Financial Objects says exceptional costs of £319,000 incurred in the period relate mainly to reorganisation costs, which included the acquisition of Wealth Management Software.

But despite posting a loss, the vendor is reporting a 22% rise in turnover to £5.6m, although this includes the effect of the WMS acquisition. Turnover from continuing operations was up nine per cent to £5m.

Revenues at the vendor's Activebank revenues increased to £2.2m in the first half of 2005, compared to £1.6m last year, although revenues at its Ibis unit dropped to £2.8m, compared to £3m a year ago.

The vendor also managed to record an operating profit before goodwill amortisation and exceptional operating costs of £190,000, which included a profit of £83,000 from continuing operations (compared with a profit of £26,000 for the same period last year).

Commenting on the results, Roger Foster, chairman, says: "For the first time in several years, we believe that trading conditions have improved, and, whilst still challenging, are showing signs of a return to growth: "Although the market for new core system replacements remains slow, there are clear signs of increasing activity, with existing clients purchasing new application modules and services."

Foster says by year-end, "the group will have fully implemented our new business model designed to enable us to compete successfully in the new and much tougher
environment that exists in our industry".

The company recently transfered its listing from the London Stock Exchange's Official List to the junior market AIM in July in a bid to cut costs and improve investment opportunities.