Banking software group Financial Objects intends to return £6 million of surplus cash to shareholders today – after revealing a £1.1 million interim loss. James Crux reports.

The techMARK-listed firm has been considering ways to return capital to shareholders for some time, as it has more cash than it needs for the foreseeable future. Directors believe buying back the depressed shares is the answer.

In the six months to June, Financial Objects turned a £937,000 profit into a £1.1 million loss, on sales down from from £8.7 million to £6.8 million, as tough markets put pressure on prices and customers delayed purchasing decisions. But the group maintained a positive cash flow, increasing cash balances by £1 million to £16.6 million.

At the end of June, cash 'at bank and in hand' was £19.8 million, down from £21.7 million on 31 December. Chief executive officer David Carruthers says 'We are looking to re-focus ourselves as a successful smaller company and, since we have more cash than we need, the buy-back would be earnings enhancing.'

It should also do no harm to the shares, which have fallen from a 52-week peak of £1 to 42.5p after today's 4p fall. That values the group at only £16 million.

Financial Objects provides advanced banking software and services to banks and financial services organisations, a tricky sector at present. Chairman Roger Foster says difficult market conditions are likely to continue throughout the second half and 'there is no indication yet of when the banking software market will improve'.

By contrast, the group's new technology arm, ActiveBank, prospered. By the end of July, four new licences were signed, against two for all of 2001.

Foster says most of the revenue on these contracts is yet to be recognised. ActiveBank's order backlog grew 45 per cent to £3.2 million, out of a total group order book up slightly from £9.2 million to £9.3 million.