Datong puts itself on the market

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SPY gadgets firm Datong has put itself up for sale after a rocky time on the stock market.

The company said that after receiving a bid approach, it is “in the best interests of the company’s shareholders to seek potential offerors by means of a formal sale process”.

The Leeds-based company, which makes covert tracking gear for security services, said Cavendish Corporate Finance is running the sale.

“The board reserves the right to reject any approach or terminate discussions with any interested party or participant at any time,” it said.

“This formal sale process is at an early stage and the board wishes to stress that there can be no certainty that any transaction will be concluded.”

The group said a further announcement will be made when appropriate.

Datong has been buffeted by a number of factors including spending logjams among governments, litigation and fluctuating earnings. In December the group launched a strategic review with the aim of boosting its presence in the US, developing new products and identifying potential acquisitions.

The company has been hit by the economic downturn in Europe and the impact of last November’s Presidential election in the US.

It reported an operating loss of £30,000 in the year to September 30, down from a £50,000 profit the previous year.

US orders slumped in September, which is usually a strong month as customers tend to spend a lot at the end of the budget cycle.

Datong said that although end user demand is strong, budgetary pressures have resulted in a number of large orders being deferred until 2013.

Datong’s finance director Stephen Ayres said: “There is uncertainty post the US election. Budgets were frozen in September and there is ongoing uncertainty. I don’t know how long it will last, but I expect it to last until March.”

Datong predicted a slow first half and a pick-up in the second half.

It recently announced a major £7.5m two-year contract with the UK security services to develop and supply a new system.

The group supplies Government agencies with high-performance covert intelligence gathering equipment used to stop terrorists and criminals.

The group is keen to launch a fully fledged US organisation which will allow it to win big US contracts.

Chief executive Mark Cook recently said: “This will allow us to win US classified contracts.

“At the moment we’re selling technology we’ve developed in the UK.

“It’s been made clear to us that if we had a more sophisticated operation we’d secure more US funded development.”

The plan is to open the new operation near Datong’s current office in Washington.

The group is also keen to improve its service offering. “Let’s say you want to track an asset where you’ve got very weak signals or an urban environment where there are lots of tall buildings.

“We want to improve our technology,” said Mr Cook.

The European market has been very difficult although Datong has seen isolated pockets of good performance, notably in Eastern Europe where countries are benefiting from funding from the EU.

At the moment Datong only sells to Government departments, but it will look at alliances to provide other organisations with sophisticated technology to track assets or VIPs.