Datong Electronics PLC 
Annual Report and Accounts 2006
Datong Electronics plc
Park House
Clayton Wood Close
West Park  
Leeds LS16 6QE
Tel: 0113 274 4822 
Fax: 0113 274 2872
Email: ir@datong.co.uk 
Web: www.datong.co.uk
Datong Electronics PLC Annual Report and Accounts 2006 MISSION STATEMENT
 IFC MISSION STATEMENT  
 01 HIGHLIGHTS 
 02 CHAIRMAN’S STATEMENT  
 04 CHIEF EXECUTIVE OFFICER’S STATEMENT 
 07 MARKET OPPORTUNITY
 08 FINANCE REVIEW 
 10 BOARD OF DIRECTORS 
 11 SENIOR MANAGEMENT 
 11 CORPORATE INFORMATION
 12 DIRECTORS’ REPORT 
 14 CORPORATE GOVERNANCE STATEMENT
 16 REMUNERATION COMMITTEE REPORT 
 18  STATEMENT OF DIRECTORS’ RESPONSIBILITIES
 19 REPORT OF THE INDEPENDENT AUDITORS
 20 CONSOLIDATED PROFIT AND LOSS ACCOUNT  
 21 CONSOLIDATED BALANCE SHEET
 22 COMPANY BALANCE SHEET
 23 CONSOLIDATED CASH FLOW STATEMENT
 23 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
 23 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 
 24 NOTES TO THE FINANCIAL STATEMENTS
 We strive to maintain an excellent reputation that exceeds customer expectations 
for robust and reliable products, technical support and customer service.
We are a company that has high levels of growth and maintains sustainable proﬁtability.
Using the latest technology we work with our customers to develop and produce 
solutions that fulﬁl their needs.
We develop the skills of our employees to be professional in all that they do and 
to enhance both their job satisfaction and the quality of our products and services. 
T H E D E S I G N P O R T F O L I O
a member of the flathill communications group plc 
www.flathillplc.com
designed & produced by Datong Electronics PLC Annual Report and Accounts 2006
2003–04 2004–05 2005–06
4,017
6,766
7 ,566
GROUP ORDERS RECEIVED (£’000)
2003–04 2004–05 2005–06
4,825
6,485
7 ,308
GROUP TURNOVER (£’000)
2003–04 2004–05 2005–06
875
1,549
1,237
GROUP PROFIT BEFORE EXCEPTIONAL ITEMS, 
INTEREST AND TAX (£’000)
HIGHLIGHTS
Turnover up 12.3% to £7 .3m (2005: £6.5m). 
Order intake up 13.2% to £7 .7m 
(2005: £6.8m).
Proﬁt before interest, tax and exceptional 
items £1.2m (2005: £1.5m).
£1.0m invested in research and development, 
ensuring Datong’s leading position within 
the homeland security market.
Increased footprint and expansion into 
new geographical markets.
Successful take up of the four new 
products released during the year.
The defence and security markets 
continued to grow globally.
Successful ﬂotation on AIM raising £3.5m 
(before expenses) of new money.  Datong Electronics PLC Annual Report and Accounts 2006
INTRODUCTION
I am pleased to present Datong’s maiden results for the year ended 31 March 2006 
following its Admission to London’s AIM market on 7 October 2005. £2.75m (after 
expenses) of new money was raised for the Company and this is being used to fund 
the expansion of the business.
BUSINESS OVERVIEW
The principal business of Datong is the development, design and manufacture 
of a range of advanced high performance surveillance products. The products 
are principally sold to government, military and federal law enforcement 
agencies to assist their operatives in covertly tracking hostile vehicles, packages, 
containers and mobile phones. Datong is headquartered in Leeds, employs 
80 people and has a sales and service ofﬁce in Virginia, USA. 
YEAR IN REVIEW
In the 12 months to 31 March 2006, Datong’s turnover grew by 12.3% to £7 .3m 
(2005: £6.5m). Before the exceptional charge of £1.9m, operating proﬁt was £1.2m 
(2005: £1.5m) and earnings per share were 7 .2p per share (2005: 8.2p per share). 
These results are in line with the expectations adjusted in January 2006 when the 
Board announced the disappointing delays in the receipt of a signiﬁcant US order 
and in the delivery of a UK development contract. 
Datong released four new products during the year, all of which have been 
well received by customers. One of these products is manufactured by a third 
party, resulting in a lower margin than Datong’s proprietary products.  
This successful launch expands the Company’s market reach and complements 
its existing product range. 
CHAIRMAN’S STATEMENT
“ DATONG RELEASED FOUR NEW PRODUCTS DURING 
THE YEAR, ALL OF WHICH HAVE BEEN WELL RECEIVED 
BY CUSTOMERS… THIS SUCCESSFUL LAUNCH EXPANDS 
THE COMPANY’S MARKET REACH AND COMPLEMENTS 
ITS EXISTING PRODUCT RANGE.”
SUMMARY OF CHAIRMAN’S STATEMENT
Successful Admission to AIM. 
Turnover up 12.3%.
Four new products successfully launched and 
well received.  Datong Electronics PLC Annual Report and Accounts 2006
Further new product launches are due to be completed in the ﬁ rst half of 
the year ending 31 March 2007 . 
Datong’s business is back-end weighted with around 65%–70% of sales 
revenue occurring in the second half of the year. This is due to EU, US and 
UK Governments’ spending trends being biased towards procurement in the 
months leading up to March, and we expect this trend to continue for the 
year ended 31 March 2007 .
DIVIDEND
A special dividend of £0.6m was paid to the previous 100% shareholder 
prior to Admission. As we wish to apply our cash resources to fund growth, 
we do not anticipate paying any further dividends in the foreseeable future. 
BOARD CHANGES
In line with our strategy, the Board is also pleased to welcome Grant Ashley to 
the Board as a Non-executive Director. Based in the US, Grant was until recently 
executive assistant director of the FBI and is currently a vice president (Corporate 
Security, Surveillance and Investigations) of Harrah’s Entertainment Inc.
The depth of experience and knowledge that Grant brings to the Company will 
be invaluable both internationally and in assisting us with the further growth of 
our US operations. Grant joined Datong on 6 June 2006.
PEOPLE
This has been an exciting and challenging year for the business and I would 
like to thank my fellow Board members and staff for their hard work, effort 
and enthusiasm over the last year.
I would also like to thank our shareholders for their continued interest 
and investment in the Group.
PAUL LEVER
CHAIRMAN Datong Electronics PLC Annual Report and Accounts 2006
OPERATIONAL REVIEW
Turnover for the year grew by 12.3% to £7 .3m (2005: £6.5m) with 
funded development contract revenues representing £1.1m of this amount 
(2005: £0.1m). 
Gross proﬁt is £3.8m or 51.5% of turnover (2005: £3.8m or 58.4% of turnover). 
The principal changes in the gross proﬁt margin can be explained by the 
combination of three factors:
  a change in the sales mix, principally the sale of third party products 
totalling £1.1m (2005: £Nil) which had the effect of reducing margins by 4.1%;
  in line with our strategy, an increase in research and development costs 
(driven by an increase in headcount) reducing gross proﬁt by 1.3%; and 
 increase in headcount of the production facility reducing gross proﬁt by 1.3%.
Order intake for the year rose by 13.2% to £7.7m (2005: £6.8m), driven 
by strong market demand from the UK and the Rest of the World (‘RoW’). 
As notified previously, we were disappointed by the delay in the receipt 
of a significant US order and in the delivery of a UK development contract 
which adversely affected turnover for the year. I am pleased to announce 
that both the UK and US contracts will be delivered in the ﬁrst half of 2006/07 .
During the year we invested £1.0m in research and development, representing 
approximately 14.3% of turnover. This investment enables us to maintain our 
leading position within our homeland security and defence core markets whilst 
also gaining a foothold in new markets using the next generation of tracking 
systems and related products. 
Our market is split into four geographical regions: UK, US, Europe and the 
RoW. Datong has ofﬁces in the UK and US and is represented by a network 
of 24 distributors in the remaining territories. We continue to expand our 
geographical reach as we move into new countries and sign additional 
agreements with key distributors.
CHIEF EXECUTIVE OFFICER’S STATEMENT
“ WE SEEK TO MAINTAIN OUR LEADING POSITION IN EACH 
OF OUR KEY GEOGRAPHIES. IN ORDER TO REMAIN AT 
THE FOREFRONT OF THESE MARKETS, WE WILL CONTINUE 
TO INVEST IN RESEARCH AND DEVELOPMENT AND EXPAND 
OUR PRODUCT OFFERING.”
SUMMARY OF CHIEF EXECUTIVE 
OFFICER’S STATEMENT
Continued operations into new markets. 
Increased investment in research and development.
Strategic alliances with key customers ensure 
new products are developed.  Datong Electronics PLC Annual Report and Accounts 2006
UK
UK turnover for the year increased by 125% to £2.7m (2005: £1.2m) due 
to the UK funded development contract discussed above. We are now 
re-organising and expanding the research and development facility to target 
such contracts in the future and are becoming proactive in our search for this 
type of business. 
US
US turnover fell to £2.6m (2005: £4.0m), primarily as a result of the delayed 
US order discussed above. Revenue from other US customers remained strong 
during the year and the current US pipeline is very healthy, with a number 
of signiﬁcant contracts expected within the year ending 31 March 2007 . 
The delayed US order is expected in the near future.
EUROPE
European turnover remained constant at £1.0m (2005: £1.0m). Sales of an  
add-on product to give legacy equipment additional GPS functionality were 
offset by a decrease in the sales of the core receiver equipment in advance 
of a product refresh in the coming year. We anticipate European sales increasing as 
the new products are accepted by the customers.
REST OF THE WORLD (‘ROW’)
Over the last year, we extended our geographic reach, particularly concentrating 
on the Middle and Far East. We are pleased to report that as a result 
of these efforts we quadrupled our sales within the RoW region to £1.0m 
(2005: £0.26m). During this ﬁnancial year we intend to build on this success, 
increasing both brand and product penetration.
MARKET DRIVERS
We continue to beneﬁt from the increase in spend in the defence and 
security industries following the recent major terrorist attacks in the US, 
UK and Indonesia, the continued spread of organised crime throughout 
the world and the current conﬂicts in the Middle East and Asia.
The Homeland Security (‘HLS’) & Homeland Defense (‘HLD’) Global Market 
Outlook 2006–2015 study reported that over the next ten years spending in 
homeland security and defence is forecast to grow at 12.1% per annum in the 
USA and 17 .2% per annum in the EU. Expenditure in emerging markets such 
as Middle and Far Eastern countries is expected to achieve even higher growth.
The United States Quadrennial Defense Review, published on 6 February 2006, 
clearly indicates a US Government commitment to the ongoing development 
of the Special Forces Operations in the ﬁght against terrorism.
Datong’s sophisticated and ﬁeld-proven products directly address this growing 
market dedicated to the ﬁght against terrorism and organised crime.
NEW NON-EXECUTIVE CHAIRMAN
The Board is delighted to welcome Paul Lever as our Non-executive Chairman. 
As former chairman of the National Criminal Intelligence Service, Paul brings 
considerable industry knowledge and has already made a significant 
contribution to our activities. I would like to thank him for his assistance since 
he joined Datong on 9 September 2005.
2006 TURNOVER BY DESTINATION 2005 TURNOVER BY DESTINATION
ROW
14%
EUROPE
13%
USA
36%
UK
37%
ROW
4%
EUROPE
15%
USA
62%
UK
19% Datong Electronics PLC Annual Report and Accounts 2006
STRATEGY FOR GROWTH 
It is our primary aim to continue to grow the business organically and we 
will consider bolt on acquisitions and new complementary technologies 
where appropriate. To this end we were pleased to sign a contract with 
the UTEK Corporation in June 2006 which will enable us to increase our 
networking capabilities within research establishments and universities relevant 
to our business around the world. We expect this arrangement to result in 
access to a greater range of new technological innovations than we could 
achieve by ourselves and to potential acquisitions.
We seek to maintain our leading position in each of our key geographies. 
In order to remain at the forefront of these markets, we will continue to 
invest in research and development and expand our product offering.  
We have a number of new products in development which are currently 
being funded by the new money raised on Admission to AIM. It is vital that 
we maintain our reputation for developing products that are robust, reliable 
and resilient and that precisely meet the needs of our customers. 
We have an active sales force and an established distributor network, 
but referrals and recommendations from existing customers also play a key 
role in developing new business. It is our policy to work closely alongside our 
most signiﬁcant customers and distributors during the product development 
stage, ensuring that even the most exacting speciﬁcations can be rigorously 
met. We have enjoyed close working relationships with some of our military 
customers for over 20 years.
In addition, we intend to target further funded research and development 
contracts as we believe there are signiﬁcant development budgets available 
in the US and UK which will assist us in fulﬁlling our growth strategy.
OUTLOOK
Datong’s sophisticated and ﬁeld-proven products directly address the rapidly 
expanding markets dedicated to the ﬁght against terrorism and organised 
crime. We are well placed to take advantage of these growth markets and 
our application of the various tracking technologies (radio frequency, GPS 
and GSM) alone or in combination allows us to develop products speciﬁcally 
for these different markets. This will ensure our future success.
It has been a period of signiﬁcant change for the Company since our 
Admission to the AIM market on 7 October 2005. The funds raised at that 
time will be used to expand the capabilities of our business, in particular in 
research and development, sales and enhancements to the manufacturing 
and test facilities in order to meet the challenges of our customers and their 
evolving needs in a rapidly changing world.
CURRENT TRADING
Current trading for the period since 1 April 2006 is in line with 
management expectations.
BRIAN MCQUEEN SMITH
CHIEF EXECUTIVE OFFICER
CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED
“ DATONG’S SOPHISTICATED AND FIELD-PROVEN PRODUCTS 
DIRECTLY ADDRESS THE RAPIDLY EXPANDING MARKET 
DEDICATED TO THE FIGHT AGAINST TERRORISM AND 
ORGANISED CRIME. WE ARE ENCOURAGED BY THE LEVEL OF 
ORDERS TO DATE, AND REMAIN CONFIDENT FOR THE FUTURE.” Datong Electronics PLC Annual Report and Accounts 2006
MARKET OPPORTUNITY
KEY 
 DATONG’S PRINCIPAL MARKETS
 
Source:  Management and HLS/HLD Global Market Outlook – 2006-2015 
Scenario 1 used – “Persistent tension without a major terrorist crisis”.
CANADA AND MEXICO
   From 2005 to 2015, HLS and HLD spend 
forecast to grow at 16.8% per annum.
  Concern over drug smuggling 
expected to prompt Governments to 
invest more in HLS/HLD procurement.
  Pressure expected to be applied 
by USA on both countries to stem 
terrorist threat.
USA
   From 2005 to 2015, HLS and HLD spend 
forecast to grow at 12.1% per annum.
  In 2005 US spend is forecast to be 
51.5% of global HLS and HLD spend. 
PEOPLE’S REPUBLIC OF CHINA AND INDIA
   From 2005 to 2015, HLS and HLD spend 
forecast to grow at 25.7% per annum.
  Fast growing international crime 
syndicates in PRC expected to increase 
the level of HLS/HLD procurement.
  Concern over terrorist activity in 
India expected to increase demand 
in market.
AUSTRALIA, JAPAN AND PACIFIC RIM
   From 2005 to 2015, HLS and HLD spend 
forecast to grow at 12.3% per annum.
  Drug and counterfeit goods trade 
prevalent in the region.
  Australian nationals have been the 
target of terrorists.
EUROPEAN UNION
   From 2005 to 2015, HLS and HLD spend 
forecast to grow at 17 .2% per annum.
  EU member states are a key target 
for terrorist groups. Datong Electronics PLC Annual Report and Accounts 2006
FINANCE REVIEW 
RESULTS
An analysis of revenue has been provided in the Chief Executive’s statement.
Operating profit before exceptional items was £1.2m (2005: £1.5m) 
as distribution and administrative costs increased by £0.3m as compared 
to the prior year. Distribution costs increased to £1.0m (2005: £0.8m) with 
administrative expense remaining constant at £1.5m. Distribution costs have 
increased as a result of the addition of three sales managers and the higher 
travel costs associated with the increased sales to the RoW. Administrative 
expenses have remained constant as the increase in establishment, IT support 
costs and professional fees of £0.2m, the additional costs associated with 
being a public company of £0.15m and the increased depreciation charge as 
a result of the increased investment in the capacity of the business of £0.1m 
have been offset by a decrease in the bonus payment to staff of £0.5m.
EXCEPTIONAL ITEMS
During the year, the Group incurred two exceptional costs totalling £1.9m, 
detailed below: 
  Listing expenses of £0.6m
  The listing expenses of £0.6m contain all expenses relating to the Admission 
of the Company to AIM on 7 October 2005. In addition to this cost, placing 
commission of £0.2m was incurred at Admission but this has been 
deducted from the share premium account (see note 22 to the ﬁnancial 
statements) rather than through the proﬁt and loss account.
  Obligation arising from previous owners to management team of £1.3m
  The previous 100% shareholder of Datong had an undertaking to provide 
executive management shares in consideration for performance while 
the Company was under its ownership. Consequently 900,000 shares  
were issued on 30 September 2005 at a cost to the Company of £1.3m  
at the Admission price of £1.28 per share.
SUMMARY OF THE FINANCIAL REVIEW
Gross proﬁt 51.5%. 
Operating proﬁt £1.2m. 
Funded research and development contracts 
of £1.1m in year.
£0.5m investment in capital expenditure. 
24%+
INCREASE IN INVESTMENT 
IN RESEARCH AND 
DEVELOPMENT
61%+
INCREASE IN CAPITAL 
EXPENDITURE INVESTMENT Datong Electronics PLC Annual Report and Accounts 2006
FINANCIAL OVERVIEW    Percent  
 2006 2005 change  
 £’000 £’000 %
Sales 7 ,307 .9 6,485.3 12.7%
Gross proﬁt 3,762.0 3,784.0 (0.6%)
 51.5% 58.4% (11.8%)
Proﬁt before interest, tax and exceptional items  1,237 .7 1,549.2 (17 .5%)
 16.9% 23.9% (26.8%)
Order book 842.9 585.1 44.1%
Orders received year to date 7 ,656.7 6,765.8 13.2%
Earnings per share on proﬁt before interest,  
tax and exceptional items (p) 7 .2 8.2 (12.2%)
Headcount 80.5  62.0  29.8%
Sales per employee 90.8 104.6 (13.2%)
EBIT per employee 15.9 25.0 (36.4%)
Increase in cash in year 994.0 1,434.0 (30.7%)
Cash generated from operations 41.0 2,141.0 (98.1%)
TAXATION
There is a Group tax credit of £93,000 this year (2005: charge of £416,000). 
There is a UK tax credit for the Company of £56,000 (2005: charge of £347 ,000) 
which has arisen due to the issue of shares to executive management and 
the fact that the Company is able to claim the research and development 
UK tax credit at the larger company rate of 25%. The large company status 
is a result of the Group being a subsidiary of a large group as at 1 April 2005. 
The overseas tax credit attributed to Datong Electronics Inc. was £37 ,000 as 
the company made losses this year.
CAPITAL EXPENDITURE
The Group invested £0.5m in capital expenditure this year. Funding raised at 
the time of the Admission to AIM is being used to both expand and upgrade 
the research and development and production equipment. 
CASH FLOW AND FINANCING
The cash balances increased by £1.0m over the course of the year 
as detailed in the cash flow statement on page 23 to these financial 
statements. Although the operating proﬁt before exceptional items was 
£1.2m, the business generated £41,000 of cash from its trading operations 
before exceptional items. The principal cause of this cash requirement was 
the need to fund two research and development contracts totalling £1.1m. 
By the year end, £0.3m of these contracts had been invoiced. 
Additionally the business funded the payment of a special dividend to the 
previous 100% shareholder prior to Admission to AIM of £0.6m.
FOREIGN EXCHANGE
In the year to 31 March 2006, 36% (2005: 62%) of the Group’s turnover 
was generated in US dollars. The Group, therefore, has signiﬁcant exposure 
to translation risk. The Group uses forward exchange contracts to manage 
this risk. In the year the effect of this exposure was a gain of £24,000 
(2005: gain of £58,000).
SHARE-BASED PAYMENTS
Share-based payments under the Group’s Share Option Scheme have been 
accounted for under Financial Reporting Standard 20 which has resulted  
in a charge of £24,000. This charge has been included in administrative 
expenses for the year.
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING 
STANDARDS (‘IFRS’)
As an AIM listed company, Datong will adopt IFRS for the year ending 
31 March 2008. The IFRS evaluation is ongoing but the main effect will be 
the capitalisation of research and development expenditure associated with 
commercially viable products and the subsequent amortisation of that asset 
over the product life cycle. Currently all research and development expenditure 
is written off to the proﬁt and loss account (as a cost of sale) in the year in 
which it is incurred. 
JAMES COOKE
FINANCE DIRECTOR Datong Electronics PLC Annual Report and Accounts 2006
BOARD OF DIRECTORS
PAUL LEVER (65)
NON-EXECUTIVE CHAIRMAN
Paul joined Datong as Chairman in September 2005. 
Paul’s career spans both the private and public sector. 
After a short spell in the regular Army and a longer 
one in the Territorial Army, where he served in Defence 
Intelligence, Paul spent the majority of his career as a full 
time executive in industry, 23 years of which were holding 
chief executive posts in a number of different companies. 
These companies include Tube Investments, Crown Paints, 
Crown Berger and Lionheart plc. Paul has also held a number 
of notable non-executive chairman roles, including the British 
School of Motoring plc and Oxford Aviation, Europe’s 
largest pilot training school. Paul was appointed as a 
non-executive director of the National Criminal Intelligence 
Service (‘NCIS’) and the National Crime Squad (‘NCS’) 
in April 1998. In 2003, he was appointed by the Home 
Secretary as his representative and vice chairman of NCIS 
and NCS, and in 2004 was appointed chairman of both, 
positions he held until March 2006. Paul is a member of 
the Audit, Remuneration and Nomination Committees. 
BRIAN MCQUEEN SMITH (61)
CHIEF EXECUTIVE OFFICER
Brian joined Datong in November 1998 as Sales Director, 
moving into the Managing Director role in July 2000. 
Brian has 30 years’ experience with AGEMA Infrared 
Systems AB, the Swedish manufacturer of Forward 
Looking Infra-Red equipment, of which 15 years were 
spent as the managing director for the UK operations. 
The UK company was responsible for sales into Africa, 
Asia, the Middle East, Australia and the Paciﬁc Rim. During 
the last three years of his time with AGEMA he took over 
responsibility of the French, German and Italian subsidiaries 
of the Swedish parent company. Brian is a member of the 
Nomination Committee.
GRANT ASHLEY (50)
NON-EXECUTIVE DIRECTOR
Grant joined the United States Federal Bureau of 
Investigation (FBI) in 1976 in the Los Angeles Field Ofﬁce. 
After a year out working in the private sector as an accountant, 
he re-joined the FBI in 1980 until his retirement in January 2006. 
During this time he worked in a variety of roles culminating 
in his appointment as executive assistant director in May 
2004 for Law Enforcement Services. Along with two other 
executive assistant directors, he worked as co-deputy of 
the FBI. Grant is now vice president of Corporate Security, 
Surveillance, Executive Protection and Investigations with 
Harrah’s Entertainment Inc. Whilst working for the FBI, 
Grant completed a Bachelor of Science Degree in 
Accounting in 1978 and qualiﬁed as a Certiﬁed Public 
Accountant in 1980. In 1995 he received a Master of Arts 
Degree in Public Administration.
JAMES COOKE (40)
FINANCE DIRECTOR AND COMPANY SECRETARY
James joined Datong as Finance Director (part time) in 
May 2000 and became full time in January 2005. James 
qualiﬁed as a Chartered Accountant with Grant Thornton 
in July 1990 and before joining the Investec Group in 
June 1997 , held a number of senior ﬁnancial roles with 
UK, US and German businesses. At Investec, James 
was initially the ﬁnancial controller of Investec’s insurance 
broking subsidiary and then moved to work in the private 
equity division where his responsibilities included operational 
management of various portfolio companies, as well as 
the realisation of value from a number of investments via 
trade sales. Immediately prior to joining Datong full time, 
James was the managing director of a traded endowment 
market-making subsidiary of the Investec Group.
ROBERT COHEN (51)
NON-EXECUTIVE DIRECTOR
Robert has been a Non-executive Director of Datong 
since March 1999 and was Chairman until the appointment 
of Paul Lever. He has over 25 years’ experience in general 
managerial roles in trade, industry, private equity and 
investment banking. He has recently set up a fund 
management company in partnership with a residential 
property development group which invests in major 
residential property developments in London. Robert joined 
Investec plc in 1998 and until early 2006 was responsible 
for credit and risk within the private bank and was head 
of Investec Group Investments, controlling a portfolio of 
private equity direct investments and funds. Prior to that, 
Robert held roles as chief executive of Vestacor Limited, 
a private equity investment fund listed on the Johannesburg 
Stock Exchange and as chief executive ofﬁcer of PG Bison 
Ltd, a South African business employing over 4,000 people. 
Robert is a member of the Audit, Remuneration and 
Nomination Committees. Datong Electronics PLC Annual Report and Accounts 2006
SENIOR MANAGEMENT
SIMON MARKER (37)
HEAD OF RESEARCH AND DEVELOPMENT
Simon joined Datong in 1992 as a Development Engineer 
where he worked on developing the ﬁrst generation of 
mapping products to allow real-time display of targets 
on a digital map. In 2000 Simon was appointed Research 
and Development Manager with overall responsibility for 
all engineering and development processes.
PAUL MOORE (37)
HEAD OF SALES
Paul joined Datong in April 2004 as Head of Sales. Paul 
has eleven years’ experience in the electronics market 
including eight years with Hewlett-Packard working in 
their test and measurement sales department, where 
he managed key accounts such as Cisco Systems. Paul 
has worked in the security sector since 2001, starting 
with a small specialist research company as a sales 
manager before moving to Datong.
STUART FLACK (40)
HEAD OF OPERATIONS
Stuart joined Datong in September 1998. He is responsible 
for the production, testing, and servicing of Datong products. 
Stuart has worked in manufacturing for 21 years in a 
variety of industries including aerospace, automotive and 
pharmaceutical. Stuart is a director of Electronics Y orkshire Ltd, 
a training and networking organisation.
REGISTERED OFFICE
Park House 
Clayton Wood Close 
West Park 
Leeds LS16 6QE
REGISTERED NUMBER
01169448
REGISTRAR
Capita Registrars Limited 
Northern House 
Woodsome Park 
Fenay Bridge 
Huddersﬁeld 
West Y orkshire HD8 0LA
BROKER 
Bridgewell Limited 
Old Change House 
128 Queen Victoria Street 
London EC4V 4BJ
BANK
Barclays Bank PLC 
PO Box 190 
2nd Floor 
1 Park Row 
Leeds LS1 5WU
AUDITOR
KPMG Audit Plc 
1 The Embankment 
Neville Street 
Leeds LS1 4DW
FINANCIAL PR 
Smithﬁeld Financial Limited 
5th Floor 
10 Aldersgate Street 
London EC1A 4NJ
CORPORATE INFORMATION Datong Electronics PLC Annual Report and Accounts 2006
The Directors present their annual report and consolidated ﬁnancial statements for the year ended 31 March 2006.
PRINCIPAL ACTIVITIES
The Group’s principal activity during the year was the manufacture, design and marketing of electronic equipment. A detailed business review of the year is 
included in the statements from the Chairman, Chief Executive Ofﬁcer and Finance Director on pages 2 to 9.
The products require sophisticated and advanced technology and the Group’s activities include the research and development thereof.
RESULTS AND DIVIDENDS
The loss for the year on ordinary activities after taxation amounted to £0.5m (2005: proﬁt of £1.1m).
The proﬁt before exceptional items, interest and tax for the year was £1.2m (2005: £1.5m).
The Directors do not recommend the payment of a dividend at the year end (2005: £Nil). However, a special dividend of £0.6m was paid to the previous 100% 
shareholder prior to Admission in September 2005.
DIRECTORS AND DIRECTORS’ INTERESTS
The Directors who held ofﬁce during the year were as follows:
Paul Lever Non-executive Chairman (appointed 9 September 2005) 
Brian McQueen Smith Chief Executive 
James Cooke Finance Director 
Robert Cohen Non-executive Director (role change from Non-executive Chairman on 9 September 2005)
Grant Ashley joined as a Non-executive Director after the year end on 6 June 2006.
The Directors beneﬁt from qualifying third party indemnity provisions in place during the ﬁnancial year and at the date of this report.
Details of the Directors’ service contracts and the interests of the Directors in the shares of the Company are disclosed in the Remuneration Committee report 
on pages 16 to 18.
At the forthcoming Annual General Meeting, Paul Lever, Brian McQueen Smith and Grant Ashley will retire and being eligible will offer themselves for re-election.
DONATIONS
Charitable donations of £59 were made this year (2005: £80). No political donations were made.
SUBSTANTIAL SHAREHOLDINGS
The Company has been informed that on 26 June 2006 the following shareholders held substantial holdings of the issued ordinary shares of the Company:
     Holding of Issued  
     ordinary shares share capital 
     Number %
Investec Group     6,252,728 45.20
Polar Capital     781,250 5.65
Unicorn Asset Management     781,250 5.65
Artemis AIM VCT     585,938 4.24
Morely Asset Management     572,485 4.16
Close Brothers     468,750 3.39
GOING CONCERN
The Directors, after making appropriate enquiries, have a reasonable expectation, that the Group has adequate resources to continue in operational existence for 
the foreseeable future. For this reason the Directors have adopted the going concern basis in preparing these ﬁnancial statements.
DIRECTORS’ REPORT Datong Electronics PLC Annual Report and Accounts 2006
ENVIRONMENTAL POLICY
The Group’s environmental policy is to meet the statutory requirements placed upon it and to apply good environmental practice in its operations.
CREDITOR PAYMENT POLICY
The Group’s strategy is to build mutually beneﬁcial relationships with its key suppliers. So long as suppliers have provided the goods or services in accordance 
with the previously agreed terms and conditions, the Group’s policy is to pay in accordance with those terms.
The average number of days’ purchases outstanding for the payment by the Group was 31 days (2005: 28 days).
ANNUAL GENERAL MEETING
The Annual General Meeting will be held on 12 September 2006 at 10:00am at the ofﬁces of Smithﬁelds Financial, Fifth Floor, 10 Aldersgate Street, London EC1A 4HJ.
AUDITORS
DISCLOSURE OF INFORMATION TO AUDITORS
The Directors who held ofﬁce at the date of approval of this Directors’ report conﬁrm that, so far as they are each aware, there is no relevant audit information 
of which the Company’s auditors are unaware; and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any 
relevant audit information and to establish that the Company’s auditors are aware of that information. 
In accordance with section 384 of the Companies Act 1985, a resolution for the re-appointment of KPMG Audit plc as auditors of the Company will be proposed 
at the Annual General Meeting.
By order of the Board on 28 June 2006.
JAMES COOKE
FINANCE DIRECTOR Datong Electronics PLC Annual Report and Accounts 2006
CORPORATE GOVERNANCE
As a result of the Admission to AIM in October 2005, there have been a number of changes to the way in which the Group is governed. In particular, the Group 
now has two additional Non-executive Directors and has established a number of Committees (as detailed below) and has increased the frequency of the Board 
meetings to monthly, which now include formal risk assessments. The second additional Non-executive Director was appointed on 6 June 2006.
The Board is committed to high standards of corporate governance and although the Group is not required to comply with the provisions of the Combined Code 
on Corporate Governance, details of how it has applied those provisions considered appropriate to the Group’s state of affairs are described below.
COMPOSITION AND ROLES OF THE BOARD AND AUDIT, NOMINATION AND REMUNERATION COMMITTEES
The PLC Board comprises two Executive Directors and three Non-executive Directors, one of whom is the Non-executive Chairman. The third Non-executive Director, 
Grant Ashley, was appointed after the year end on 6 June 2006. Robert Cohen and Grant Ashley are considered to be independent of the Group. The details of 
the changes in the Board following Admission to AIM are detailed in the Directors’ report.  
The Non-executive Directors fulﬁl a key role in corporate accountability.
The Board is responsible to the shareholders and is responsible for formulating, reviewing and approving the Company’s strategy, budgets and corporate actions. 
Following Admission to AIM, the Company holds monthly Board meetings.
The Group has established Audit, Remuneration and Nomination Committees of the Board with formally delegated duties and responsibilities.
AUDIT COMMITTEE
The Audit Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the ﬁnancial performance of the Group is properly 
measured and reported on. It receives and reviews reports from the Group’s management and auditors relating to the interim review and annual audit and the 
accounting and internal control systems in use throughout the Group. The Committee meets at least once every quarter and has unrestricted access to the 
Group’s auditors.
In addition, it is responsible for overseeing the relationship with the external auditor, ensuring the scope of the planned audit work is consistent with  
the audit engagement.
The members are Paul Lever and Robert Cohen. Robert Cohen is the Audit Committee Chairman.
REMUNERATION COMMITTEE
The Remuneration Committee reviews the performance of the Executive Directors and senior management and makes recommendations to the Board on matters 
relating to their remuneration and terms of employment. It also makes recommendations to the Board on proposals for the granting of share options and other 
equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time.
The members of the Remuneration Committee are Paul Lever and Robert Cohen. Robert Cohen is the Remuneration Committee Chairman. Meetings are held 
at least twice each year.
NOMINATION COMMITTEE
The Nomination Committee reviews the structure, size and composition required of the Board compared to the current position of the Group, makes recommendations 
to the Board with regard to any changes and gives full consideration to succession planning for Directors and other senior executives in the course of its work. 
The Committee meets twice a year and is composed of Paul Lever, Robert Cohen and Brian McQueen Smith. 
CORPORATE GOVERNANCE STATEMENT Datong Electronics PLC Annual Report and Accounts 2006
INTERNAL CONTROL AND RISK MANAGEMENT
The Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. The Group maintains systems which are designed 
to provide reasonable but not absolute assurance against material loss and to manage rather than eliminate risk.
The key features of the Group’s system of internal control are as follows:
●  management structure with clearly identiﬁed responsibilities;
●  production of comprehensive historical management information produced timely;
●  detailed budgeting and forecasting;
●  monthly analysis of risks and threats reviewed by the Board at each of its meetings;
●  day to day hands on involvement of the Executive Directors; and
●  ISO accredited business processes which are externally audited.
PERFORMANCE EVALUATION
The performance of the Board, its individual members and its Committees is regularly reviewed as required by the revised Combined Code.
COMMUNICATION WITH SHAREHOLDERS
The Board are keen to encourage the participation of a broad base of both institutional and private investors in the Group. Communication with investors will  
be maintained through the Annual General Meeting, annual and interim reports and press releases.
SHARE OPTIONS
The Group has an approved share option scheme under the Enterprise Management Incentive Scheme. Share options will be issued at appropriate intervals 
in order to motivate and retain Executive Directors, senior management and other key staff whilst aligning their interests with those of the Group’s shareholders. 
Such grants are approved by the Remuneration Committee. Datong Electronics PLC Annual Report and Accounts 2006
INTRODUCTION
The following report provides information relating to the pay and beneﬁts policy for the Company’s Directors. The sections of this report which are required  
by the Companies Act 1985 are indicated by an asterisk *.
MEMBERS OF THE REMUNERATION COMMITTEE
Details relating to the Remuneration Committee can be found in the corporate governance statement on pages 14 and 15.
The Committee meets during the year to determine all aspects of the remuneration of the Executive Directors and executive senior management. 
The remuneration of the Non-executive Directors is determined by the Board as a whole following recommendations made by the Executive Directors.
REMUNERATION POLICY
The Committee believes remuneration levels should be competitive and set to attract, retain and motivate Executive Directors and to align their interests as closely 
as possible with the interests of the shareholders.
The Company makes contributions to Group personal pension schemes on behalf of Executive Directors.
The Company operates an approved Enterprise Management Incentive Share Option Scheme and an Employee Beneﬁt Trust in order to incentivise its key 
employees. As at 31 March 2006, neither of the Executive Directors had been awarded any options.
OBLIGATION ARISING FROM PREVIOUS OWNERS TO EXECUTIVE DIRECTORS AND MANAGEMENT
As disclosed in the ﬁnance review, the previous 100% shareholder of the Company had an undertaking to provide the executive management shares 
in consideration for performance while the Company was under its ownership.
These shares were issued to the Executive Directors and the other executive senior management through the Datong Employee Beneﬁt Trust at the Admission 
price of £1.28 per share and the number and value awarded to the Executive Directors are disclosed in the total Directors’ pay and beneﬁts table for the year 
to 31 March 2006 below.
TOTAL DIRECTORS’ PAY AND BENEFITS FOR THE YEAR ENDED 31 MARCH 2006 (*)
   
Shares awarded
   
   
prior to Admission by
  
 Salary/  
previous 100% owner
  2006
  fees Bonuses  Value Beneﬁts Total 
  £’000 £’000 Number £’000 £’000 £’000
Executive Directors
Brian McQueen Smith 105 — 370,370 474 1 580
James Cooke 100 — 111,112 142 1 243
T otal Executive Directors’ pay and beneﬁts 205 — 481,482 616 2 823
Non-executive Directors
Paul Lever 20 — — — — 20
Robert Cohen 14 — — — — 14
T otal Non-executive Directors’ pay and beneﬁts 34 — — — — 34
TOTAL DIRECTORS’ PAY AND BENEFITS FOR THE YEAR ENDED 31 MARCH 2005 (*)
   Salary/   2005 
   fees Bonuses Beneﬁts Total 
   £’000 £’000 £’000 £’000
Executive Directors
Brian McQueen Smith   94 110 1 205
James Cooke   18 — — 18
T otal Executive Directors’ pay and beneﬁts   112 110 1 223
REMUNERATION COMMITTEE REPORT Datong Electronics PLC Annual Report and Accounts 2006
NOTES TO THE TOTAL DIRECTORS’ PAY AND BENEFITS FOR THE YEARS ENDING 31 MARCH 2006 AND 2005
1.  The service contract of James Cooke with the Company commenced 1 September 2005. Prior to that date the Company was charged £42,000 by the 
Investec Group (the previous 100% owner of the Company) for services provided by him from 1 April 2005 to 31 August 2005. This amount is included in 
the table on page 16. For the year ended 31 March 2005 the Investec Group charge was £18,000. These amounts charged by the Investec Group have been 
disclosed on page 34, Note 24 to the ﬁnancial statements details the related party transactions with the Investec Group.
2.  Paul Lever was appointed to the Board as Non-executive Chairman on 9 September 2005. The amount shown is the pro-rata amount from 9 September until 
31 March 2006.
3.  The fees for Robert Cohen’s services until 1 September 2005 were borne by the Investec Group and not recharged to the Company. From 1 September 2005 
to 31 January 2006 the fees for his services of £10,000 were paid to the Investec Group; from 1 February 2006 to 31 March 2006 fees of £4,000 were paid to 
CRV Management Limited, a company controlled by Robert Cohen. These amounts are shown in the table on page 16. The amounts charged by the Investec Group 
have been disclosed on page 34, Note 24 to the ﬁnancial statements. The amount shown is the pro-rata amount from 1 September until 31 March 2006.
4.  There were no payments for the services of Robert Cohen, the only Non-executive Director in the year ended 31 March 2005.
PENSION CONTRIBUTIONS
The following Directors have received contributions to Group personal pension schemes in the year:
  Amount of Company  
  contribution accrued  
 Contributions paid or payable  at the year end
   
 
   2006 2005 2006 2005 
   £’000 £’000 £’000 £’000
Executive Directors
Brian McQueen Smith   5 4 1 —
James Cooke   5 — 1 —
SHARE INTERESTS
The beneﬁcial interests of the Directors in the ordinary shares of the Company as at 31 March 2006 were:
      Number
Paul Lever      30,750
Brian McQueen Smith      126,110
James Cooke      91,668
No Directors held any shares as at 31 March 2005.
SHARE OPTION SCHEME
The Group operates an Enterprise Management Incentive Share Option Scheme. As at 31 March 2006 and the date of this report, no Directors have been 
awarded any share options. Further details of this scheme are provided in note 21 to these ﬁnancial statements. Datong Electronics PLC Annual Report and Accounts 2006
DIRECTORS’ CONTRACTS
Details of service agreements in place for the Directors holding ofﬁce during the year are as follows:
 Date of contract Unexpired term at 31 March 2006 Annual salary/fee Notice period
Paul Lever 9 September 2005 29 months £35,000 Not less than 6 months by either party
Brian McQueen Smith 1 September 2005 Continuous until 65th birthday £100,000 Not less than 12 months by either party
James Cooke 1 September 2005 Continuous until 65th birthday £100,000 Not less than 6 months by either party
Robert Cohen 1 September 2005 5 months £25,000 Not less than 6 months by either party
ROBERT COHEN
CHAIRMAN OF THE REMUNERATION COMMITTEE
The Directors are responsible for preparing the annual report and the ﬁnancial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare ﬁnancial statements for each ﬁnancial year. Under that law they have elected to prepare the Group and 
parent company ﬁnancial statements in accordance with UK Accounting Standards.
The Group and parent company ﬁnancial statements are required by law to give a true and fair view of the state of affairs of the Group and the parent company 
and of the proﬁt or loss for that year.
In preparing these ﬁnancial statements, the Directors are required to:
● select suitable accounting policies and then apply them consistently;
● make judgements and estimates that are reasonable and prudent;
● state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the ﬁnancial statements; and
●  prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue 
in business. 
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the ﬁnancial position of the parent 
company and enable them to ensure that its ﬁnancial statements comply with the Companies Act 1985. They have general responsibility for taking such steps 
as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and ﬁnancial information included on the Company’s website. Legislation 
in the UK governing the preparation and dissemination of ﬁnancial statements may differ from legislation in other jurisdictions.
REMUNERATION COMMITTEE REPORT CONTINUED
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF 
THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS Datong Electronics PLC Annual Report and Accounts 2006
We have audited the Group and parent company ﬁnancial statements (the ‘ﬁnancial statements’) of Datong Electronics PLC for the year ended 31 March 2006 
which comprise the Group proﬁt and loss account, the Group and Company balance sheets, the Group cash ﬂow statement, the reconciliation of net cash ﬂow 
to movement in net debt, the Group statement of total recognised gains and losses and the related notes. These ﬁnancial statements have been prepared under 
the accounting policies set out therein.
This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been 
undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. 
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, 
for our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Directors’ responsibilities for preparing the annual report and the ﬁnancial statements in accordance with applicable law and UK Accounting Standards 
(UK Generally Accepted Accounting Practice) are set out in the statement of Directors’ responsibilities on page 18.
Our responsibility is to audit the ﬁnancial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing 
(UK and Ireland).
We report to you our opinion as to whether the ﬁnancial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. 
We also report to you whether in our opinion the information given in the Directors’ report is consistent with the ﬁnancial statements. The information given in the 
Directors’ report includes that speciﬁc information presented in the operating and ﬁnancial review that is cross referenced from the business review section of the 
Directors’ report. We also report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and 
explanations we require for our audit, or if information speciﬁed by law regarding Directors’ remuneration and other transactions is not disclosed.
We read the other information contained in the annual report and consider whether it is consistent with the audited ﬁnancial statements. We consider 
the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the ﬁnancial statements. We read the 
Directors’ report and consider the implications for our report if we become aware of any apparent misstatements within it.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes 
examination, on a test basis, of evidence relevant to the amounts and disclosures in the ﬁnancial statements. It also includes an assessment of the signiﬁcant 
estimates and judgements made by the Directors in the preparation of the ﬁnancial statements, and of whether the accounting policies are appropriate to the 
Group’s and Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufﬁcient 
evidence to give reasonable assurance that the ﬁnancial statements are free from material misstatement, whether caused by fraud or other irregularity or error. 
In forming our opinion we also evaluated the overall adequacy of the presentation of information in the ﬁnancial statements.
OPINION
In our opinion:
●  the ﬁnancial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of the Group’s and the 
parent company’s affairs as at 31 March 2006 and of the Group’s loss for the year then ended;
●  the ﬁnancial statements have been properly prepared in accordance with the Companies Act 1985; and
●  the information given in the Directors’ report is consistent with the ﬁnancial statements.
KPMG AUDIT PLC
CHARTERED ACCOUNTANT
REGISTERED AUDITOR
LEEDS
28 JUNE 2006
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF DATONG ELECTRONICS PLC Datong Electronics PLC Annual Report and Accounts 2006
   Year ended 31 March 2006
   Before  2006   Year ended  
   exceptional  Exceptional Total  31 March  
   items items 2006 2005 
  Note £’000 £’000 £’000 £’000
Turnover  2 7 ,308 — 7 ,308 6,485
Cost of sales    (3,546) — (3,546) (2,701)
Gross proﬁt   3,762 — 3,762 3,784
Distribution costs   (1,061) — (1,061) (754)
Administrative expenses  3 (1,464) (1,889) (3,353) (1,481)
Operating (loss)/proﬁt   1,237 (1,889) (652) 1,549
Interest receivable  4 75 — 75 24
Interest payable  5 (17) — (17) (19)
(Loss)/proﬁt on ordinary activities before taxation   1,295 (1,889) (594) 1,554
Tax on (loss)/proﬁt on ordinary activities  8 (297) 390 93 (416)
(Loss)/proﬁt for the ﬁnancial year   998 (1,499) (501) 1,138
Basic (loss)/earnings per share   11 7 .2p (10.8)p (3.6)p 8.2p
Diluted (loss)/earnings per share  11  7 .1p (10.7)p (3.6)p  8.2p
Details of the exceptional items which relate to the Admission of the Company to AIM are included in note 6.
There is no difference between the results on ordinary activities before taxation for the year stated above and their historical cost equivalent.
The Group did not have any discontinued operations in either the current or preceding year.
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2006 Datong Electronics PLC Annual Report and Accounts 2006
 2006 2005
   
 
  Note £’000 £’000 £’000 £’000
Fixed assets
Tangible assets  12  1,379  1,101
Current assets
Stocks  14 1,205  969
Debtors  15 3,036  1,672
Cash at bank and in hand   2,789  1,795
   7 ,030  4,436
Creditors: amounts falling due within one year   17 (1,286)  (1,783)
Net current assets    5,744  2,653
T otal assets less current liabilities    7 ,123  3,754
Creditors: amounts falling due after more than one year  18  (177)  (195)
Net assets    6,946  3,559
Capital and reserves
Called up share capital  20  69  1
Share premium account  22  4,468  —
Proﬁt and loss account  22  2,409  3,558
Shareholders’ funds – equity interests  23  6,946  3,559
These ﬁnancial statements were approved by the Board of Directors on 28 June 2006 and were signed on its behalf by:
BRIAN MCQUEEN SMITH
DIRECTOR
CONSOLIDATED BALANCE SHEET AT 31 MARCH 2006 Datong Electronics PLC Annual Report and Accounts 2006
 2006 2005
   
 
  Note £’000 £’000 £’000 £’000
Fixed assets
Tangible assets  12 1,341   1,069
Investment in subsidiary undertakings  13 2   2
    1,343  1,071
Current assets
Stocks  14 1,158  892
Debtors  15 3,169  1,854
Cash at bank and in hand   2,658  1,618
   6,985  4,364
Creditors: amounts falling due within one year   17 (1,239)  (1,727)
Net current assets    5,746  2,637
T otal assets less current liabilities    7 ,089  3,708
Creditors: amounts falling due after more than one year  18  (165)  (191)
Net assets    6,924  3,517
Capital and reserves
Called up share capital  20  69  1
Share premium account  22  4,468  —
Proﬁt and loss account  22  2,387  3,516
Shareholders’ funds – equity interests  23  6,924  3,517
These ﬁnancial statements were approved by the Board of Directors on 28 June 2006 and were signed on its behalf by:
BRIAN MCQUEEN SMITH
DIRECTOR
COMPANY BALANCE SHEET AT 31 MARCH 2006 Datong Electronics PLC Annual Report and Accounts 2006
      2006  2005 
    Note £’000 £’000
Net cash (outﬂow)/inﬂow from operating activities    28 (102) 2,141
Return on investments and servicing of ﬁnance    29 58 5
T axation    29 (565) (166)
Capital expenditure and ﬁnancial investment    29 (527) (321)
Dividends paid     (600) —
Cash (outﬂow)/inﬂow before ﬁnancing     (1,736) 1,659
Financing    29 2,730 (225)
Increase in cash in the year     994 1,434
 
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 
FOR THE YEAR ENDED 31 MARCH 2006
 
     2006 2005 
    Note £’000 £’000
Increase in cash in the year     994 1,434
Cash inﬂow from debt ﬁnancing     15 226
Changes in net debt resulting from cash ﬂows     1,009 1,660
Movement in net funds in the year     1,009 1,660
Net funds/(debt) at start of the year     1,575 (85)
Net funds at end of the year    30 2,584 1,575
 
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES  
FOR THE YEAR ENDED 31 MARCH 2006
 
     2006 2005 
     £’000 £’000
(Loss)/proﬁt for the year     (501) 1,138
Exchange differences     2 (3)
T otal recognised gains or losses for the year     (499) 1,135
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2006 Datong Electronics PLC Annual Report and Accounts 2006
1. ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group’s ﬁnancial statements. 
In these ﬁnancial statements the following new standards have been adopted for the ﬁrst time: 
● Financial Reporting Standard 20 ‘Share-based payments’;
● Financial Reporting Standard 21 ‘Events after the balance sheet date’; and
● Financial Reporting Standard 28 ‘Corresponding amounts’.
The accounting policies under these new standards have had no material effect on their adoption in both the current and prior year. Financial Reporting Standard 28 
‘Corresponding amounts’ has had no material effect as it imposes the same requirements for comparatives as hitherto required by the Companies Act 1985. 
The impact of Financial Reporting Standard 20 ‘Share-based payments’ is discussed under ‘Share Options’ on page 25.
BASIS OF PREPARATION
The ﬁnancial statements have been prepared in accordance with applicable accounting standards and under the historical cost accounting rules.
BASIS OF CONSOLIDATION
The consolidated ﬁnancial statements include the ﬁnancial statements of the Group and its subsidiary undertakings made up to 31 March 2006. The acquisition 
method of accounting has been adopted. Under this method, the results of the subsidiary undertaking acquired or disposed of in the year are included in the 
consolidated proﬁt and loss account from the date of acquisition or up to the date of disposal.
Under section 230(4) of the Companies Act 1985 the Company is exempt from the requirement to present its own proﬁt and loss account.
TURNOVER
Turnover is the amount derived from the provision of goods and services falling within the Company’s ordinary activities excluding Value Added Tax.
LONG TERM CONTRACTS
Contracts which are long term in nature are accounted for in accordance with Statements of Standard Accounting Practice 9. Revenue is recognised only to 
the extent that it is considered to be recoverable and the associated costs related with that revenue are transferred to cost of sales. Any work done not yet 
recognised as revenue is included in stock.
Amounts recoverable under long term contracts are included within debtors after deducting cash received on account. Where cash received on individual 
contracts is greater than the value attributed the difference is included within creditors. 
RESEARCH AND DEVELOPMENT
Costs incurred in respect of research and development are written off in the year in which they are incurred.
TANGIBLE FIXED ASSETS AND DEPRECIATION
Depreciation is calculated to write down the cost of ﬁxed assets to their estimated residual values by instalments over their expected useful lives which 
are considered to be:
Plant and machinery – 3 and 5 years 
Motor vehicles – 5 years 
Freehold buildings – between 25 and 50 years 
Leasehold improvements – over period of the lease
INVESTMENTS
Investments in subsidiaries are held at cost.
TAXATION
Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes 
which have arisen but not reversed by the balance sheet date, except as otherwise required by Financial Reporting Standard 19.
STOCKS AND WORK IN PROGRESS
Stocks and work in progress is valued at the lower of cost and net realisable value. Cost where appropriate includes a proportion of work overheads. Provision 
is made for obsolete and slow moving stock.
NOTES TO THE FINANCIAL STATEMENTS Datong Electronics PLC Annual Report and Accounts 2006
1. ACCOUNTING POLICIES continued
SHARE OPTIONS
Share options granted are accounted for in accordance with Financial Reporting Standard 20 under which a charge is recognised in the proﬁt and loss account based 
on the fair value (the economic value) of the grant, measured at the grant date. The charge is spread over the vesting period and may be subject to adjustment if the 
number of options or shares actually vesting differs from that assumed at the outset. The valuation methodology takes into account future share price volatility, future 
dividend yield, future risk-free interest rate, an estimate of the earnings per share and exercise behaviour and is based on the binomial lattice method. The ﬁnancial 
impact of this policy was a £24,000 charge in administrative expenses. There was no charge in the prior year as there were no outstanding options.
LEASE AND HIRE PURCHASE AGREEMENTS
Assets held under ﬁnance agreements that give rights approximating to ownership are treated as if they had been purchased outright at the present value  
of the total amount payable during the primary period of the agreements.
The corresponding ﬁnancial commitments are shown as creditors. The interest element of payments under these agreements and depreciation on the relevant 
assets are charged to the proﬁt and loss account.
The rentals arising under operating lease agreements are charged to the proﬁt and loss account over the terms of the agreements.
PENSIONS
The Group operates a series of personal plans administered by trustees independently of the Company. The Company’s contributions are determined by contractual 
arrangements referenced to the employees’ own contributions and are reﬂected in the ﬁnancial statements for the period in which they are paid.
FOREIGN CURRENCY TRANSACTIONS
Monetary assets and liabilities denominated in foreign currency are translated at the rate ruling at the balance sheet date.
2. ANALYSIS OF TURNOVER
The turnover attributable to each of the Group’s geographical markets is:
     2006 2005 
     £’000 £’000
UK     2,689 1,243
USA     2,643 4,024
Europe     986 958
RoW     990 260
     7 ,308 6,485
In the opinion of the Directors the turnover result for the year and net assets are attributable to one class of business.
3. OPERATING PROFIT
     2006 2005 
     £’000 £’000
Operating proﬁt is arrived at after charging/(crediting)
Auditors’ remuneration:
– Audit – Company      25 10
– Audit – Group     29 13
– Other fees     166 —
Operating leases:
– Rental costs of land and buildings     11 1
Depreciation     249 167
Proﬁt on disposal of ﬁxed assets     (1) (1)
Costs, including appropriate salary costs, incurred on research and development of products during the year  
reﬂected within cost of sales     1,044 840 Datong Electronics PLC Annual Report and Accounts 2006
4. INTEREST RECEIVABLE
     2006 2005 
     £’000 £’000
On bank deposits     75 24
Of this, £24,000 (2005: £21,000) was received from bank accounts at Investec Bank (UK) Limited – see note 24.
5. INTEREST PAYABLE
     2006 2005 
     £’000 £’000
Bank interest and interest on loans repayable within ﬁve years     16 17
On loan from Group undertakings repayable within ﬁve years     — 1
On hire purchase contracts     1 1
     17 19
 
6. ADMINISTRATIVE EXPENSES – EXCEPTIONAL ITEMS
     2006 2005 
     £’000 £’000
Issues of shares to management prior to Admission to AIM     1,300 —
Listing expenses     589 —
     1,889 —
The exceptional items are made up of two elements:
●  Obligation arising from previous owners to management team of £1,300,000
  The previous 100% shareholder of Datong had an undertaking to provide the executive management shares in consideration for performance while the Company 
was under its ownership. Consequently 900,000 shares were issued on 30 September 2005 at a cost to the Company of £1,300,000.
●  Listing expenses of £589,000
  The listing expenses of £589,000 contain all expenses relating to the Admission of the Company to AIM.
7 . INFORMATION REGARDING DIRECTORS AND EMPLOYEES
DIRECTORS’ EMOLUMENTS
Details of the Directors’ emoluments and shareholdings are contained in the Remuneration Committee report on pages 16 to 18 and forms part of these 
ﬁnancial statements.
EMPLOYEE COSTS DURING THE YEAR (INCLUDING DIRECTORS)
The average number of persons, including Directors, employed by the Group in its normal activities during the year was 72 (2005: 64).
The costs incurred in respect of these employees were as follows. These amounts include amounts paid to the senior executive management arising from the award 
of shares from the previous 100% owner of the Company as disclosed in note 6.
     2006 2005 
     £’000 £’000
Wages and salaries     3,506 2,273
Social security costs     391 255
Other pension costs (note 26)     69 46
     3,966 2,574
NOTES TO THE FINANCIAL STATEMENTS CONTINUED Datong Electronics PLC Annual Report and Accounts 2006
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
     2006 2005 
     £’000 £’000
Corporation tax 
– Current      (50) 375
– Prior year     — (7)
     (50) 368
Foreign tax 
– Current     (30) 63
– Prior year     (7) 6
     (37) 69
Total current tax (credit)/charge     (87) 437
Deferred tax     (6) (21)
Tax (credit)/charge     (93) 416
The current tax credit for the year is lower at 13.4% (2005: charge lower at 28.2%) than the standard rate of corporation tax in the UK of 30% (2005: 30%). 
The differences are explained below:
     2006 2005 
     £’000 £’000
Current tax reconciliation
Proﬁt on ordinary activities before tax     (594) 1,554
Current tax at 30% (2005: 30%)      (178) 466
Effects of:
– Relief on research and development expenditure in excess of cost    (78) (63)
– Disallowable costs related to Admission to AIM      178 —
– Trading expenses not deductible for tax purposes     8 3
– Depreciation in excess of capital allowances     2 —
– Capital allowances for year in excess of depreciation      — (3)
– Intercompany proﬁt      (10) 20
– Capital items expensed     1 1
– Higher/(lower) overseas tax rates     (3) 15
– Foreign currency difference     — (1)
– Prior year adjustment     (7) (1)
Total current tax (credit)/charge – includes foreign tax (credit)/charge (see above)    (87) 437
9. DIVIDEND
     2006 2005 
     £’000 £’000
Interim dividend      600 —
On 7 September 2005 a special interim dividend of £1,000 per share (of which there were 600 at the time) was declared and then paid on 30 September 2005.
  Datong Electronics PLC Annual Report and Accounts 2006
10. LOSS FOR THE YEAR ATTRIBUTABLE TO DATONG ELECTRONICS PLC
As permitted by section 230 of the Companies Act, the proﬁt and loss account of the parent company is not presented separately as part of these ﬁnancial 
statements. The parent company’s loss after tax for the year ended 31 March 2006 was £479,000 (2005: proﬁt of £1,114,000).
11. LOSS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue 
during the year.
As a result of the Admission to AIM on 7 October 2005 there was a signiﬁcant re-structuring of the share capital of the Company to make it more suitable for 
a publicly traded company. Details of this are disclosed in note 20. In order that the earnings per share calculation below is more meaningful, the loss per share 
is based on the number of shares in existence since Admission to AIM rather than the weighted average. The comparatives for the year ended 31 March 2005 
are also based on this number.
        
 2006 2006  2006  2005 2005  2005  
 (Loss)/earnings (Loss)/proﬁt  Number  Earnings  Proﬁt  Number  
 per share after tax of shares per share after tax of shares 
 pence £’000 (see note above) pence £’000 (see note above)
Basic (loss)/earnings per share (3.6) (501) 13,834,375 8.2 1,138 13,834,375
Earnings per share – pre-exceptional 7 .2 998 13,834,375 8.2 1,138 13,834,375
Fully diluted (loss)/earnings per share (3.6) (501) 14,093,175 8.2 1,138 13,834,375
Fully diluted earnings per share – pre-exceptional 7 .1 998 14,093,175 8.2 1,138 13,834,375
 
Earnings per share before exceptional items are disclosed above to highlight the trading performance of the business. Basic and diluted (loss)/earnings per share 
are reconciled to earnings per share before exceptional items as follows: 
  2006  2006   2005 2005 
 2006 Basic Diluted 2005 Basic Diluted 
 £’000 pence pence £’000 pence pence
Proﬁt after tax  (501) (3.6) (3.6) 1,138 8.2 8.2
Exceptional items after tax 1,499 10.8 10.7 — — —
Proﬁt after tax before exceptional items 998 7 .2 7 .1 1,138 8.2 8.2
The diluted number of shares used is made up as follows:
     2006 2005
Number of shares in issue following Admission to AIM     13,834,375 13,834,375
Add: maximum dilution from share options     258,800 —
     14,093,175 13,834,375
NOTES TO THE FINANCIAL STATEMENTS CONTINUED Datong Electronics PLC Annual Report and Accounts 2006
12. TANGIBLE FIXED ASSETS
  Freehold Leasehold 
  land and land and  Plant and  Motor  
  buildings buildings machinery vehicles Total 
Group  £’000 £’000 £’000 £’000 £’000
Cost
At 1 April 2005  752 — 1,589 65 2,406
Exchange differences  — — 4 1 5
Additions  44 58 389 40 531
Disposals  — — (2) (11) (13)
At 31 March 2006  796 58 1,980 95 2,929
Depreciation
At 1 April 2005  93 — 1,178 34 1,305
Exchange differences  — — 2 — 2
Charge for the year  15 7 212 15 249
Disposals  — — (1) (5) (6)
At 31 March 2006  108 7 1,391 44 1,550
Net book value
At 31 March 2006  688 51 589 51 1,379
At 31 March 2005  659 — 411 31 1,101
  Freehold Leasehold 
  land and  land and  Plant and  Motor  
  buildings buildings machinery vehicles Total 
Company  £’000 £’000 £’000 £’000 £’000
Cost
At 1 April 2005  752 — 1,543 55 2,350
Additions  44 58 374 25 501
Disposals  — — (2) — (2)
At 31 March 2006  796 58 1,915 80 2,849
Depreciation
At 1 April 2005  93 — 1,158 30 1,281
Charge for the year  15 7 194 12 228
Disposals  — — (1) — (1)
At 31 March 2006  108 7 1,351 42 1,508
Net book value
At 31 March 2006  688 51 564 38 1,341
At 31 March 2005  659 — 385 25 1,069
Included in the net book value of motor vehicles is £21,000 (2005: £17 ,000) in respect of assets held under hire purchase contracts. Depreciation for the year 
on these assets was £7 ,000 (2005: £6,000). The net book value of land, not subject to depreciation, amounted to £209,000 (2005: £209,000). Datong Electronics PLC Annual Report and Accounts 2006
13. FIXED ASSET INVESTMENTS
The Company owns 100% equity interest in Datong Electronics Inc., a company incorporated in the USA, whose primary activity is the marketing of electronic 
equipment. The investment is held at cost.
14. STOCKS
 Group Company
   
 
   2006 2005 2006 2005 
    £’000 £’000  £’000 £’000
Raw materials and consumables   581 512 581 510
Work in progress and sub-assembled   558 365 558 365
Finished goods and goods for resale   66 92 19 17
   1,205 969 1,158 892
15. DEBTORS
 Group Company
   
 
   2006 2005 2006 2005 
    £’000 £’000  £’000 £’000
Trade debtors   1,855 1,548 1,314 872
Amounts recoverable under long term contracts (note 16)   770 — 770 —
Amounts due from Group undertakings   — — 780 872
Deferred tax (note 19)   26 21 26 21
Corporation tax recoverable   240 — 150 —
Other debtors   20 — 20 —
Prepayments and accrued income   125 103 109 89
    3,036 1,672 3,169 1,854
 
16. AMOUNTS RECOVERABLE UNDER LONG TERM CONTRACTS
 Group Company
   
 
   2006 2005 2006 2005 
    £’000 £’000  £’000 £’000
Recorded as turnover being value of work done   770 — 770 —
Cumulative payments on account   — — — —
Classiﬁed as amounts recoverable on long term contracts   770 — 770 —
Total costs incurred   405 — 405 —
Transferred to costs of sales   (405) — (405) —
Amount included in stock   — — — —
Gross proﬁt on long term contracts recognised    365 — 365 —
NOTES TO THE FINANCIAL STATEMENTS CONTINUED Datong Electronics PLC Annual Report and Accounts 2006
17 . CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
 Group Company
   
 
   2006 2005 2006 2005 
    £’000 £’000  £’000 £’000
Bank loan and overdraft   20 19 20 19
Obligations under hire purchase contracts   8 6 5 4
Trade creditors   888 476 865 476
Amount owed to Group undertakings   — 2 — 3
Corporation tax   — 410 — 375
Other taxation and social security   75 61 75 61
Accruals and deferred income   295 809 274 789
   1,286 1,783 1,239 1,727
The bank loan and overdraft are secured by way of a ﬁxed charge over the Group’s freehold property and a ﬂoating charge on other assets.
18. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
 Group Company
   
 
   2006 2005 2006 2005 
    £’000 £’000  £’000 £’000
Bank loan   165 186 165 186
Obligations under hire purchase contracts   12 9 — 5
   177 195 165 191
The maturity of the bank loan and overdraft is as follows:
 Group Company
   
 
   2006 2005 2006 2005 
    £’000 £’000  £’000 £’000
In one year or less or on demand   20 19 20 19
Between one and two years   22 21 22 21
Between two and ﬁve years   76 71 76 71
In ﬁve years or more   67 94 67 94
   185 205 185 205
 
The maturity of obligations under hire purchase contracts is as follows:
 Group Company
   
 
   2006 2005 2006 2005 
    £’000 £’000  £’000 £’000
Within one year   8 6 5 4
Between two and ﬁve years   12 9 — 5
   20 15 5 9 Datong Electronics PLC Annual Report and Accounts 2006
19. DEFERRED TAX
     2006 2005 
     £’000 £’000
Deferred tax asset at beginning of year      21 —
Excess depreciation over capital allowances     5 21
Deferred tax asset      26 21
This is included in debtors (see note 15).
The above all relate to the difference between accumulated depreciation and capital allowances.
20. SHARE CAPITAL
     2006 2005
Authorised
Number of shares     200,000,000 600
Nominal value – 0.5p each     £1,000,000 —
Nominal value – £1 each     — £600
Allotted, called up and fully paid
Number of shares     13,834,375 600
Value     £69,172 £600
In preparation for the Admission of the Company to AIM on 7 October 2005 there was a signiﬁcant re-structuring of the share capital of the Company to make 
it more suitable for a publicly traded company. The changes in the share capital are detailed below.
On 7 September 2005:
●  the authorised share capital of the Company was increased from £600 to £1,000,000 by the creation of 999,400 new ordinary shares of £1 each;
●  each of the authorised and issued ordinary shares and each of the authorised but unissued ordinary shares of the Company were subdivided into 200 
ordinary shares of 0.5p each; and
●  the sum of £50,400 (standing to the credit of the revenue reserves of the Group) was capitalised, such sum being distributed to the holders of the issued 
ordinary shares (on the register at close of business on 6 September 2005), by paying in full 10,080,000 ordinary shares of 0.5p each in the proportion of 
84 new ordinary shares for every one ordinary share of 0.5p held on such date.
On 30 September 2005, a further 900,000 ordinary shares were issued to the Datong Electronics Employee Beneﬁt Trust.
On 7 October 2005, a further 2,734,375 shares were issued bringing the total number of ordinary shares issued to 13,834,375 of 0.5p each.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED Datong Electronics PLC Annual Report and Accounts 2006
21. SHARE OPTIONS
The Group operates an Approved Enterprise Management Incentive Share Option scheme (‘2005 EMI Scheme’) which was established at the date of Admission 
to AIM.
At 31 March 2006 rights to options over 258,800 ordinary shares of the Company were outstanding as follows:
2005 EMI SCHEME
Date of grant Exercise price Exercise period from date of grant 2006
7 October 2005 £1.28 2 to 5 years 258,800
The options will only vest if the percentage growth in the Company’s earnings per share shall exceed the percentage growth in the Retail Price Index by at least 
ten percentage points per annum (on average) over the three year period from the date of grant (or at least the two year period from the date of grant in the case 
of options exercised prior to the third anniversary).
22. SHAREHOLDERS’ FUNDS – EQUITY INTEREST
   Share Share Proﬁt  
    capital  premium  and loss Total 
Group   £’000 £’000 £’000 £’000
At 1 April 2005   1 — 3,558 3,559
Capitalisation of proﬁt and loss reserve   50 — (50) —
Issue of 3,634,375 shares at £1.28 each   18 4,634 — 4,652
Placing commission on issue of 2,734,375 shares    — (166) — (166)
Loss for the year to 31 March 2006   — — (501) (501)
Dividends paid   — — (600) (600)
Exchange difference   — — 2 2
At 31 March 2006   69 4,468 2,409 6,946
   Share  Share  Proﬁt   
    capital  premium  and loss Total 
Company   £’000 £’000 £’000 £’000
At 1 April 2005   1 — 3,516 3,517
Capitalisation of proﬁt and loss reserve   50 — (50) —
Issue of 3,634,375 shares at £1.28 each   18 4,634 — 4,652
Placing commission on issue of 2,734,375 shares    — (166) — (166)
Loss for the year to 31 March 2006   — — (479) (479)
Dividends paid   — — (600) (600)
At 31 March 2006   69 4,468 2,387 6,924 Datong Electronics PLC Annual Report and Accounts 2006
23. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
 Group Company
   
 
   2006 2005 2006 2005 
    £’000 £’000  £’000 £’000
(Loss)/proﬁt for the ﬁnancial year   (501) 1,138 (479) 1,114
Dividends paid   (600) — (600) —
Issue of ordinary shares   4,652 — 4,652 —
Issue costs of ordinary shares   (166) — (166) —
Exchange differences   2 (3) — —
Net addition to shareholders’ funds   3,387 1,135 3,407 1,114
Opening shareholders’ funds   3,559 2,424 3,517 2,403
Closing shareholders’ funds   6,946 3,559 6,924 3,517
 
24. RELATED PARTY TRANSACTIONS
Until 7 October 2005 (the date of Admission to AIM) the Company was a wholly owed subsidiary of Investec Bank (UK) Ltd, a subsidiary of Investec plc, 
a company listed on the London Stock Exchange. Investec Ltd, a company listed on the Johannesburg Stock Exchange, and Investec plc are part of a Dual Listed 
Company arrangement. Both the Investec plc and Investec Ltd groups provided services to, and received services from, the Company as detailed below. Following 
the Company’s Admission to AIM on 7 October 2005 (and to 31 March 2006), Investec Bank (UK) Ltd remained a signiﬁcant shareholder with a 45.2% holding.
     2006 2005 
     £’000 £’000
Interest receivable
Interest earned on monies deposited     24 21
Administrative costs
Director fees charged by Investec to the Company     52 18
Fees charged to Investec by the Company      (14) —
Net fees charged by Investec and included in administrative expenses     38 18
Dividend
Interim dividend – note 9     600 —
25. COMMITMENTS
The Company had capital commitments at the year end of £175,000 (2005: £14,000).
NOTES TO THE FINANCIAL STATEMENTS CONTINUED Datong Electronics PLC Annual Report and Accounts 2006
26. PENSIONS
The Company contributes to individual personal pension plans administered by trustees independent of the Company. The pension cost charge of £69,000 
(2005: £46,000) represents contributions payable by the Company to the plans.
The amount of outstanding contributions at the 31 March 2006 was £3,000 (2005: £Nil).
27 . LEASE COMMITMENTS
Annual commitments in respect of non-cancellable operating leases relating to land and buildings are as follows:
 Group Company
   
 
   2006 2005 2006 2005 
    £’000 £’000  £’000 £’000
Operating leases which expire:
Within one year   18 28 — —
Between two and ﬁve years   12 — 12 —
   30 28 12 —
28. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
 Group
     2006 2005 
      £’000 £’000
Operating (loss)/proﬁt after exceptional items     (652) 1,549
Exceptional items    
Issue of shares to Directors and executive management     1,300 —
Listing expenses deducted from gross funds raised     589 —
      1,889 —
Operating proﬁt before exceptionals     1,237 1,549
Depreciation     249 167
Exchange differences     (3) (2)
Proﬁt on disposal of ﬁxed assets     (1) (1)
(Increase)/decrease in debtors     (1,116) 339
(Decrease)/increase in creditors     (89) 348
Increase in stock     (236) (259)
Net cash inﬂow from operating activities before exceptional items    41 2,141
Employers National Insurance paid on issue of shares to management (note 6)    (143) —
Net cash (outﬂow)/inﬂow from operating activities     (102) 2,141
  Datong Electronics PLC Annual Report and Accounts 2006
29. ANALYSIS OF CASH FLOWS
 Group
     2006 2005 
      £’000 £’000
Returns on investments
Interest received      75 24
Interest element of ﬁnance lease rental payments     (1) (1)
Interest paid      (16) (18)
     58 5
T axation
Corporation tax paid     565 166
     565 166
Capital expenditure and ﬁxed asset investment
Purchase of tangible ﬁxed assets     531 328
Receipts from disposal of ﬁxed assets     (4) (7)
     527 321
Financing
Gross proceeds raised at Admission to AIM     3,500 —
Less: Admission related expenses     (589) —
Less: Placing Commission     (166) —
Net cash raised       
Net proceeds from issue of new shares     2,745 —
Funding from new ﬁnance leases     16 —
Repayment of capital element of hire purchase     (11) (21)
Repayment of loans     (20) (205)
     2,730 (226)
30. ANALYSIS OF NET FUNDS
    1 April   Cash 31 March 
    2005   ﬂow 2006 
    £’000 £’000 £’000
Cash in hand and at bank    1,795 994 2,789
Debt due within one year    (19) (1) (20)
Debt due after one year    (186) 21 (165)
Finance resources    (15) (5) (20)
T otal    1,575 1,009 2,584
NOTES TO THE FINANCIAL STATEMENTS CONTINUED MISSION STATEMENT
 IFC MISSION STATEMENT  
 01 HIGHLIGHTS 
 02 CHAIRMAN’S STATEMENT  
 04 CHIEF EXECUTIVE OFFICER’S STATEMENT 
 07 MARKET OPPORTUNITY
 08 FINANCE REVIEW 
 10 BOARD OF DIRECTORS 
 11 SENIOR MANAGEMENT 
 11 CORPORATE INFORMATION
 12 DIRECTORS’ REPORT 
 14 CORPORATE GOVERNANCE STATEMENT
 16 REMUNERATION COMMITTEE REPORT 
 18  STATEMENT OF DIRECTORS’ RESPONSIBILITIES
 19 REPORT OF THE INDEPENDENT AUDITORS
 20 CONSOLIDATED PROFIT AND LOSS ACCOUNT  
 21 CONSOLIDATED BALANCE SHEET
 22 COMPANY BALANCE SHEET
 23 CONSOLIDATED CASH FLOW STATEMENT
 23 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
 23 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 
 24 NOTES TO THE FINANCIAL STATEMENTS
 We strive to maintain an excellent reputation that exceeds customer expectations 
for robust and reliable products, technical support and customer service.
We are a company that has high levels of growth and maintains sustainable proﬁtability.
Using the latest technology we work with our customers to develop and produce 
solutions that fulﬁl their needs.
We develop the skills of our employees to be professional in all that they do and 
to enhance both their job satisfaction and the quality of our products and services. 
T H E D E S I G N P O R T F O L I O
a member of the flathill communications group plc 
www.flathillplc.com
designed & produced by Datong Electronics PLC 
Annual Report and Accounts 2006
Datong Electronics plc
Park House
Clayton Wood Close
West Park  
Leeds LS16 6QE
Tel: 0113 274 4822 
Fax: 0113 274 2872
Email: ir@datong.co.uk 
Web: www.datong.co.uk
Datong Electronics PLC Annual Report and Accounts 2006