Companies: SCO   

Though loss-making last year, video telecommunications minnow SCOTTY claims to have moved into profit and reports record order and enquiry levels.

Chaired by former Tory junior defence minister Lord Trefgarne, SCOTTY reported a £6.1m deficit for the year to July, after losses related to the sale of its non-core Telehealth operations to management. However, operating losses were cut to £3.16m (£3.92m) and the divestment has left the company running far leaner in the government, aviation and military markets, in which it is seeing strong profit margins. Its ‘aero-certified’ encrypted satellite communications systems and ground-based systems are well regarded and throw up high entry barriers to rivals.

Turnover eased to £5.92m (£6.44m) last year, but this reflected timing issues pertaining to follow-on work with Eurocopter, which is upgrading the CH53 helicopter fleet for the German military and to which SCOTTY delivers in-flight satellite-based video and data communications technology.

SCOTTY is pushing other projects that install similar technology into helicopters and fixed-wing aircraft. Furthermore, its land-based ‘ruggedised’ satellite technology is generating good sales, particularly in North America. With costs cut by 30% in the wake of the telehealth sale, the first quarter of the current year to October apparently proved profitable.

Running leaner, with gross margins rising and management predicting positive cash generation and a return to profits this year, the lowly shares have recovery potential for investors willing to bear SCOTTY's micro-cap risks.

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