But the group, which came to the market just over a year ago and is still developing and creating a market for its virtual reality technology, said trading was in line with expectations.
Turnover was up 60 per cent to pounds 4.1m. The company has concentrated on cutting the cost of its second-generation hardware in an effort to boost sales. The average cost of new virtual reality machines has fallen to about pounds 20,000 from pounds 33,000.
David Payne, chairman, said that as a result the company had sold 184 units in the first half, one more than in the whole of last year. A total of 609 virtual reality machines have been installed in outlets.
But Mr Payne said the group had so far only scratched the surface of the market, with machines installed in barely 1 per cent of potential outlets. The longer-term aim is to persuade large companies to license Virtuality's technology. So far, the group has signed deals with Sega, the Japanese computer game company, and IBM.
Virtuality is developing the operating system and games software for Sega's new themed VR arcade machine, aimed mainly at the Japanese market.
Mr Payne said a mixture of the existing core business and the signing of further licensing deals would enable the company to report profits in 1995. Profits before development expenditure and tax were pounds 185,000, compared with pounds 393,000. The drop reflected the costs of setting up new offices in Tokyo and Dallas, and the expense of producing a new generation of the company's virtual reality hardware. Development expenditure rose to pounds 880,000 ( pounds 328,000). The group had net cash in June of pounds 5.3m.Reuse content