Datong

Intelligence gadgets play Datong, growing in new territories including India and the Middle East, has announced a swing into the black for the half to March.

The Leeds-based concern reported pre-tax profits of £206,000 at the interim, a turnaround from losses of £128,000 driven by increased sales to 'Rest of World’ territories including Saudi Arabia and Singapore which drove turnover up 48% to £7.41m.

Operating in the secretive world of intelligence technology, Datong has traditionally focused on sales to intelligence agencies in the UK, Europe and the United States and enjoyed growth in both the UK and Europe. UK sales skipped 11% higher in the half to £2.86m, whilst European-derived revenues grew by an impressive 87%. However, ‘Rest of World’ sales saw the sharpest rise, growing from £93,000 to £1.08m year-on-year.

Dean Blood, CEO, informed Growth Company Investor that Datong is moving into geographic areas that have been less affected by the economic downturn. 'We have expanded into the Middle East, India following the Mumbai attacks and further into South and Central America’, he explained, noting that sales to the Americas are being driven by the increased focus on tackling drug trafficking in those regions.

Datong recently changed its year-end from March to September to better reflect the fact that 70% of its sales are made in the first six months of the calendar year. Broker Canaccord is forecasting profits of £500,000 for the year to September and earnings of 3.4p, leaving the shares, backed here last year at 34.5p, selling on less than twelve times earnings.

Debt-free and with £1.67m cash, Datong looks well placed long-term, given that the intelligence sector is likely to prove more resilient than other parts of the defence market and the company has been diversifying risk by moving into new territories. Investors who bought at our urging should sit tight.