Shares in the UK company fell 23.30% to 0.46 pence in mid-morning trading - a new year low - after it reported a 38% drop in full year turnover and said it has continued to find the UK market "challenging" in the new trading period.

Group turnover fell to £12.1m from £19.4m for the year ending 31 March 2006, due to lost business and delayed projects. The group managed to reduce reduced pre-tax losses slightly to £3.5m compared with £3.9m previously.

Whilst the results are in line with those announced to the market on 31 March, ID Data says an end of year reappraisal has found that its net assets are less than 50% of its paid up share capital and it is calling an EGM to consider whether, and if so what, steps should be taken to deal with the situation.

In its trading statement, the vendor says sales have also been slow in the initial months of the new financial year, reflecting the "recent uncertainty in the retail sector".

But the firm says there are grounds for optimism with major long term contracts signed, which will add to recurring revenues in the current and coming years.

"We have successfully transformed ID Data from a card manufacturing company with a high fixed cost base to a solutions provider with a relatively low cost base," says ID Data chief executive Peter Cox. "We have achieved significant progress with regard to the cost reduction programme."

Looking ahead Cox says he is confident that the company is well placed to be involved in the potential launch of the UK's national identity card programme.

The group says the cost cutting measures taken, together with a projected upturn in sales will lead to the generation of profits and positive cashflows, but this will ultimately depend on improved trading.

The vendor says it continues to "pursue opportunities to reduce the costs and improve competitiveness" and is also in active negotiations with financing companies in order to refinance certain assets to assist with current working capital requirements.