Orchestream shares dive 31% as losses more than double to £21m

The software company Orchestream yesterday warned it was mulling all options to secure its future as losses more than doubled to nearly £21m in the first half of the year.

Shares in the company, which had once traded as high as 692.5p, plunged 31 per cent, or 1.25p, to close at 2.75p yesterday after it said it had appointed the investment boutique Close Brothers to help it evaluate its "financing alternatives". "We do need to address what could be a [funding] shortfall," Anthony Finbow, the recently-appointed chief executive, said. "But we do have options and once we've addressed the issue of financial viability, the future is potentially very bright."

He said the company, which had some £10m of cash at the end of June, had enough money to "see us through the end of the year and beyond" but would not be drawn on when it might break even.

While Mr Finbow stressed he was "not expecting any growth through the end of this year, consistent with the market", he said: "There's no way the company's going to hit the wall, in my opinion."

The warning bell was sounded as Orchestream announced a pre-tax loss of £20.9m in the six months to 30 June compared with a loss of £9.8m a year before. Sales in the period nearly halved to £3.9m from £6.7m.

Orchestream, which sells software to telecoms companies such as Vodafone, Colt Telecom and to cable companies such as Telewest, blamed the performance on "ongoing difficult conditions" in the telecoms software sector.

"We did believe we were seeing a slight improvement in market conditions through the end of Q1 but the suggestion of an improvement deteriorated rapidly," Mr Finbow said.

"That said, Orchestream is experiencing unparallelled levels of interest from all sorts of very highly regarded potential clients but that, unfortunately, does not necessarily translate into automatic, immediate sales," he added.

The company also confirmed yesterday that a previously announced accounting error had reduced revenues in the first quarter of the year by nearly £1m while £2.7m had been cut from its 2001 figures.

While the company said some of those sales related to projects that had since been cancelled, it said other sales had been deferred and that there was a "realistic chance" they could be recognisable "in due course".