Shock profit warning wipes third off IndigoVision shares

SHARES in Scottish CCTV systems maker IndigoVision plummeted bynearly a third yesterday after the company stunned the market with awarning that profits would be significantly lower than expected.Thecompany, run by technology entrepreneur Oliver Vellacott, revealedthat gross margins had continued to be "weak" in the second half ofits financial year.The collapse in the share price knocked GBP2.1million off the value of his 22.9 per cent holding in the company hecreated.Shares fell to a year-low of 220.3p before rebounding toclose at 315p, a drop on the day of 125p or 28.4 per cent, valuingthe company at GBP23.8m.Analysts had expected the firm to return aGBP3.6m pre-tax profit in the year to 31 July on the back ofGBP32.8m in revenue.While the company confirmed it still expected tobeat the previous year's GBP28m turnover, the firm warned that salesgrowth had slowed and was now expected to miss internalforecasts.Directors at the firm say the gross margin for the year tobe 2 per cent below last year's 60 per cent, which had fallen from64 per cent in 2009.The company - which makes digital CCTV systemsfor airports, casinos and other customers in 84 countries - willupdate the market again around its year-end on 31 July, beforepublishing its results in September. In March, the firm postedrecord sales, with interim revenue up 25 per cent to GBP15m andoperating profits up 15 per cent at GBP1.4m, prompting the directorsto declare a maiden interim dividend of 4p.But the firm warned atthe time that margins had fallen "a little more than we hadexpected" as the weak global economy squeezed customers'spending.IndigoVision - which has bases in Dubai, London, NewJersey, Sao Paulo and Singapore as well as its head office Edinburgh- uses so-called internet technology to let customers remotelyaccess their CCTV systems.The firm said: "The global market for[internet protocol] video continues to develop at an encouragingrate and we remain confident in IndigoVision's future, whilst beingrealistic about the risks and challenges the group faces."As weindicated in our interim report, gross margins weakened marginallyin the first half. This has continued into the second half and wenow expect gross margins for the year as a whole to be some 2 percent lower than last year."As a result, we anticipate that groupprofits for the year to 31 July will be significantly below currentmarket expectations."As well as having staff in 24 countries, thecompany uses a network of 300 engineers to design, install andservice its systems.Vellacott founded the firm in 1994 after gaininga doctorate from Edinburgh University, and he moved the company toits base at the Edinburgh Technopole business park in 2000.Earlierthis month, The Scotsman revealed that IndigoVision was recruiting15 staff, swelling its existing headcount of about 100, and takingan extra 6,000sq ft of office space to take its presence in thepark's Charles Darwin House to 15,641sq ft.At the time, Vellacottsaid the creation of new products, including video managementsoftware, was driving the expansion.In March, Andrew Fulton,chairman of the Scottish Conservative Party, was appointed as a non-executive director.Fulton has a career spanning more than 30 yearsin the British diplomatic service. Among other roles, he is honorarypresident of the Scottish North American Business Council and asenior adviser to Memex Technology.