ID Data plc (“ID Data”)
ID Data plc, a provider of secure smart card based transaction systems and services to the international telephony, banking, retail and secure access sectors, today announces that the Company is to undertake a placing of new ordinary shares.
· Raising up to £4.1 million (net of expenses), including £381,000 from the Directors, by way of a placing up to 91,961,276 new ordinary shares at 5p per share
· Proceeds of the Placing to fund growth in new business sectors, the development of the Systems Division and ChipPort, the payment of existing obligations and to permit certain strategic capital expenditure· Implementation of cost reductions
Commenting on the Placing, Peter Cox, Chief Executive of ID Data plc, said:
“The Placing will provide the Group with working capital for growth in new business sectors and fund the development of the new Systems and ChipPort business areas. This continues the Group’s strategy of moving towards a higher margin intellectual property-based business model.”
“Although sales for the second half of the year to 31 March 2002 were in line with expectations, the investment in new business areas and the level of fixed cost within the existing manufacturing operations has held back any improvement in margins.”
“Despite difficult market conditions we have made progress since 31 March 2002 and in recent weeks the Group has signed new contracts. We believe that the impact of new sales, the move to higher margin business and the reduction of the fixed cost base will assist our move to profitability.”
For further information, please contact:
ID Data plc
Tel: +44 (0) 1536 207 000
Peter Cox, CEO
Nick Martin / Grant Harrison
Tel: +44 (0) 20 7628 4306
Bankside Consultants Limited
Julian Bosdet / Russell Elliott
Tel: +44 (0) 20 7444 4140
ID Data plc (“ID Data”)
Placing to raise up to £4.1 million (“ the Placing”)
ID Data announces it is raising up to £4.1 million (net of expenses) by way of a placing of up to 91,961,276 new ordinary shares at 5 pence per share, principally to fund the Company’s working capital requirements and future developments.
The Placing is conditional, inter alia, upon the approval of shareholders at an EGM which is scheduled
to take place on 17 June 2002 at 10 am at the offices of Simmons & Simmons of City Point, One Ropemaker Street, London EC2Y 9SS.
The new ordinary shares will be conditionally placed with investors by Durlacher. The Directors have undertaken with Durlacher, to subscribe for a total of 7,620,000 new ordinary shares.
The Group is a producer of secure card based transaction systems and services to the global banking, telephony, retail and security markets, using a range of smart and magnetic card solutions.
The Group operates from three sites with over 250 employees in the United Kingdom:
· Lewes – Card Manufacturing Division producing a range of plastic card bodies;
· Coventry – Smart Card Technology Division, manufacturing IC modules, assembling and
finishing smart cards;
· Corby – Personalisation Division and bureau mailing services.
The Group has also established two new areas of activity – a systems division to source, develop and market a range of smart card based applications to plastic card and silicon producers or issuers (“Systems Division”), and a channel marketing division through which the Group’s range of licensed smart-card technologies can be marketed through a network of independent card producers worldwide (“ChipPort”).
Developments since Admission to AIM
When the Company’s shares were admitted to AIM in October 2000, the Directors expected that its business would be underpinned by its five year exclusive contract with Marconi for fixed line telephone cards. They also expected that sales growth would come from new smart card contracts in banking and mobile telephony and from increased use of smart cards in Internet and related applications. In addition, they expected the development of new, more sophisticated products resulting from the Group’s work with a range of technology partners, particularly in the mobile telephony area.
In practice, a sharp fall in orders from Marconi, down from £7 million in the financial year ended 31 March 2001 to some £2 million in the financial year to 31 March 2002, has hampered the Group’s development. The development of the banking market was held back by the delays experienced by the UK banking industry in reaching agreement on key operational issues. The growth in the international mobile telephony market slowed considerably during 2001 and the development of the Company’s full range of mobile telephony products was slower than anticipated. These factors, together with a planned cut-back in smaller low-margin customers (sales to which had amounted to £2 million in the financial year to 31 March 2001), have limited increases in the Company’s sales in the period since its admission to AIM.
The Group has also, in view of the decline in Marconi’s orders, successfully begun to sell fixed line telephone cards direct to telecommunication companies and, in the three months since it adopted this strategy, has sold smart cards into this market to the value of approximately £1.8 million. The Group has also extended its mobile telephone product range and has made approaching £2 million of GSM SIM card sales.
The Group can point to a number of recent achievements. The Group has launched Origin J, a software product which implements the full features and facilities of Java on a smart card, enabling a number of different applications. The Directors believe Java is on the way to becoming an industry-standard product for microprocessor cards and that, while initial sales are primarily being targeted at the mobile telephony industry, there will also be great demand for banking and identity cards and for multiple applications to be run on the same card. In addition, the Group has recently obtained its first order, amounting to over £2 million in revenue in the first year, for a multi-application smart card scheme developed for a consortium of organisations. The Group worked closely with Hitachi to configure the required features. Using Multos, an alternative to Java, the card will combine credit card functionality with two additional applications.
The Group has strengthened its management and sales teams in recent months, with a number of key appointments, bringing in specialist personnel focusing on specific market sectors, and has restructured its management into three sales teams, focusing on manufactured products, the Systems Division and ChipPort.
After the reduction in sales resulting from the planned cut-back in smaller customers referred to above, the continuing business of the Group in the year to 31 March 2001 grew by 28 per cent. as compared with the annualised sales from the fifteen-month period ended 31 March 2000. In the six months to 30 September 2001, sales to customers other than Marconi were again some 28 per cent. higher than in the same period of 2000.
When the Company was admitted to AIM, the Board stated that the Group was progressively moving away from dependence upon commodity product supply to providing complete solutions to card issuers. This remains a key part of its strategy, which aims:
· to capitalise on routes to market rather than depending upon existing manufacturing competence;
· to exploit the Group’s smart card expertise and its portfolio of licensed intellectual property;
· to work with technology partners such as software developers to create new applications;
· to build ChipPort to provide global reach for its smart-card technology; and
· to reduce the number of manufacturing sites and associated overhead and labour costs.
By these means, the Directors aim to move the Group over the medium-term towards a higher margin intellectual property-based business model. Fundamental to this will be the development of both ChipPort and the Systems Division.
New Business Activities
Through ChipPort, the Group intends to exploit its portfolio of technology applications by supplying them on licence to independent plastic card manufacturers. Out of several hundred such manufacturers worldwide, the Company has identified approximately one hundred with smart card manufacturing capability and, of these, it has focused on some forty with sufficient market position to represent worthwhile potential partners for the Company. The Directors believe that these companies, despite strong customer relationships in their local markets, lack the technological capacity to be able to produce cards incorporating the increasingly sophisticated applications now becoming available. ChipPort will license the Company’s technology to such companies and will thus establish and support a network of smart card-enabled partners across the world. Negotiations are presently being conducted with a number of the targeted group of companies.
It is intended that sales by the Systems Division will be achieved by licensing software products and services to plastic card and silicon producers or issuers. Origin J has already attracted widespread interest from card and silicon producers and the Multos project referred to above, which resulted in an order for the cards to be manufactured by the Group, is an example of the kind of systems work for which the Directors believe the Group is well placed in the future. The Group has recruited a small core of software specialists to continue in-house developments and to manage the sourcing and licensing of new products from technology partners.
The Board continues to review the structure and operations of the Group to ensure that they remain in line with prevailing market conditions.
The Directors believe that the Group has strengthened its position in the banking, telecom and retail markets since its admission to AIM in October 2000. With Visa and MasterCard accreditation, TTi is placed to take advantage of recent developments which, the Directors believe, will accelerate the migration of the UK banks and credit card issuers to chip technology, while decisions relating to fraud management by Visa and MasterCard will put strong pressure on the worldwide banking industry to adopt chip technology.
The Group has targeted mobile telephone operators in emerging markets where mobile telephone usage is at an earlier stage of development than in Western Europe and the Far East and which therefore, they believe, have the potential for faster growth. It is working with mobile operators to develop added value applications which enable the operator to increase its per-user revenue. In addition, the Group has recently launched an electronic top-up product for Vodafone’s prepaid mobile telephones in the UK.
A significant part of the Group’s business continues to be generated from its traditional retail loyalty and membership market, where customers include The Automobile Association, Esso and Tesco. The Directors believe that signs of convergence in the retail, banking and telephony markets are emerging, including partnerships with financial institutions, which will bring about a switch in demand to higher value smart cards with bank or credit card functionality. In the security field, recent events such as the terrorist attacks on September 11th 2001 will, the Directors believe, highlight the potential of smart cards as security tokens and in access control, where biometric technologies can be used to enhance the effectiveness of cards in proving identity.
As a result of the developments described above, the Directors consider that the Company now has a number of competitive advantages over existing card manufacturers, including its willingness and ability:
· to license smart card technology to independent card producers;
· to partner with independent developers in the creation of further software and technology;
· to work with ‘open’ systems, such as Java and Multos, rather than proprietary systems;
· to respond flexibly and rapidly to the demands of the marketplace arising from its relative lack of dependence on commodity product manufacturing; and
· to establish partnerships with international companies such as Toshiba, Toppan and Hitachi which strengthen its credibility in negotiations with potentially important customers.
Since the announcement of the interim results for the six month period to 30 September 2001, the Group’s turnover for the subsequent period to 31 March 2002 has remained in line with the Company’s expectation. As already noted, the sharp fall in orders from Marconi has had a marked impact on turnover in the first half of the year to September 2001 and contributed significantly to the pre-tax loss of £2.8 million reported for that period. Whilst some direct sales to fixed line telephony users have been achieved, the lower level of Marconi sales continued to affect the second half of the year to 31 March 2002 and the Group’s cash resources have been significantly reduced in consequence.
Delays in achieving additional banking sales and a slower than anticipated move into GSM SIM card sales have restricted the growth in turnover in the second half of the year to 31 March 2002. In addition, the cost of set up for the GSM market together with additional investment in technical and sales staff have increased the Group’s costs.
In the period to 31 March 2002, the level of fixed cost within the existing manufacturing operations has constrained any improvement in the Group’s margins. As referred to in the section headed Strategy above, the Group has resolved to take significant steps to reduce its manufacturing cost base in order to reduce the level of sales required to trade profitably. As part of this process, the Company expects to provide for the write down of plant and machinery as a non-cash impairment provision in the twelve month period to 31 March 2002.
Since 31 March 2002, the Company has announced significant new orders for the supply of multi-application cards with an initial order value of £2 million and the launch of a number of European loyalty membership schemes with a combined order value in excess of £6 million. In addition, TTi has recently signed a contract with EDS for the exclusive supply of EMV compatible smart bank cards. The initial contract will run until December 2006 at a total value in excess of £7.5 million.
The progressive move to higher value sales in smart card sales is expected to increase the gross contribution per unit sold. In addition, the rising level of smart card sales is expected to improve capacity utilisation. As ChipPort and the Systems Division begin to contribute to revenues, higher margin licence, royalty and software income, the Directors believe this will result in improved margins and returns. The Board continues to remain confident in the future overall growth potential of the Company.
Reasons for the Placing and use of proceeds
The proceeds of the Placing will provide working capital for growth in new business sectors, fund the development of the Systems Division and ChipPort, the payment of existing obligations and allow for certain strategic capital expenditure.
Terms of the Placing
The Company is proposing to raise a minimum of £3.9 million (net of expenses) and a maximum of £4.1 million (net of expenses) by way of an issue of up to 91,961,276 new ordinary shares pursuant to the Placing.
88,513,000 new ordinary shares have been conditionally placed firm with investors by Durlacher Limited.
Conditionally on admission of the new ordinary shares to AIM, the new ordinary shares will be issued credited as fully paid and will rank pari passu in all respects with the existing ordinary shares.
Extraordinary General Meeting
A notice convening an Extraordinary General Meeting of the Company to be held at the offices of Simmons & Simmons, City Point, One Ropemaker Street, London EC2Y 9SS at 10 a.m. on 17 June 2002, is set out in a prospectus sent out to shareholders today. A Special Resolution will be proposed at the EGM to, amongst other things:
1. increase the authorised share capital of the Company by 150 per cent. from £1 million to £2.5 million by the creation of an additional 150,000,000 ordinary shares and grant the Directors a general authority pursuant to Section 80 of the Act to allot such shares; and
2. disapply the shareholders’ statutory pre-emption rights in relation to the Placing.
One of the purposes of calling the EGM is to consider the net asset position of the Company. The Directors are required to call such a meeting when the Company’s net assets are half or less of its called-up share capital pursuant to s.142 of the Act.
Although audited accounts for the year ended 31 March 2002 have not yet been finalised, as a result of an impairment review of the Company’s fixed assets which the Directors are carrying out in accordance with FRS 11, it is possible that the Company’s net assets at that date will be less than half of its called up share capital.
Expected Placing Timetable
EGM - 17 June 2002
Trading to commence in the New Ordinary Shares - 19 June 2002
CREST Accounts credited - 19 June 2002
Where applicable, definitive share certificates dispatched - 1 July 2002
Copies of the Prospectus are available from ID Data plc, Wansell Road, Weldon North, Corby, Northamptonshire, NN17 5LX for one month from the date of this announcement.
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