Shares in Datong, the covert intelligence company, fell 16% today after it warned it was being hit by government spending cuts.
Revenue in the year to the end of September came in at £11.8m, down from £14m in 2010.
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The firm said business was proving volatile with a high degree of dependency on budgetary policy within its markets.
Operating profit before exceptional items was £0.05 million, down from £0.8m the previous year.
Earnings per share were 1.03p, compared to 6.38p in 2010, and the firm said it would not pay a dividend.
"The current world economic climate and its affect on our customers' budgetary policies is impacting Datong with the timing of orders not following usual trends," said chief executive Brian Smith
"Nevertheless, Datong is well positioned in the intelligence gathering sector with a good sales pipeline and consequently the Board remains confident that the Group's strategy will continue to drive the business forward."
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