Flying Brands entered the red and was forced to renegotiate its financing after a difficult first half.
The group warned on its full year profits as it posted losses of £1.97m for the six months to July 1, against profits of £0.4m last year. Sales from continuing business dipped slightly at £15.77m against £15.86m last year.
The retailer said the half was “very difficult” and that sales and profits were “materially below expectations”. As a consequence of tumbling sales it has renegotiated the covenants on its main term loan.
£1.49m of the losses came from discounting website Dealtastic. The retailer scaled back its investment in discounting website, writing off its initial payment. Flying Brands had upped its stake in Dealtastic to 80% earlier this year. It will be scaled back to 25%.
Flying Brands chairman Tim Trotter said: “We do not believe that it is appropriate for us to continue to fund a start-up internet company. We have accordingly renegotiated the terms of our investment in Dealtastic so that we have no future funding commitments.”
Sales in its gardening business - which supplies plants, bird food and related equipment - fell 10% to £9.95m. The retailer said it remained bright about the prospects in its garden division and said its underperformance was from “mistakes” in its marketing plans and disruption from its chance of courier providers.
Revenues in the gifts division rose to £5.03m from £3.7m, although this included additional sales from the acquisitions of Flowers Direct and Drake Algar. Flying Brands said it saw significant opportunities in the third party deals it had carried out in its gifts division. It entered the personalised cards market by partnering with online specialist Hephalump.com this month.
Trotter said: “Although the first six months of 2011 have been tough we remain positive about the future of the business. We have a strong plan in place and are confident that the initiatives undertaken thus far will continue to improve performance and efficiency in the business.”