This week ITnet announced pre-tax profits of£400,000 in 2000 compared to£900,000 in 1999.
The firm is blaming the plummeting profits on a change in accounting policy meaning costs and revenues on contracts are recognised as they occur.
Hackney LBC terminated its contract with ITnet in January after warning it in November that its service was not up to scratch. The council blamed a 'failure to process housing benefit claims and a failure to collect council tax at the contracted level'.
Before Hackney's announcement ITnet's share price stood at 460p, but after Monday's announcement it fell to 206p.
The company announced an increase in public sector revenue of 7% in 2000 to£75.7m, compared with£71m in 1999. Despite losing the Hackney contract ITnet won a number of deals with councils, including Cambridge City Council and Slough BC.
ITnet acknowledged the problems it had with benefits administration: 'The business process services market, particularly benefits administration, continued to be challenging. Many of the difficulties we have encountered with these contracts relate to issues facing the entire industry, which include radical changes in government policy and legislation, as well as historic under investment in the sector.'
Bridget Blow, chief executive, added: 'Despite a challenging year, we retain a strong order book in both our commercial and public sector businesses.'