ID Data slips on sales warning

ID Data slips on sales warning

Shares in UK smart card systems vendor ID Data dropped over 20% in morning trading after the company warned that full year sales were hit by increased competition and profits were hit by contract delays.

The stock fell 24% to 0.65 pence, before recovering slightly to 0.70 pence in early morning trading, after the vendor released a trading update saying that sales had dropped to £12.0m in the year ending March 2006, compared to £19.4m a year ago.

The group expects to report a full year loss of £2.7m, a slight improvement on last year's losses of £3.1m.

ID Data says it's annual results are expected to show a reduction in fixed costs of approximately £4m, which was mainly achieved by relocating its card manufacturing facility to Poland in August 2005.

But the vendor says 2006 sales were lower than expected due to adverse publicity surrounding its fund raising last year. ID Data said in July it was raising £4m in a share placing and loan note conversion, which was required to secure the future of the company. The vendor says the announcement was used by competitors "to unsettle our existing and prospective customers" and as a result it lost momentum and some "valuable business opportunities".

Secondly, ID Data says two major card projects expected to be undertaken in the year were delayed. These projects are now expected to occur during the next financial year.

Furthermore, after the transfer of its card business to Poland ID Data says it became more selective in the size of client it was prepared to handle and also declined clients where profitability was "inadequate". This has had a knock-on effect on sales and profitability.

But the firm says its Dublin-based CardBase Technologies unit has had a better year and has seen sales increase to £1.2m and losses reduced from £720,000 to £200,000.

The group's annual results will be released in June.

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