Zonal Retail Data Systems, the leading maker of electronic tills for the hospitality sector, has reported continuing top-line growth but a second successive sharp fall in profits as the family-owned business invests in staff and technology to keep pace with global rivals.
After racking up pre-tax profits totalling a combined £5.3 million in 2010 and 2011, Zonal saw them fall to £158,667 in the year to June 2013 from £1m in 2012, according to accounts just posted at Companies House.
In notes included in the accounts, the directors however cited "our policy of continued high investment in research and development with a spend in excess of £4m".
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The fiercely independent Edinburgh-based company, which has four McLean brothers on the board but has also imported top-level outside management, was created in 1979 when the family invented an electronic point of sale system to stop stock shrinkage at its one Midlothian hotel.
It now supplies 6500 pubs, hotels, restaurants and other leisure venues with hardware produced in Livingston, where it opened a new £1m manufacturing, warehouse and logistics facility in 2012.
The same year it opened an 'innovation centre' sales showroom in Oxford, while last year it bought digital marketing agency TXD.
Customers include the likes of JD Wetherspoon and Mitchells and Butler.
Turnover at Zonal has trebled since 2009 to £41.3m, including a £5.1m rise last year.
The company increased its headcount again, from 231 to 260, including an addition of six in research and development, adding more than £1m to staff costs.
That helped push administrative expenses from £13.8m to £16m.
Net funds at the debt-free group reduced from £3.9m to £2.2m in the year, but shareholder funds eased only slightly from £10m to £9.9m.
The directors' pay bill was steady at £1m and the highest-paid director, assumed to be managing director Stuart McLean, rose from £264,807 to £297,000.
The dividend to the McLean Family Trust was unchanged at £221,000.
Writing in the annual report, the directors say the year to June 2013 was a "truly transformational year".
They say the continuing investment has been needed to deliver for the hospitality industry "a market-leading innovative and broad product range" which positively impacts their customers' businesses.
New contracts had been secured during the year with regional brewers, small and medium-sized pub companies, restaurant chains, bowling alleys and theatres.
Zonal said the most notable agreement it made in the period was with Mitchells and Butlers, the UK's biggest managed restaurant and pub retailer.
"Our market share in all of the sectors we operate in has increased and the board is delighted in the progress made," the directors said.