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Fitted kitchen group Waterline has warned profits for the current year will be lower than expected, adding that challenging conditions will continue into the next financial year.

"Profit before tax is expected to be significantly lower than the market expectations for the year ended 31 March 2008," said the group, citing poor trading conditions in January and February 2008, reduced levels of confidence in the sector among its customers, fuel cost rises and the weakening of the pound against the euro.

It believes the difficult trading conditions will continue for the first half of the following year.

"While there are signs of improvement for the year ending 31 March 2009 and the management team remain committed to its success, the board remain cautious about trading in the early part of next year," said the statement.

The poor conditions at the start of year have been in respect to kitchen furniture, which led to a significant reduction in the level of turnover forecast for the final quarter of the year.

It said reduced levels of confidence in the sector among its customers were due to interest rate uncertainty, increasing personal debt levels and a slow down in the house moving and refurbishment sector.

The group has taken steps to improve the levels of turnover by reviewing its customer database and refocusing its efforts on low and nil spending customers.

"In addition the Board is looking at the product portfolio with a view to adding incremental products that may address some of the requirements of our existing customer base," it added.