Profits at Bond International Software were hit as recruitment firms paired back on IT investment.
The firm, which provides software to the recruitment sector, added that a shift from from traditional licences to cloud-based deals - known as Software as a Service (SaaS) - had also impacted the bottom line.
The result was total revenues for the group dropped 5% from £18.4m in 2011 to £17.4m in 2012.
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Operating profit dropped almost a third to £1m, while earnings per share fell to 2.07p.
The company said it had significant prospects both in the UK and abroad, but these are likely to be less lucrative SaaS deals and might not have a material impact on short term results.
"The staffing software market remains challenging and while we remain cautious about the UK and USA, the group is well placed to take advantage of continued growth in key emerging markets and to prosper when growth returns to the economy," said Group Chief Executive Steve Russell.
"In the last six months Bond has continued to invest in, and expand operations, in Asia Pacific, leading to a significant contract win in Japan, showing continued confidence in our service offering and strength in this market."
Shares were off by almost 17% by 1445 on Tuesday.
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