A former dealer in second world war memorabilia today pleaded guilty to handling a stolen Enigma encoding machine.

Dennis Yates, 58, of Sandiacre, Nottinghamshire, admitted the charge of handling the Abwehr Enigma G312 machine, worth £100,000, between March 31 2000 and November 19 2000, when he appeared at Aylesbury crown court this afternoon.

A separate charge of blackmailing Christine Large, the director of Bletchley Park, Buckinghamshire, where the machine was kept, was ordered to lie on file.

Yates was due to stand trial today but changed his plea.

The encoding machine was stolen from a display cabinet at Bletchley Park - codenamed Station X - on April 1 last year during an open day at the former top secret site.

Following months of ransom demands, the machine, one of only three left in the world, was returned to Jeremy Paxman, presenter of BBC2's Newsnight. At a previous court appearance, Yates, a father of three, insisted he would be acquitted at any forthcoming trial, saying: "All I did was broker the return of the machine and rotors to Bletchley Park."

The Enigma machine was used by the Nazis during the war to encrypt top secret messages between their forces.

Bletchley Park once housed 10,000 linguists, mathematicians and chess champions working to crack the codes. They were credited with helping to shorten the war by up to two years and saving thousands of lives.

The Enigma machine, believed to be only one of three left in the world, was eventually returned to Paxman following months of ransom demands to Bletchley Park.

A £25,000 reward was even offered for its safe return.

Yates insisted he was merely acting as an innocent go-between for his client, known as The Master, who had purchased the machine in good faith.

Today John Causer, prosecuting, said: "The Bletchley Park Trust held open days fortnightly and one of those was on April 1 last year.

"This Enigma machine was on display in a cabinet in the hall of the mansion at Bletchley Park. The open day was well-attended with people attending by the coach-load.

"One of the volunteers observed the machine on display in its cabinet at 11.40am that Saturday morning. It was missing at 1.30pm.

During the meantime, hundreds of visitors had been around the display. There was a police investigation, large amounts of resources were devoted to it, but no leads had been established by September 2000."

Mr Causer told the court a series of letters and ransom demands were then sent to Ms Large demanding £25,000 for the safe return of the machine.

The letters were followed by a series of phone calls with negotiations between the police and the letter writer being conducted through the national press.

Following his arrest, Yates admitted writing all but two of the letters, but said in police interviews he was merely acting as a go-between for his anonymous client in India.

He said: "I have never met my client. He lives in India, he's of high office and very reclusive."

In his letters to Bletchley Park, Yates insisted the full purchase price of the Enigma machine - £25,000 - was to be repaid to him with the added guarantee of no action being taken by police against him in the future.

Further letters threatened to destroy the machine unless his demands were met.

Mr Causer told the court that from October 12 last year the defendant sent the machine, minus three rotor wheels, vital for the machine's use, to Paxman by special delivery.

Five days later Paxman returned from holiday and opened the package immediately realising the significance of the parcel.

Further demands for the £25,000 were then received for the money to be placed in a graveyard in £50 notes in the village of Longford, Derbyshire, or else the defendant threatened the rotors would be destroyed.

The case was adjourned until October 19 for pre-sentence reports.

Yates was granted bail on condition that he surrenders his passport, resides at his home address and reports to his nearest police station daily between noon and 2pm.

The judge said the fact that the case had been put back for reports should not be used as an indication as to what the future sentence may be. He said: "The offence is so serious as to cross the custody threshold."

Enigma, a feature film about the code-breakers at Bletchley Park, is released in Britain on Friday.