In the latest Success 2007 feature profiling North-East businesses, Mike Parker visits a Darlington pet tagging firm that is now tackling crime in the equine and music industries.

AS you read this, it is highly possible that somewhere in a Swiss laboratory, a scientist is feeding a bolus to a cow. In that bolus is a microchip, one which has new technology giving it read-write capability.

In other words, the scientist is implanting a gadget in the cow's stomach that will allow vets to store and update information on the animal's medical history, vaccinations and treatment without fear of it being passed or broken down by the digestive process.

The concept excites Richard Newhouse, managing director of Darlington-based Cleveland Studios Ltd (CSL).

For a man operating in a £4bn industry, it would be right to say that he specialises in the "identification market".

His company has cornered the top end of the pet tagging business - a line of work helped enormously by legislation. The Control of Dogs Act 1992 ensures all dogs carry an identification tag on their collars, showing the owner's name and address.

CSL's Lingfield Way factory produces 300 to 700 tags a day, with details to help owners or the authorities identify the pets.

The majority of this work comes from a carefully nurtured network of veterinary practices nationwide that display and take orders for the tags.

However, with 94 per cent of practices that are members of the British Small Animals Veterinary Association (BSAVA) already with open accounts, it is a niche market all but saturated.

But Mr Newhouse has been exploring other options to add to his lost-and-found enterprise. He has begun another, more hi-tech, tagging venture.

"Microchipping has increasingly become big business in the animal industry," he says.

"I wanted to explore what other uses we could put the microchip to."

Mr Newhouse admits that his initial foray has yet to fully take flight. ChiptraC was designed as a general purpose approach to security tagging.

He created microchipping packs for owners of expensive items, such as antiques, in case of theft.

He says: "Say a Hepplewhite chair had been stolen here in the North-East and it came up for auction down South, it would be very difficult to categorically say that it was your chair. If you put a microchip in it with its own unique number, you can be certain that it is the one."

The system was developed with the help and advice of the police and scanners were supplied to a UK police authorities. It became clear that the system had to be tailored for specific industries.

CSL refined the idea and targeted the equine industry. With three million new and second-hand saddles sold each year, the saddle industry offers remarkable opportunities for retailers to push microchipping.

CSL launched Saddle-traC, which uses a microchip smaller than a five pence piece, that is inserted into the saddle.

Each purchase provides free entry on the National Saddle Register, which is managed by CSL and can be accessed by police.

"It is virtually impossible to find the chip without pulling the saddle apart," says Mr Newhouse. "If you did that, it wouldn't be worth any money to the thief, so they are unlikely to do that."

A more finely-focussed approach has enabled CSL to get heavyweight backing for Saddle-traC. The scheme is approved by both the British Horse Society and the British Equestrian Trade Association.

This coup has seen 300 tack retailers sign up to be approved Saddle-traC sellers nationwide.

The scheme has also just won the backing of insurance firm Allianz, which has created a joint-promotion offering £1,000 free tack insurance complete with micro-chipping to horse owners who sign up to their PetPlan Equine insurance.

Mr Newhouse says: "This is a real feather in our cap to get one of the biggest insurance companies behind the product."

Saddle-traC's growing profile has brought with it attention from other industries looking to safeguard their assets. Out of the blue, music officials got in touch to say they wanted to see if the company could do something similar with musical instruments.

The Music Industries Association (MIA) wanted to stop the sale of stolen instruments and saw microchipping as a way forward.

After careful research, Musi-traC was created with a fitting guide for all instrument.

As with Saddle-traC, Musi-traC is targeted at a large retail industry that sees more than a million new and second-hand instruments worth more than £200 sold each year.

A further million instruments are taken into music shops for repair or adjustment each year.

Musi-traC has also attracted considerable interest from more than 300 music retailers enlisted as approved sellers.

Mr Newhouse believes their is potential for a multi-million-pound business.

He said: "The potential for this type of system is immense. It is in its infancy in this country. There is a wealth of uses for microchips."

CSL is on the lookout for an equity partner to help it achieve its potential.

Other markets CSL is considering include the marine leisure industry for surfboards, windsurfers, dinghies and outboard motors, and use in the firearms industry.

Mr Newhouse spent many years within the music industry, so appreciates MIA's concern, having owned a business with four music shops trading under the name Hamiltons of Teesside.

The company stopped trading shortly before a meeting with the original founders of CSL, David and Betty Darnton-Turner, in 1997.

The couple had established a pet-tagging business in Australia before returning to the UK in 1996.

The Pet Tag business was launched in 1996 out of the couple's garage in Bishop Middleham, near Sedgefield, before it expanded to office premises in Sedgefield itself as the business grew.

But the children struggled to settle and the Darnton-Turners decided they would like to return to Australia.

Mr Newhouse said: "At the time, I had wound my own company up and I was wondering what to do with the rest of my life when I met them at a dinner party.

"We got talking and they asked if I'd come and work for them. I said I would help them establish the business in the UK and then find a business manager for them.

"The more I got involved in it, the more I realised what an exciting opportunity there was." At the time, the Pet Tag business had 200 veterinary practices using the service.

By 1999, the UK version of the business had out-stripped the original Australian arm, with more than 1,500 veterinary accounts.

Mr Newhouse approached the founders to discuss a management buyout.

He says: "Sadly, the growth of the business that I had achieved in the three years had a major impact on the price that I had to pay for the business."

By December 1999, CSL was founded.

Since then, the business has grown considerably with the veterinary tagging side now accounting for 65 per cent of turnover.

Heavy investment in machinery and technology has kept it ahead of its competitors and has allowed it to diversify into other areas, including signs, name badges and banners.

The company also embarked on a wholesale catalogue venture, offering clients the opportunity to sell quality pet products.

Mr Newhouse says: "Vets were initially very reticent about selling anything.

"They saw themselves as a professional body that did not want to sell to its clients.

"They have now starting to see the benefits of selling pet products within the waiting room. High profit margins contribute to the practice running costs."

With general signage work and the microchip side of the business each growing at 20 per cent a year, with the wholesale service at 40 per cent. Mr Newhouse is predicting a strong future for CSL.

* Mike Parker is the former business editor of The Northern Echo. He runs a PR company, Mike Parker Media, and handles the North-East Chamber of Commerce media relations.