CLOTHING retailer Austin Reed has seen its profits crumpled by the revamp of its flagship London store.

Half-year profits tumbled 59 per cent to £1.1m due to disruption caused at the Regent Street outlet, as well as the wider impacts of the Sars virus and the Iraq war.

The group, based in Thirsk, North Yorkshire, is also reorganising at a time when it has experienced "a difficult trading environment".

But it added that some of the benefits of its reorganisation would emerge in the second half of this year, with the full impact coming next year.

Like-for-like sales in the first eight weeks of the second half were down six per cent after the firm carried out changes to its product ranges.

Roger Jennings, group chief executive, said: "These changes give a strong foundation for growth."

The group has been the focus of takeover speculation this year after several approaches, including one from the grandson of the company's founder, Nigel Robertson.

But it ended this summer after the group declined the approaches in May and Mr Robertson pulled out in June.

The group operates 47 Austin Reed stores and 39 concessions in the UK, as well as 64 Country Casuals stores and 141 concessions.

Group turnover was £56.4m against £60.3m last time.

The cost reduction programme launched in March resulted in a 19 per cent reduction in the group's staff numbers to 1,700 and delivered planned cost savings of £300,000 in the first half.

A property sale boosted bottom line pre-tax profits to £3.5m compared to £2.7m last time.