Findel warns of another hit to its profits

In addition, net assets as at April 2009 will be reduced by nearly 21m.

But the Burley-in-Wharfedale company said there would be no impact following the review on profit expectations for the year to April 2010.

Further details including the impact on the results for previous years will be given when the group announces its preliminary results.

The company has been reviewing a number of accounting entries in the educational division which appear not to be properly substantiated.

Errors at the education arm came to light following changes in the management of the division. The employees concerned have left the company.

Findel has been investigating the accounting errors alongside the group's auditor Deloitte.

The educational supplies division has been hit by a decline in sales in a difficult market environment and a more prudent approach to accounting following the discovery of the errors in March.

The education arm struggled with sales down 12 per cent in the 39 weeks to the start of January, hit by falling export and project sales. School closures due to the snow storms also affected sales after 8,000 schools closed across the UK.

The division has also suffered as teachers were asked to keep some of their budgets back for the following year.

The uncertainty caused by the General Election last month has also led to reduced spending.

Yesterday the group said its net debt at the beginning of April was in line with expectations at 309.7m.

Last night Findel's shares closed down 0.75p at 17.25p, a fall of four per cent.

Following the discovery of accounting errors in the education division, Findel asked KPMG to conduct a review of all its businesses.

Yesterday it said KPMG had found all the accounting entries have been properly substantiated. "The directors are pleased to report that no material issues have been identified in any other of the divisions following the review by KPMG," Findel said in a statement.

Earlier this year Findel reported a fall in underlying sales, but said its turnaround plan is gathering pace and it is on course to make savings of 25m.

Sales at sports home shopping brand Kitbag remain strong.

Kitbag, which is Europe's leading online sports retailer, operates official online stores for Manchester United, Chelsea, Real Madrid, Barcelona, Everton, the English FA, British Lions, Formula 1, Wimbledon and the Ryder Cup.

Earlier this month turnaround specialist Endless bought Findel's struggling entertainment retailing business Webb for 1. The Leeds-based private equity house pledged to invest 15m in Webb, which has been starved of trade credit.

Webb, which sells games, DVD and music via its two subsidiaries, Choices UK and Webb Ivory Burton, made underlying earnings of 1.7m on revenues of 53m in the year to the end of March.

In April Findel said benchmark pre-tax profits for the year to April 2, 2010 would be lower than expected at between 16m and 17.5m. The group's house broker had previously pencilled in profits of 20m.

But home shopping sales have held up well thanks to new clothing ranges. Home shopping default levels have also improved following tighter credit management.

In the year to April 2, the group expects sales to show a one per cent improvement to 582m.

From fine art beginnings

Findel started life as greetings cards manufacturer Fine Art Developments, which was established in 1955.

Fine Art was floated on the Birmingham Stock Exchange in 1962, later moving to the London Stock Exchange.

By the 1990s, Fine Art had expanded into mail order, education supplies and direct mail. In 1997, the group de-merged into two businesses.

Fine Art Developments focused on mail order and education supplies, while Creative Publishing focused on cards, giftwrap and stationer.

In 1998, Creative Publishing plc was acquired by Hallmark Cards.

Fine Art Developments rebranded as Findel in 2000 to reflect the move away from art to mail order and education supplies.