FY2016 Result 'Snoopy Forecast' vs 'Actual'
Quote:
Originally Posted by
Snoopy
Fast forward to FY2016. Taking the base level profit of FY2015 (adjusted to $4.725m NPAT) how do I see things developing over the current year?
Amount |
Description |
Calculation |
$4.725m |
Baseline Profit FY2015 |
+$0.800m |
Interest saved from recapitalisation |
$1.132m x 0.72 |
+$0.194m |
Interest earned from surplus capital |
$9m x 0.03 x 0.72 |
+$0.226m |
HTS-110 elimination of losses |
$2.1m x 0.15 x 0.72 |
+$1.490m |
Meat industry Robotics (incremental) |
($15m-$1.201m) x 0.15 x 0.72 |
-$1.000m |
Appliance Production Lines |
Based of $13m sales, down yoy |
+$1.075m |
MAR sales annualisation adjustment (sales steady) |
$1.236m-$0.161m |
-$0.230m |
Adjust profit between FY2014 acquistion year & FY2015 peak |
|
$7.280m |
Forecast NPAT Total |
|
Other Assumptions:
1/ No change in the contribution of Rocklabs YOY.
2/ No benefit from decrease in exchange rate YOY. I am assuming that due to the weak mining and appliance line outlook some discounting will be required to acquire overseas work.
3/ No benefit from the new 'scale' that new capital was meant to bring. Benefits from scale should come. But I am not expecting any in the next twelve months.
In theory (assuming scheme of arrangement is approved by the court) there are now 74.8m shares on issue.
So NPAT eps for FY2016 will be: $7.28m/74.8m = 9.7cps
Last year the dividend was 8cps. So there is room to hold the dividend steady on the increased number of shares. Good for those pensioner shareholders (7.8% gross yield).
At $1.42, SCT trades on a perspective PE of $1.42/9.7 = 14.5
Given the hoped for growth potential with JBS as a partner, this sounds about right. However, the market will be watching to see some tangible benefit from the 'scaling up' of operations. That will take a couple of years to emerge, and one year for the market to price it in. Consequently I see little share price movement over the next 12 months.
Net interest charge for FY2015 was: $0.032m - $1.134m = -$1.102m
Net interest charge for FY2016 was: $0.299m - $0.773m = -$0.474m
Improvement year to year was $0.628m (vs forecast $0.8m +$0.194m =$0.994m (behind my forecast, maybe some extra costs in there to terminate existing loan facility early?)
No specific mention of HTS110 superconductive technologies. But annual summary says:
"we are starting to see early signs of commercialisation success with greater uptake of our developed technologies." So I am going to assume the elimination of the $0.226m loss as forecast was 'ballpark correct'.
I was predicting a 15% margin in meat industry robotics sales. Scott's share of the 50% joint venture with Silver Fern Farms (RTL) has produced a profit up $0.264m to $0.264m. Taking account the loss from the NSL Australia, the meat industry joint venture, this reduces to a profit gain of $0.250m. Actual result from the meat industry showed 'all revenues' up 256%, but off a low base. Note 26 in the results shows RTL revenue up from $0.293m to $9.689m, which is an increase of 3200%. Work farmed out by the joint ventures to the Scott Technology parent is not included in that combined joint venture $0.250m profit. Work done for JBS in Australia is not included either. So this is why 'real' meat industry revenues, across all of SCT, 'only' increased by 256%. Nevertheless that is substantially more than I was expecting, even if the increase in profitability with such a large increase in revenue may still be within the ballpark of my +$1.490m 'profit adjustment' prediction, based on a 120% increase in business. This could mean that
1/ My assumed 15% gross profit margin was too high (real margin closer to 8%). OR
2/ Some of the work being tackled is still 'work in progress' (part of revenue is not yet billed) OR
3/ Some of the work has been distributed around the new production facilities in Australia, which has increased my assumed production costs, and consequently reduced profits.
OR perhaps a combination of 1,2 and 3?
Appliance sector revenues were up 48%. That was a surprise. This is an increase from $13.606m to $20.137m. Sounds impressive, although I note this is well below the $28.828m of revenue from FY2014. I was assuming a $1m decrease in profitability for appliances over FY2016. But let's assume the actual result profitability was the same as last year.
No mention specifically on Machinery and Robotics (MAR) in Australia, so I will assume my steady as she goes annualised assumption is correct. I am also assuming it is 'steady as she goes' for Robotworx in the USA and the the Rocklabs business based from NZ.
Put all those corrections into my profit forecast table and what happens?
Amount |
Description |
Calculation |
$4.725m |
Baseline Profit FY2015 |
+$0.628m |
Net Interest Improvement |
(Actual Result) |
+$0.226m |
HTS-110 elimination of losses |
$2.1m x 0.15 x 0.72 |
+$1.490m |
Meat industry Robotics (incremental) |
($15m-$1.201m) x 0.15 x 0.72 |
$0.000m |
Appliance Production Lines |
Based on steady YOY profit result |
+$1.075m |
MAR sales annualisation adjustment (sales steady) |
$1.236m-$0.161m |
$8.144m |
Total Estimated Actual NPAT Breakdown |
|
Actual profit for the year was $8.134m (after tax). So I am picking I am not too far off base with those 'year to year' changes. There are 74.681m SCT shares now on issue. So historical 'eps' is
$8.134m / 74.681m = 10.9cps
At a share price of $2.10, SCT is sitting on an historic PE ratio of:
210 /10.9 = 19.3
Of course we need to recognise that all of this information is now historical. Nevertheless 19.3 means SCT is very much 'priced for growth'. The question now is, can SCT meet the market expectations for this growth? I think it is possible. But I also think the implied increase from the much crowed about upscaled meat industry robotics expansion is disappointing to date. The Mr Market value at $2.10 looks fair. I won't be either increasing nor decreasing my SCT holding on the basis of this result.
SNOOPY
discl: hold SCT