[IT IS FUNNY HOW THIS RATHER POSITIVE REPORT CAME OUT THE DAY...

[IT IS FUNNY HOW THIS RATHER POSITIVE REPORT CAME OUT THE DAY BEFORE THE POOR H1 ANNOUNCEMENT. THE MD WAS CLEARLY ANGRY WITH THE COPY CAT COMPETITORS WHO HE WAS CONFIDENT TO BEAT IN THE LONG RUN WHEN CUSTOMERS COME BACK TO SCD'S QUALITY PRODUCT. HOWEVER THIS H1 SCD IS ABSOLUTELY BEATEN HARD. ]


ASK David Lindeberg why "innovation" is said to be too often viewed as a dirty word by Australian business, and his response is unequivocal.

"I think that is bullshit," says the straight-talking chief executive of Adelaide-based industrial instrument maker Scantech.

"We spend a huge amount of time in overseas markets and, given the amount of innovation, imagination and training of the people we see overseas, I'd say Australians compare more than favourably with any other country. I'd say Australians are just as good, if not better than any other particular culture I have come across."

He says Australians have "talked themselves down for years" on their ability to mix it with the best of the world in innovation.

And Lindeberg should know. Scantech has developed world-leading technology that provides online analysis of the moisture and chemical composition of coal, limestone and other materials. It provides the world's biggest mining companies with an alternative to traditional laboratory-based analysis of their commodities, dramatically cutting the turnaround time for the analysis of mineral samples.

Lindeberg says many companies, especially in China, have tried to replicate Scantech's technology and failed, producing what he calls "rubbish".

"What puts us apart from the pack, if there really is a pack, is to spend the money on the research and the people. This is our theme and core business," he says.

"Scantech has also got great support from the federal government through start grants and commercialisation grants. I think they are absolutely fantastic. The 125 and 150 per cent tax breaks are also fantastic. Without those things, we wouldn't be where we are today."

In May last year, the company hosted a large delegation from Innovation Australia, including its chairman David Miles, where it was presented with a certificate acknowledging its contribution to improving Australia's productivity.

So it is no surprise that Scantech -- which counts Dean Brown, former Liberal premier of South Australia, as a director -- has become a favourite of the sharemarket over the past year despite having a limited free-float.

Directors and associates control more than 40 per cent of the stock, but the trading volumes have improved since the company's annual profit numbers in July last year that showed earnings almost doubled to $4.44 million, on revenue of $17.7m.

Product sales revenue increased from $10.8m to $12.5m, while service revenues rose from $4.5m to $5.2m.

Lindeberg says the service business is key in the company's plan to double revenues over the next five years

"We expect revenues to double, principally because we expect to get a lot of service revenue with our installed base. A lot of repeat business, a lot of our growth will be from service, which is good," he says.

One of the company's key products is the Scantech Geoscan M analyser. Orders so far this year are well over $53m, compared with $38.6m at the same time a year ago. There are also many projects for which proposals have been submitted that are scheduled for decision in the current financial year.

Importantly, the company is now quoting for installation of its analysers.

That work has previously been subcontracted to third parties, but Scantech's strategy is now to try to capture as much of that work as it can.

"We believe in the technology and believe that the industry does need this technology so they can improve their processes," Lindeberg says.

"Going forward, in the years to come -- and we are seeing it in copper and other ores -- the actual yield is getting lower.

"The miners will be finding deposits with lower yields. We think there will be more and more mines of lower quality and thus higher demand to get to know the quality of the ore at an earlier stage in the process."

Because the quality of the ore mined at Australian mines is generally higher than other parts of the world, most of the revenue earned by Scantech continues to be generated outside Australia.

Last year, more than 90 per cent was earned overseas and it is now looking at projects in places where it has not previously earned significant revenue. South America, Africa and Russia will be a focus.

"We have created the industry. Nobody can do this in minerals. Now people have seen what we do and want to make a quid out of it too," Lindeberg says.

"They don't realise how difficult it is and to a large extent they have bastardised the market. We know these people can't do it. The number of copycats out there is extraordinary.

"A lot of the quality players in the mining sector are saying we have tried our hand at this cheap junk and it is not working and they are coming back to us where they have tried to go with the competition."

But it has not always been plain sailing for Scantech. Far from it. It was hit hard by the global financial crisis in 2010 and 2011. Even before that it had high debts and five years ago it had accumulated losses of $9.8m.

In 2010 it was also revealed that Lindeberg's wife, Mahshid Lindeberg, had been employed at the company for four years without any disclosure to shareholders. This was only disclosed by a belated note to the market on the issue.

But Lindeberg has worked hard on cleaning up the problems of the past and by the end of last financial year accumulated losses had been reduced to $2.8m, bank debt was zero and the company had cash in the bank.

While Scantech does not expect the results for this current year to match the results achieved last year, if the company is able to ship the analysers that it expects by June 30, Lindeberg believes the accumulated losses should be substantially reduced.

While Scantech gave shareholders a capital return a year ago, a dividend was last paid in December 2006.

With the elimination of the losses, the board is planning to recommence payments in the next financial year.

But the lack of payouts has annoyed a group of dissident shareholders who pushed the board to an ultimately unsuccessful "second strike" spill motion at the 2012 AGM.

They again voted the report down last November, arguing that Lindeberg was overpaid for a chief executive of a micro-cap company.

"I've got no idea what they are on about. The rem (remuneration) report was voted down at the AGM and five minutes earlier they said they wanted to congratulate the board and management on a fantastic result," Lindeberg says.

Former Adelaide stockbroker Danny Watson, who is Scantech's second-largest shareholder, says Lindeberg has presided over a great turnaround for the company.

"If you look at the results, he has proved his worth. He is a hands-on managing director. I think he is doing a great job," he says.

But the shareholder instability is an ongoing problem for Scantech and is the core reason why it has been unable to attract institutional shareholder interest.

"It does impede us, when we look at acquisitions, we know if we need shareholder support we are not going to get it in full," Lindeberg says.

'When people see these negative votes, it doesn't help with the share price, the market."

In the interim he is worrying only about what he can control. And he says the company's other shareholders are "200 per cent behind management."

The future looks bright.

"We have no debt, cash in the bank and the best technology in the world. And we have customers that love us," he says.

"And they are not the mum and dads -- they are the Anglo Americans, the BHPs Rio Tintos, the Xstratas of the world."