Montgomery Litho returned to the black in its latest financial year as increasing sales, combined with cost-saving measures, allowed it to improve efficiencies.

The business, which specialises in printing sales literature, brochures, leaflets and programmes, made a pre-tax profit of £186,460 during the 12 months to January 2007. This compared to a loss of £767,505 previously, Montgomery Litho's first-ever dip into the red in its 23-year-plus history.

Sales during the period rose 11% to £19.5m, while staff costs were down slightly following a number of redundancies across operations in East Lothian, Glasgow and Perth. As a result, the previous operating loss of £389,451 was turned into a profit of £573,024 in the most recent year.

The business, headed by chief executive Thomas Montgomery,employed an average of 369 people during the period, down from 396 the year before. Accounts filed with Companies House showed a reduction of 20 people in production, plus another half-dozen across distribution, selling and administration.

"Due to the group suffering its first-ever loss in 2006, the main focus for 2007 was to increase the efficiency of our sites with investment in new machinery, merging existing sites, improving site layouts, and making several redundancies," Montgomery said in the directors' report.

"The benefits of these actions can be seen in the improvement in the group's performance."

Investments included £1m towards the purchase of a state-of-the-art binding machine for hard-cover books. Montgomery Litho, which counts Harper Collins and Harcourt among its customer base, owns bookprinter Scotprint and binder Hunter & Foulis, both based at the group's headquarters in Haddington, East Lothian.

It also has M&M Press and Print People, both in Glasgow, and has operations at the Inveralmond Industrial Estate in Perth.

"As for many businesses of our size, the business environment in which we operate continues to be challenging," the directors' report said. "The printing industry in the UK and Europe is highly competitive, and trading conditions are difficult.

"With these risks and uncertainties in mind, we are aware that any plans for the future development of the business may be subject to unforeseen future events outside of our control.

"However, with additional cost and efficiency management, we are confident we can continue to build a relatively successful year."

The accounts show that Montgomery Litho's three directors shared total remuneration of £211,005, up from £193,483 previously. All of the increase was attributable to a rise in the value of company contributions to the money purchase pension schemes of two directors.

No dividends were distributed at the year-end. Thomas Montgomery, who owns 99% of the shares, received a dividend of nearly £8000 at the end of the previous financial year.