News blog
Datong
- BY: Andrew Hore |
- POSTED: 06/12/2011 |
Surveillance technology developer Datong reported a sharp fall in profit in the year to September 2011.
Revenues fell from £14.1m to £11.7m, while the profit slumped from £482,000 to £48,000. That is after the cost of the departure of former chief executive Dean Blood. A rush of orders in August and September was not enough to offset the earlier declines. Datong’s own product revenues rose from £7.47m to £9.41m and the profit contribution improved. The decline in third party revenues meant that their profit contribution fell by nearly two-thirds.
There is strong demand for surveillance products but uncertainties about government budgets, particularly in the US, can hamper spending and making the timing of business difficult to predict.
Net cash fell to £1.27m by the end of September 2011 due to the higher working requirements for the business in the last few weeks of the financial year. Datong did complete the sale of its former factory for £375,000.
Datong is reducing its cost base and hopes to make annual savings of £400,000. That will cost around £100,000 in the first half. Gross R&D spend was £1.74m last yaer and it is likely to fall by around £100,000 this year.
Trading in October and November was disappointing and the business could be even more second half weighted this year. House broker Canaccord Genuity forecasts a sharp recovery in profit to £500,000 on revenues of £12.8m in the year to September 2012. The expected cost savings should make this improvement achievable.
At 20p a share, down 4.5p on the day, Datong is valued at £2.77m. If Datong can achieve the recovery predicted by its house broker then the shares will trade on four times 2011-12 earnings.
A new chief executive should be chosen in the near future.
Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFNovember2011_26.pdf
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