Zonal Retail Data Systems, the market-leading maker of electronic tills for the hospitality sector, has reported a third successive fall in profits despite a 27per cent rise in sales.
The family-owned business ploughed over £5million into research and development last year, following a £4m spend in 2013, as it invested in the technology and staff to stay ahead of its largely global competitors.
Zonal slipped to a pre-tax loss of £235,485, while turnover climbed by £9m to £52.3m.
The company made a £158,667 profit in 2013 after aggregate profits of £5.3m in the previous two years. Turnover meanwhile has almost quadrupled since 2009.
Managing director Stuart McLean, one of four brothers on the board, said the current year had started well. "We are significantly ahead of last year and making quite good profits so far." He said major investments, such as £1m into its KitchenIQ management system, were beginning to feed through into a return to profitability. "Once we release it we will get lots of return - there are investment cycles."
Last December Zonal won the Business Innovation award in the Herald Scottish Family Business Awards. The company, celebrating its 35th anniversary, was recognised for innovative technology used to revolutionise the way orders are taken in the hospitality industry with its iOrder system, accessed through a phone app. It is already being used in Greene King's Hungry Horse chain.
Mr McLean said: "You go onto the Hungry Horse app, order your two pints of lager and cheese and pickle sandwiches for table 12, pay for it, that links into our system and tills automatically, you have never moved away from your table and your food and drink arrives."
He added: "We have got a lot of interest, some of our big customers are interested."
Zonal also offers an ordering system for staff via a hand-held Apple device.
The fiercely independent Edinburgh-based company, created in 1979 when the family invented an electronic point of sale system to stop stock shrinkage at its one Midlothian hotel, now supplies 6500 pubs, hotels, restaurants and other leisure venues. It manufactures its own hardware in Livingston, where it opened a new £1m facility in 2012.
The same year it opened an 'innovation centre' sales showroom in Oxford, while in 2013 it bought digital marketing agency TXD.
Its biggest customers include pub groups JD Wetherspoon and Mitchells and Butler.
Founder Ralph McLean's other three sons are all involved in the business - James as property director, Howard as special projects director and Robin as director.
The cost of sales rose from £25.1m to £32.2m, with staff costs up from £10.1m to £12.5m. The average headcount rose to 318, from 260 in the previous year, adding twice as many new jobs as in 2013. They included nine new research and development staff, 39 more in manufacturing, installation and maintenance, and 10 in administration.
Director remuneration however fell from £1.28m to £1.04m, the highest paid director's earnings slipped from £297,000 to £280,071, and the dividend to shareholders was cut from £221,002 to £116,546.
Writing in the accounts the directors say: "We have and continue to make a huge investment in extending and developing our software and hardware solutions over the last few years. This has enabled us to offer the leading enterprise solution to the hospitality industry in the UK and US." The past year's investment had enabled Zonal to deliver a "market-leading, innovative and broad product range".
Mr McLean commented: "We have our vision, and our vision means spending lots of money to get it right. That will keep us ahead of the competition, but we are not spending because of the competition, but because it's the right thing to do."
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