SHARES in spy gadgets company Datong took a nosedive yesterday after the group warned that US orders slumped in September.
This month is usually a strong one as customers tend to spend a lot at the end of the budget cycle in the US, but this September Datong said order intake has been unexpectedly slower than previous years.
Shares in the Leeds-based group closed down x per cent last night, a fall of xp to xp after the group said annual sales will be materially below last year at around £9.3m, down from £11.7m in 2011 and £14.1m in 2010.
Datong said that although end user demand is strong, budgetary pressures have resulted in a number of large orders being deferred until 2013. The group had expected to receive and deliver these large orders in September.
Datong’s finance director Stephen Ayres said: “The US business had a good year until September.
“The sector usually saves a big chunk of money to spend at the end of the fiscal year which runs until September 13, but this year the year end budget pots were pulled centrally. We’re not entirely sure of the reason.”
Customers are expected to push demand into the 2013 year.
“Certainly demand is still there,” said Mr Ayres. “We expect the orders to come in.”
He estimated that the combined worth of the orders was between £1.5m and £1.7m.
“The US is moving into election fever and that will cause some ripples. We never quite know what will happen,” said Mr Ayres.
“A split between Senate and Congress has caused a delay, but year on year the spend has been increasing. This argument between the two parties causes timing issues.”
Datong said demand from other territories has been in line with expectations with the European market remaining weak.
“Some of our major customers are in countries where there are economic issues,” said Mr Ayres.
“They’re not well-off countries and they’ve not had money to buy the equipment. They are keeping going the equipment in the field rather than buying new equipment.”
In contrast, Datong said the UK and the Rest of The World territories (ROW) have performed well.
“In the UK there are still budgetary pressures, but we’re more focused on the military side, which is more robust in the UK, than law enforcement,” said Mr Ayres.
The Middle East and South East Asia performed well.
“It’s still a relatively new territory for us, but it’s growing and it’s quite a strong area for us now,” said Mr Ayres.
An £800,000 order within the ROW territory has been delayed until the early part of the 2013 financial year due to delays in obtaining the relevant export licenses.
Earlier this year, Datong revealed plans to expand in the US by opening two new offices in a bid to boost growth after six months of lacklustre sales.
Yesterday Mr Ayres denied that it had been a mistake to focus on the US.
“The US is by far the biggest market. It accounts for around 50 to 60 per cent of the world’s military spend. Our customer base tends to be special forces not the first infantry,” he said.
“The US and the UK are the two main markets for Datong. Expanding in the US is fundamentally the right thing for Datong to be doing.”