testing with the customer at increased volumes before handover. Margins have improved to 26% through efficiency and mix.

As Mike mentioned, we’ve had some recent wins, including our first palletisation order into Australia, some palletisation wins into adjacent FMCG sectors, and, positively, multiple AGV orders up in North America. Just on to Protein. Protein performance was down 8% on prior year and, as mentioned, softer than we anticipated. That was pretty much across the whole Protein portfolio. Service does continue to provide that recurring revenue base and smooth out some of the project orders. Margins softened due to utilization and volumes, and a little bit mix play there as well. On a positive note, multiple recent wins, including a Lamb Primal System for a major meat processor in Australia, does support a stronger H2, along with an increasing run rate of BladeStop sales in the last few months.

Real focus for the Protein business is accelerating the beef and lamb prototypes that we have currently in works towards commercialization, which will help boost the product portfolio and further help smooth out some of the swings of our exposure to one-off projects in the Protein business. Mining grew 9%, driven by record Rocklabs standard equipment sales up 25% on prior year, with gold prices being at record highs throughout the period and our expansion into North America. This was partly offset by cycling the large MHL project in Modular and the timing of securing new Modular orders, which are now expected in H2, where we have multiple hot prospects in the works at the moment. Margin did increase with mix of standard equipment and our increase in direct sales channel. On to Appliances, yeah, the lower revenue, as mentioned, reflects project timing.

We do have several large projects which we announced at the back end of last year, and these have progressed through design phase and moving in now into build and assembly. We expect we’re positioned for a stronger second half for our Appliance businesses. Just last point here is that the margin is normalized from prior period elevated levels where we had several one-offs and an exceptional project. I will now hand back to Mike to take us through the looking forward and market outlook.

Mike, Chief Executive Officer (CEO), Scott Technology: Thank you, Mark. Key recent wins driving or continuing to drive growth. It’s probably just worth noting on this slide that financial year 2022-2023 included the major JBS project. We are seeing positive trend in forward work. As Mark mentioned, key recent project wins across all of the domains are really driving growth. Those wins are sitting at around that NZD 40 million mark in the last couple of weeks. That’s absolutely fantastic for us as an organization. The forward work, as you’re already aware, provides a strong basis for a good second half. Again, just to touch on those recent wins, Material Handling and Logistics, NZD 40 million in new contracts across end-of-line automation and AGVs.

Multiple end-of-line automation contracts comprising of PepsiCo, Danone, Bacardi, Essity, Empower, and MHL’s first project in Australia with Farm Frites, supported by the domain’s execution expansion into new markets and FMCG, as Mark O’Malley mentioned. Additionally, AGV contracts in the U.S. with a leading aerospace manufacturer and a leader in the wine and the spirits market. More importantly, for the Protein segment, the second LEAP system contract with a large Australian meat processor. That’s taken quite some time for us to close that project, but that’s now in and secured. Another Appliance win with a white goods manufacturer in the United States of America. Just moving to the market outlook. We see improved operating leverage and earnings anticipated through H2. That’s through the strong forward work, and performance is expected to positively be weighted towards H2, as we saw in H1.

Our confidence is driven by those project timings and the recent wins. It’s a positive start to H2 with the key wins across MHL and Protein and Appliances, and really good progress towards the NZD 530 million by 2030, which is our Destination 2030. That really remains on track. The foundational strategic enablers, it really is building confidence in our delivery. Albeit it’s not necessarily a linear growth from where we are to NZD 530 million, there is that hockey stick effect. Actually, when you look at the work that we’ve done in the last year, the structural changes, the cultural changes, and still to see the positive results that we’ve achieved, that really does give us the good confidence that we are on the right track. However, what we do need to recognize is global volatility.

This really still does sit and affect most areas, most companies, and most regions. That’s something that we have to monitor, focus on very carefully. To a degree, we still push forwards, and we have the ability to manufacture in many different areas, which gives us a little bit of that protection. We still have and see strong automation requests from our customers. Closing comments. If we just go back to the Investor Day, we said we would do a number of things. We have implemented a lot of things in the last six months. Some of those things have gone really well, and, as identified, we have had some challenges that have taken us extra time, and that’s okay, and we have to recognize that. The learnings that we’ve taken from some of those challenges has been really good for us.

We have delivered a 7% EBIT growth position. We have advanced Destination 2030, really laying the foundations for future growth. We’ve delivered that diversification in MHL and mining, offset with some softer Protein conditions, and we’ve maintained a strong 29% margin across the group, supported by that higher quality of revenue mix. Again, we have confidence, and we see a much stronger half year 2 ahead, and that’s supported by the recent wins. Obviously, we have to bring that caution around the global uncertainty, but that’s something that we continue to monitor daily but shouldn’t be panicked by. We have to live with that and work with that. That was the key, or those are the key update points for the half year 2026 announcement. We would invite any questions that are coming in.

Eugene, Meeting Moderator/Operator, Scott Technology: James Lindsay has had his hand up. We can bring James online.

Mike, Chief Executive Officer (CEO), Scott Technology: Okay

Eugene, Meeting Moderator/Operator, Scott Technology: To ask that directly. Hi, James Lindsay. You’ve activated your mic.

James Lindsay, Analyst/Investor: G’day, guys. Can you hear us now?

Eugene, Meeting Moderator/Operator, Scott Technology: Yep.

Mike, Chief Executive Officer (CEO), Scott Technology: Lovely to hear you, James.

James Lindsay, Analyst/Investor: Much appreciated and well done. A few from me, if I may. Obviously, on LEAP systems and things like that, you’ve been selling these for a number of years. Are you starting to see a replacement cycle come around? I think if I recall, there’s a 10-year view of some of those systems implemented.

Mike, Chief Executive Officer (CEO), Scott Technology: It’s a good question, James. We see absolutely the ongoing maintenance and upgrades of those systems and those machines. A lot of the superstructure-type equipment obviously doesn’t need replacement. We are seeing mid-life upgrades, we are seeing PLC upgrades, legislative and statutory upgrades. That comes through in that service mix. What we are starting to see, though, as we mentioned earlier on, is new customers that we haven’t worked with before come into that market, so the LEAP system that we recently sold.

James Lindsay, Analyst/Investor: Great. Thanks so much. You sort of mentioned with regards to lifting R&D cadence into FY 2027. Can you just give us a heads-up about the quantum of that and maybe the domains you’re targeting for extra spend?

Mike, Chief Executive Officer (CEO), Scott Technology: Yeah. Look, we’re working that through into our 2027 business planning cycles at the moment.

Mark O’Malley, Chief Financial Officer (CFO), Scott Technology: James, we are targeting a percentage, and that might be around 3% of revenue. How that compares to today, we’ve only got so much visibility because we’re looking to improve how we’re tracking our R&D at a timesheet basis, as some is ad hoc and some is formalized. That’s where we’re moving towards. As far as where we prioritize, that’s part of the innovation framework that we’ve been conducting at the moment and with the market analysis, so that will effectively inform where we direct our capital into 2027. At the moment, probably can’t tell you whereabouts we’re going to spend the money in 2027. We already have a couple of projects that are in flight, primarily in the Protein business, obviously with beef development and a couple of additional lamb modules as well.

That will continue into 2027, but the incremental new spend should become clearer in the next six months, James.

James Lindsay, Analyst/Investor: Yeah, perfect. Thanks for that. While you’ve got the mic, just with regard to working capital is obviously built a little bit as well. Just interested in the unwind in the second half.

Mark O’Malley, Chief Financial Officer (CFO), Scott Technology: Yeah. We should see it naturally a little bit with some of that pre-build of inventory. Some of that was tagged to orders that we were anticipating, and it got across the line post balance date. We should see that unwind and normalize into H2 as well.

James Lindsay, Analyst/Investor: Yep. Just on the mining side of things, you mentioned that it had made some good progress on the traditional systems. Just interested in the progress of AMS and on the combined system. Is there anything holding that up with regard to sales programs?

Mark O’Malley, Chief Financial Officer (CFO), Scott Technology: Not necessarily anything in particular. I think a lot of the mines have been focused on taking advantage of the gold pricing as it stands, hence why the standard equipment has increased so significantly. A couple of those automation projects have been a little bit of a longer burn, so to speak. We’ve got several opportunities that hopefully we’re able to announce in the coming months, which have taken a little bit longer than we had anticipated, but still there, haven’t gone away.

James Lindsay, Analyst/Investor: Yep. Maybe just one with regard to Protein and BladeStop. You obviously launched the smaller unit for targeting supermarkets, et cetera. Can you talk to the progress on sales pipeline for that and if there’s anything in the works?

Mark O’Malley, Chief Financial Officer (CFO), Scott Technology: Yeah. What we’ve alluded to in the past is that it’s effectively safety saw in that retail space is kind of novel as such, and it hasn’t been fully penetrated. We’ve got several trials in place with some large providers up into North America, and it’s kind of binary. We either are successful in those trials, in which case a large opportunity is unlocked, or they’re not, or it’s not the right time for them. Yeah, we’re working with several on those trials at the moment, and hopefully we’re able to unlock a large order. If they do purchase, James, and I think talked to you about this in the past, then it’s more than likely that they’ll roll it across their store network. As such, again, it comes back to it’s kind of binary, those opportunities. Yeah.

James Lindsay, Analyst/Investor: Yep. No, I understand. Maybe just two or three just quickly on Materials Handling sort of things. Obviously, some good progress on margins over the period. Is that a new base for margins, or was there something in the period that specifically helped it out?

Mark O’Malley, Chief Financial Officer (CFO), Scott Technology: Yeah, good question. I wouldn’t roll forward necessarily that half margin all the way through. Some of it will stick. Some of it was the timing of projects coming to the end of their, I guess, completion and therefore being able to recognize the final part of margins. We generally hold a conservatism in our margins and recognition on our projects, so we hit the benefit of that. There will be an uptick from historical averages, probably just not to that level for the next 12 months onwards. Yeah.

James Lindsay, Analyst/Investor: Yeah. Got it. Obviously you mentioned that the Brooks site is getting a couple of months away from completion. I assume it’s been used extensively already as a reference site. How are potential other customers viewing that as it gets towards completion?

Mark O’Malley, Chief Financial Officer (CFO), Scott Technology: Yeah, I think we have a number of other customers that are carefully watching Brooks and how the integrated automation goes, James. I think that’s going to be a very strong reference point for us, both within JBS themselves and also externally.

James Lindsay, Analyst/Investor: Yeah. Right. Yep. Just with regard, obviously, the Materials Handling business is going gangbusters, which is phenomenal to see. Just interested in your capacity about being able to deliver further sites once Brooks get up and running and other customers go and see it and are positively disposed to it. What sort of capacity as far as getting new sites online would there be?

Mike, Chief Executive Officer (CEO), Scott Technology: Yeah. That’s something we’re working through at the moment, James. That’s part of the domain strategy itself. We’re obviously looking at those growth plans and how we increase output within each of those areas. That’s something we’re currently working on. We do believe that we have methods and routes to do that, especially with our manufacturing capability globally. It’s something that we’re working through at the moment, but it’s something we’re definitely preparing for.

Mark O’Malley, Chief Financial Officer (CFO), Scott Technology: Chicks are a very big site, James. I’ll just add further to that. When we were in the peak of the build of JBS Brooks, the Chicks facility was able to flex. When we’re not at the capacity levels that we were at the peak of that build, there’s still some ways to go. The chicken facility, let alone some of our other facilities as well, like Mike mentioned.

Mike, Chief Executive Officer (CEO), Scott Technology: It’s more related to switching on and off resource short notice. Would you actually require any sort of production up in the States? Would that be an advantage? Oh, the $64 million question. I think, realistically, I think that there is the opportunity to manufacturing in the U.S. We’re not seeing necessarily the demand at the moment to do that, and we’re not seeing any projects slipping away because of us not doing that. I think we’re monitoring that carefully, and I think that’s a decision that we will have to take as we start to review our global manufacturing locations, James. Yep, I’ll leave it there. I really appreciate your time. Thanks, gents. Cheers. Thank you very much for your questions. Very much appreciated.

Mark O’Malley, Chief Financial Officer (CFO), Scott Technology: Thanks, James.

Mike, Chief Executive Officer (CEO), Scott Technology: Eugene, do we have any other questions?

Eugene, Meeting Moderator/Operator, Scott Technology: No questions.

Mike, Chief Executive Officer (CEO), Scott Technology: People can type in their questions or raise their hands if they have anything. Anything come through? Okay. If there are no other questions, we’ll bring the meeting to conclusions. Following the meeting, obviously, if there are any further questions that you wish to ask Mark or myself directly, please feel free to make contact. We’d be more than happy to answer those either in writing or meet you and go through those. Yeah, thank you very much for your time today. We very much appreciate it. We understand that you’re extremely busy. I hope you share the same view of us that we are seeing good progress and that we really are implementing our Destination 2030 strategy. Again, we look forward to reporting back to you later in the year as to our progress. Thank you so much.

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