Stockbroker and investment bank Collins Stewart today reported an 82% fall in profits as stock market listings in London dried up.

The £250 million firm, which is in takeover talks with a possible bidder, - thought to be Japanese bank Nomura - said profits for the first six months of the year crashed from £52 million to just £9.6 million.

It came after the capital markets division slumped to a £10.5 million loss as the number of companies raising money through London's junior market AIM dwindled.

Chairman Terry Smith and chief executive Joel Plasco forecast further pain over the next 18 months and beyond, but were quick to declare that AIM was not dead.

Collins Stewart cut its first half dividend from 2.5p to 1.3p after revenues dropped from £129.3 million to £89.2 million. The shares fell 6¼p to 97p, having tumbled from as high as 270p in January 2007 to 63½p this year.

Smith said: "Market conditions are obviously challenging and have adversely affected the capital markets division."

But three other businesses, Hawkpoint corporate advisory, securities and wealth management, were profitable.

Plasco said: "It's been a fairly difficult trading period for most people in this sector. For us the reality is that we are proud of the three businesses which are still performing well but we can see the effects of the capital markets downturn-We have seen a very marked drop in issuing activity in the London market and high-profile fundraisings have been pulled at the last minute.

"We don't think that AIM is dead as some people have pointed out, but companies with less liquidity have suffered."

Collins Stewart said takeover talks were at "an early stage" and there was no guarantee a bid would be made. The firm locked horns last week with the Takeover Panel over its admission that it had received an approach.

The shares jumped 10% last week as traders closed short positions, drawing the Panel's attention. Collins Stewart argued there was no need to put out a statement with talks at such an early stage but the Panel disagreed.