Shares in Raft had dropped 10.80% to 8.25 pence by mid-day after the vendor posted disappointing first half results and warned that second half revenues will be lower than it had anticipated at its AGM in March.

The vendor is reporting narrowing pre-tax losses of £575,000 for the six months to 30th April 2005, compared to £988,000 a year ago. Turnover increased 30% to £4.2 million, from £3.2 million in H1 2004.

In a statement, David Priestley, executive chairman, Raft, says the disappointing performance was due to "the current low level of activity in the market" and investment of £400,000 in product development and sales. The vendor has developed two new modules for its raft credit product and has also re-architected its raft radar product to provide greater flexiblility and easier configurability, which increased the firm's cost base in the first half of the year.

Says Priestley: "Although such investment in the second half will be much lower than in the first half, these investments do mean that we will not be profitable in the current year as previously anticipated.

"We are taking steps to match revenues to costs, by undertaking a fundamental review of our cost base but this is unlikely to have a significant impact for the current financial year."

On a more positive note Raft says its pipeline has built to record levels reflecting the pressure on energy companies and financial institutions to meet regulatory guidelines.

The vendor secured contracts during the first half with new clients - US-based Mirant Energy and Canada's Powerex Corporation - and also signed a new deal with existing customer American Electric Power.

But Priestley says the "sales cycle continues to be very long and we have experienced delays to purchasing decisions in the period".

Looking ahead, Priestley says the firm remains "cautiously optimistic" of a continued upturn in the markets and is positioned to take advantage of increased spending on Basel II requirements and Sarbanes-Oxley regulations.