LOM Holdings Limited saw earnings for the first six months of 2005 plummet 88 percent on a sharp decline in broking revenues, LOM?s withdrawal from the US OTC Bulletin Board markets and publicity from a US Securities and Exchange Commission probe into alleged securities fraud.

The Bermuda-based firm has planned further cost cutting measures ?and expects staff costs will again decline? during the second half of 2005.

LOM?s half year earnings of $251,139 for the first half of 2005 were $1.8 million off from the $2.1 million earned in the same period of 2004.

Managing director Scott Lines said in a letter to shareholders that the company had experienced a sharp decline in broking revenues in the 2005 period.

The group lost some business due to a combination of difficult markets and LOM curtailing client activity in the US bulletin board and pink sheet over the counter markets due to regulatory scrutiny and resulting negative publicity.

Ongoing adverse publicity resulting from the SEC?s probe also saw the group lose some business during the first half of 2005, he said.

LOM recently claimed to have spent US$2.75 million in the past two years on legal fees associated with the SEC investigations into alleged securities fraud involving bulletin board listed SHEP Technologies Inc., HiEnergy Technologies Inc. and Sedona Software Solutions Inc.

Brian Lines, the president of LOM since 1992 and a co-founder of the company, recently retired in a bid to help LOM facilitate a settlement, but the SEC is continuing its legal battle to force LOM and Scott Lines to comply with four subpoenas for information.

Legal fees were primarily behind a $1 million bill for professional fees in the first half of 2005, a 65 percent increase over the same period in 2004 when professional fees were $657,213. The rise sent the period?s operating costs three percent higher year-on-year, ex-commission payments and jitney fees, which are directly related to brokerage revenue.

Excluding these costs, overall operating expenses fell five percent year on year due to a reduction in staff numbers.

Mr Lines said: ?Management has set targets for further cost cuts by year-end and therefore, we expect staff costs will again decline during the second half of the year.?

First half net brokering revenues fell 36 percent from the same period of 2004 to represent 67 percent of net revenues. Less demand for margin loans resulted in a ten percent fall in interest earnings, while lower deal flow resulted in a 44 percent decline in corporate finance revenue. Other divisions of the group also suffered with asset management fees down six percent year on year and overall net revenues sliding 28 percent. Leasing activity however continued to grow with lease income revenues rising 19 percent.

The company has experienced a normal summer slowdown in business activity in July and August, but expects that activities will pick up in the last four months of the year, however the outlook is very much dependant on the financial markets.

?The publicity generated by the SEC investigation and the loss of revenue from withdrawing from the US Bulletin Board market will continue to present serious challenges to the group winning new business,? Mr. Lines said.

LOM?s assets under administration fell 2.2 percent year on year to total $842 million as of June 30. The company said however that its balance sheet ?remains very healthy with net equity of $25.3 million. The group carries no debt and holds cash and equivalents of $14.9 or 59 percent of total assets.

As of June 30, 2005, LOM?s book value was $4 per share however the stock has been trading at $3 on the Bermuda Stock Exchange. Given this disparity, the company will continue to buy back shares for cancellation in an amount not exceeding $1 million. To date this year, LOM has purchased for cancellation 94,550 shares.

?Despite the reduction in brokerage activity and burdensome legal costs, the group remains profitable and other divisions are seeing increases in activity,? Mr. Lines said.

In June LOM paid its regular dividend of five cents per share to shareholders of record and will pay the same regular semi-annual dividend on December 1, 2005 to shareholders of record as of November 18 2005.