CAE Technology Services boosted its turnover by nearly a fifth to take annual sales to the brink of the £50m mark during its 2011 fiscal year.
But operational profit flatlined, and the directors' report for the year reveals the VAR faced margin pressure and delivered a big project "at no margin, in order to secure the relationship" with a customer.
For the 12 months to 30 June 2011, the Watford-based reseller's revenue spiked 17.6 per cent year on year to £49.9m. Gross profit jumped 14.1 per cent to £11.4m, but this equates to a decline in gross margins from 23.5 to 22.8 per cent.
The directors' report for the year explains: "Gross profit margin reduced ... as a result of two significant factors. The focus from customers on core spend was to reduce costs by applying pressure on hardware and engineering prices.
"In addition, CAE completed a large, highly innovative digital media project, which continues to give a wonderful demonstration of the organisation's capability, but was delivered at no margin, in order to secure the relationship."
Operating profit was also down during the year, sliding marginally to just over £2m. Administrative expenses jumped 17.5 per cent during the year, and two-thirds of this was attributed to increasing investment in rewarding top-performing staff and attracting new talent.
During the year, average staff numbers rose modestly, from 107 to 112. However, the firm's wage bill leapt about 18 per cent to £5.6m. More investment in valued employees is planned for FY12, according to the directors' report.
"It is the directors' opinion [that] continued investment is the correct strategy in order to maintain [the] overall business agility that has been such an important feature of CAE's success," adds the report.
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