The Burley-in-Wharfedale company shocked the market last month with a profits warning just two weeks after saying it expected to report record results this year.

Yesterday chief executive Patrick Jolly said the group had seen a dramatic increase in bad debts in March, which prompted the warning. However April has seen a return to more normal trends and the group said it is on track to deliver long-term growth.

"We know Findel has been overshadowed by the bad debt charge, but we still have excellent prospects," he said.

The market welcomed the news and the shares closed the day up 3.5 per cent, a rise of 10p to 289.75p.

Mr Jolly said the credit crunch may well continue for the rest of the year so the group has drawn up a two-pronged strategy to tackle bad debts.

Firstly it will no longer take on risky customers by raising credit scores so the five or so per cent of customers that are prone to bad debts will be turned down.

"The bad debts were predominantly due to new customers," Mr Jolly said. "These people have been hit by higher energy and food prices, but we will take them out of the equation in future."

Secondly, it is to target its established customer base in order to encourage larger and more frequent orders from existing customers.

Mr Jolly said the group was pleased with the five per cent increase in sales seen during the first six weeks of the new financial year. He said all divisions have made positive sales progress.

During the 12 months to March 31, underlying pre-tax profits rose from £55.9m to £57m, in line with expectations.

The group announced exceptional charges of £15.9m following the integration of the businesses it bought last year and redevelopment of its site in Hyde, which will include the construction of a custom-built new office for the group's Education division and the commercial development of the remainder of the site.

Like-for-like sales in the Home Shopping division rose 22 per cent to £403.5m and underlying operating profits increased 6 per cent to £50.3m.

The group's sports-orientated business Kitbag reported strong sales after launching three more Premier League football club sites and moving into cricket, rugby, motorsport and tennis.

Findel Direct's brands are
Kitbag.com, I Want One of Those.com, Letterbox, the Cotswold Company and Confetti. Combined, these brands have a customer base of over one million and over 70 per cent of their sales are transacted over the internet.

In addition to home shopping, Findel supplies educational supplies to schools and healthcare equipment to the NHS which are both far more resilient to the economic downturn. Both the education and healthcare divisions reported a five per cent increase in sales over the past six weeks.

Findel had been seen as fairly immune to the downturn because its customers tend to be at the lower end of the market and few own property, but this is no longer the case as the credit crisis spreads further.