In the six months to 30 June 2003, revenues declined by 5% to £27.9 million, from £29.3 million for the same period last year, while operating profit fell by 10% to £3.5 million from £3.9 million in 2002. A 25% drop in European revenue was compensated for by a 48% rise in North American business to £12.4 million.

Shares in the UK-based vendor slipped by 25 pence to 382.5 pence by mid-morning, representing a 6.1% drop, as CEO Chris Aspinwall warned of tough trading conditions ahead.

"The difficulties experienced in the financial markets have continued into 2003 and despite some improvements in the market towards the end of Q2 it is too early to predict any sustained change in trading conditions," he says. "Looking ahead we continue to anticipate tough trading conditions."

With consultancy revenues down 23% on the first half of last year, and not expected to recover in the second half, Aspinwall chose to focus on the group's relative success in shifting the business model to more predictable recurring sources of income from enterprise rental and ASP-based fidessaNet services.

"Revenue from these sources has increased by 48% compared to the same period last year, and recurring revenue now represents 49% of our overall revenues," he says.

Other highlights include 11 new fidessaNet orders signed - six in Europe, five in the US - and the Q1 launch of the fidessa workstation product with over 100 positions already in production.

Aspinwall says the US fidessaNet business continues to be on schedule to achieve break even by the end of this year, with an estimated four per cent of Nasdaq tradeflows executed over royalblue screens.

The shift in business model will involve a painful transition and further impact on consultancy revenues as customers increasingly make use of fidessaNet services rather than taking fidessa products in house, he says. "As a result, in the short-term, we expect full year revenues for 2003 to be slightly below those achieved last year."

The change in business strategy will also see the introduction of outsourcing-type serviced, in which royalblue will configure and run client enterprise systems from its own data centres - and provide staff to manage the service from end to end including onsite consultancy.

Says Aspinwall: "This new model is much closer to the complete outsourcing of a fidessa system with costing that works out around one third less expensive than an enterprise customer running the system themselves in house."