Companies: SCO   

Bombed-out defence-oriented video telecommunications specialist SCOTTY Group expects to be 'usefully in the black' in the year to next July on the back of sub-contractor contracts with the German military and other deals. The revamped company has warned investors of a likely £6.3 million loss for 2006/07 after taking maximum allowable write-downs of £3.3 million following the disposal of the Motion Media and Telehealth businesses.

Now chaired by well-connected former Tory Junior Defence Minister Lord Trefgarne and run by Austrian chief executive and sector specialist Kurt Kerschat, SCOTTY, which boasts a combination of video aero-certified, encrypted and SatCom equipment, is a sub-contractor with the Eurocopter Group in a 40-helicopter deal for Germany, worth more than £200,000 each. SCOTTY says margins on such contracts can exceed 50 per cent, while most of any capital expenditure involved falls on the main contractor.

The company, which claims the need to work on project specifications with prospective clients cuts out the middle man and reduces the risks of tendering for contracts, is working on civil applications and pursuing civil and military projects in the UK, Europe and the USA. Observers suggest key arms of the UK defence services could be targeted.

SCOTTY maintains it has no plans to come back to the market for funds and saw its shares fall from 5p three years ago to 1.23p in August, when Growth Company Investor highlighted their possibilities. They have now fallen further to 1.02p, as the company has put all the bad news it could into the historic figures to close the chapter.

The shares are still worth holding on possible recovery prospects.

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