Viglen swallows wafer-thin margins to boost top line

System builder's profit sliced in half as sales soar

Viglen sacrificed profit at the altar of revenue growth, as it drove a top-line expansion of more than a quarter in its 2010 fiscal year.

For the 12 months to 30 September, the St Albans-based system builder increased sales by 26.2 per cent on the previous year to £67.36m. But operating profit was nigh-on cut in half and stood at just £515,000. This equates to operational margins of just 0.8 per cent.

The directors' report claims that, despite the bottom-line pain, Viglen's increased client base will stand it in good stead for the future.

"Although profitability fell due to the pressure on margins and declining average selling prices, the company continued to grow within its [main] markets," said the report. "The company focused on supplying a quality product and service to its growing customer base during the difficult trading conditions. This impacted on gross margins but resulted in a stronger customer base for the future."

Despite the revenue rise, the system builder's net assets fell 6.7 per cent during FY10 to just under £6.5m. Stockholding, meanwhile, increased 11.7 per cent to £5.4m.

The firm trimmed its staff ranks during the year, with headcount falling by 10 to 156. Sales and admin numbers dropped by eight to 113, while the production and warehouse staff ranks slipped from 45 to 43.

During its current fiscal year, Viglen will pay out £14.18m to creditors and recoup £12.39m from debtors.