Durlacher, the fringe stockbroker that became an internet investment star, admitted yesterday that it would return to its share dealing roots after recording a £45m full-year loss in the wake of the dot.com sector's collapse.
After a slump in revenues, a rise in losses and a 99% fall in its share price, Durlacher said it would focus on the revenue generating activities such as share dealing commissions and corporate finance work, rather than pursuing further investments in speculative technology ventures.
However, it warned that between July and September brokerage volumes remained "abnormally depressed", and fixed assets had to be sold to turn a profit.
The strategy shift was detailed in a lengthy statement by chairman Geoffrey Chamberlain which gave an insight into how firms that placed big financial bets on the power of the internet have had to retrench, given that investors are no longer prepared to back them.
From being a £2.2bn "internet investment bank" Durlacher is now a penny stock in search of revenues and deals.
Mr Chamberlain, the architect of Durlacher's internet adventure and a wealthy man after cashing in several million pounds worth of shares in the group, will relinquish his position as chief executive but remain non-executive chairman.
In the statement he said the sharp reversal in fortunes of hi-tech stocks had had a domino effect on Durlacher's business, progressively knocking back its internet incubation, research, corporate finance and traditional stockbroking divisions.
In the year to June 30, turnover slumped from £26.1m to £12.7m as the shaky stock markets and subsequent fall-off in the number of flotations hit revenues at the stockbroking and corporate finance divisions.
In recent years, Durlacher has made money by trading investments in companies it helped create, such as Autonomy and 365 Corporation.
Last year a decline in the valuation of internet and particularly e-commerce companies forced Durlacher to close or write off an assortment of previously highly regarded start-ups offering services ranging from wedding supplies to comparison shopping.
"Like many others, we have been surprised by the severity, longevity and speed of the change in the market sentiment," Mr Chamberlain said. "It is unprecedented in all my own years in the City."
The cost of the provisions and write-offs for the company has been increased from £8.5m to £34.6m.
"This is more in recognition of the dire state of the secondary funding market for early stage technology companies at present rather than a reflection of any lack of progress achieved by a number of our investee companies in strengthening their business proposition," Mr Chamberlain added.
Durlacher's determination to salvage the position of many of its start-ups compounded its problems, with many of its key dealmakers and analysts having to spend their time on no-fee work.
Following the write-offs, losses for the year hit £44.8m. In 2000, Durlacher made a profit of £12.2m. The net book value of its portfolio companies is now £10.6m.
Durlacher was left with £12m cash in the bank at the year's end, data that should end rumours that it is close to going bust. Shares rallied 0.75p to 3.5p.
Mr Chamberlain will step down as chief executive early next year. Andy Bottomley, the director of research, has already left the company.
