ID Data reports preliminary year-end results

Highlights:

• Group turnover up 72% to £19.4 million (2004: £11.3 million)
• Loss reduced to £4.2 million (2004: £5.1 million)
• Acquisition of CardBASE Technologies. Integration of Mids & Horsey
• Funds to be raised totalling £4.0 million and £3.7 million of Loan Stock to be converted post-period-end

Commenting on the results, Peter Cox, Chief Executive of ID Data plc, said: "This has been a year of considerable progress for ID Data helped by trading conditions in our industry which are showing signs of improvement. The past financial year has seen an impressive increase in sales combined with a decrease in operating losses.

"During the year we renewed important existing contracts, including the Post Office Card Account, and won several new blue-chip clients. I am confident that our client base, coupled with a tight control on costs, will enable ID Data to achieve profitability in the near future."

INTRODUCTION

A year ago I expressed confidence in the Group's ability to deliver a more encouraging performance, confidence which has been borne out by results. Turnover to 31 March 2005 increased by 72% to £19.4 million (2004: £11.3 million) whilst the loss reduced to £4.2 million (2004: £5.1 million).

Since the year end, and assuming the relevant resolutions are passed at an Extraordinary General Meeting of the Company to be held on 8 August 2005, shareholders will be subscribing for £4.0 million of new ordinary shares whilst holders of £3.7 million of Loan Stock have indicated their intention to convert their Loan Notes into ordinary shares as well.

The Board appreciates the support provided for the business and the confidence it shows in our prospects. Once again the Chief Executive is committing significant personal funds in the equity raising and Loan Stock conversion. New shares are also being taken up by other members of the Board.

BUSINESS REVIEW

The acquisition of Mids & Horsey Limited in March 2004 provided the Group with a modern production facility having accreditation from both Visa and Mastercard. Consequently our Lewes factory was closed, enabling plant and equipment to be shipped to Poland, contributing to a new joint venture with two Polish companies, Ortis and Argo. Card production costs will be significantly lower going forward in light of lower labour costs.

Our intellectual property activities enjoyed mixed fortunes. CardBASE Technologies Limited, our Dublin based wholly owned subsidiary, acquired in July 2004, was at the heart of the Group's success in winning a significant contract from Bracknell Forest Borough Council. This should pave the way towards further business from the Local Authority marketplace in the smart/I.D. arena.

By contrast, we decided to cease further investment in OneEighty Software Limited. Notwithstanding the many expressions of interest in the intended Origin J product, unsustainable levels of cash were being consumed whilst a commercially viable solution consistently failed to materialise. Closure costs amounting to £0.9 million have been charged in the period under review.

BOARD AND MANAGEMENT

Martin Coles, Finance Director since 2003, relinquished his executive responsibilities in February 2005 and resigned from the Board in July 2005. Martin is pursuing a long-held ambition of running his own business in a non-competing area and has left with our good wishes and thanks for the fortitude and commitment which he brought to his role. In his place we welcomed Stephen Mitchell in January 2005. Stephen has an entirely appropriate background in technology companies for his new position.

Michael Stewart, Managing Director of ID Data Systems Limited and a main board member since 2002, is also to establish his own business and will be retiring from the Board at the Extraordinary General Meeting. He, too, has been indefatigable in balancing the many conflicting demands of his role and he will also leave with our very best wishes. His responsibilities will be absorbed by the Chief Executive and his new management team.

For some time I have privately indicated my wish to stand down from the Chairmanship and the Board. Now, having served for five years in the role, and with the latest fund-raising about to be concluded, I have publicly announced that intention in the Placing Circular. A new non-executive director appointment will be made shortly and I expect to have secured my successor as Chairman in the near future as well.

Peter Cox, the Company's founder, largest private shareholder and Chief Executive, has worked tirelessly to deliver an improving performance. I extend the Board's thanks to him and all our colleagues for their efforts in challenging circumstances.


OUTLOOK

The strategy of the Board has been to acquire various businesses and with them differing products to make us a complete card solution supplier in our chosen sectors. With the acquisitions that have taken place, together with the setting up of offshore manufacturing and rationalisation of our UK sites, the Group has a tremendous opportunity to increase sales, reduce costs and make profit. The Chief Executive's Review provides the detail which reinforces my confidence in our future prospects.

JM BLACKBURN
Chairman
5 August 2005


CHIEF EXECUTIVE'S REVIEW

As our Chairman has stated, the last year has seen your company achieve significant sales growth and reduced losses. But the year does not fully reflect the considerable progress made in the development of the business, which can deliver value to its shareholders and customers alike. The strategy of the business is now focused on two sectors, card services and intellectual property solutions for card management.

The Placing Circular indicated that operating cash inflow/(outflow) for the year was £(1.6) million based on management information. However, due to the fact that certain classifications are used in determining cash flows on a statutory basis, which vary to the classifications used in the Management Accounts, the statutory operating cash outflow is now only £(1.1) million. The cash balance on the Balance Sheet is unchanged from the March Management Accounts.

CARD SERVICES

The Company designs, manufactures and personalises cards for the Retail, Government and Bank/Financial markets.

Our financial market sales progress has been significant. The winning of major contracts with Citigroup, for their launch of Chip & PIN bank cards, and GE Capital has given us relationships with the world's two top card issuers.

The renewal of our contract for the Post Office Card Account with EDS through to 2010 was confirmation of our ability to manage and deliver the largest UK Government contract for smart cards. This combined with our win of Bracknell Forest Borough Council, a leading e-commerce council under the UK Government's National Smart Card project, again reinforced our strength of offering and our ability to tender for the National ID card with credibility.

In retail, we have again had an excellent year with contract renewals, the launch of a unique key fob product and the re-issue of 11 million Tesco Club cards with new branding together with the patented 22 million key fobs. The advent of Gift cards also has given our business significant new opportunities and is expected to follow the American model in becoming a core product in our European sales. We have developed within card services a range of solutions that differentiate us from our competitors.

INTELLECTUAL PROPERTY

The acquisition of CardBASE Technologies Ltd, the Dublin based software business, in July 2004, signified our belief that many customers required end-to-end solutions and that the future profitability of our business would be enhanced by controlling the card processing on behalf of our clients.

On acquisition, CardBASE had four significant clients, ValuCard Nigeria, British Airways, The Bank of England and St George's Bank in Australia, but a limited prospect list. We believed that the historic issue for CardBASE had been its lack of a total solution, including card supply and fulfilment.

Since acquisition, we have proved this point, with contract wins for full solutions where we offered card products alongside the Card Management system Mascot, E-purse and public key infrastructure (PKI) solutions from CardBASE. The development of enhanced card management and transaction-related software solutions will greatly enhance our margins and profile as a leading provider of sophisticated software solutions through our channel marketing partners and direct sales.

THE CHALLENGE FOR ID DATA AND THE MARKET PLACE

The challenge for ID Data is not simply growth but profitability. Your board recognises that the value of our shareholders' investments will be greatly enhanced following a move to profitability, thus this must be our primary objective.

After five years, our industry is now showing dynamic growth and long awaited profits. The scene is set for a period of high activity, the opportunity for ID Data is to be the lowest cost producer in the industry with a product and service range that wins business.

To this end, we have made significant investments that will deliver results.

ID DATA OPENS ITS CARD PRODUCTION PLATFORM TO POLAND

We signalled our intentions to develop a centre of excellence for low cost production in Eastern Europe. I can now confirm that we have established a Joint Venture in Poland, using plant from our former Lewes site, and production will commence in August 2005.

Through this Joint Venture we will have the capacity to produce 150 million card "bodies" per annum, for supply not only to our own personalisation centre in the UK but also directly to other card companies and end users throughout Europe, the Middle East and Africa.

This Joint Venture will have a significant effect on our UK cost base and allow us to focus on winning more business in territories where previously we were not competitive.

COST REDUCTIONS

We have already reduced our labour headcount over the last year by some 30%. We will continue to seek additional cost savings of some £2.8 million by 2007 through initiatives including offshore manufacturing.

This cost reduction, combined with our desire to focus most of our UK production into our new Petersfield secure facility, will offer further cost savings in management and communications, and avoid duplication of resource, without reducing our ability to grow and deliver sales.

I am pleased to announce that we have initiated a cost review programme and identified opportunities to reduce costs further without adversely affecting the service we offer.

POST-YEAR-END FINANCING, ENHANCING THE BALANCE SHEET BY £7.7 MILLION

ID Data needed to raise additional funds to cover its development and the planned changes to our cost base, and to finance the development of our card services business and losses in the acquired CardBASE business during its transition to profitability.

The objectives of this fundraising were to bolster the balance sheet through the injection of new equity, and conversion of long term debt. This will greatly strengthen your company, and enlarge our shareholder base with further quality institutional investors. The management will be taking 11% of the enlarged capital base.

I must thank all of our existing and new investors for their support and assure them that we, the management of the business, are working diligently to deliver a healthy return.

PETER COX
CHIEF EXECUTIVE
5 AUGUST 2005

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