Silk industries, the parent company for designer Paul Costelloe's clothing operations, issued a profit warning yesterday, stating that lost orders due to last year's disruption in production had a greater than anticipated impact on sales and was affecting the spring 1999 collection.

The pre-tax profit for the 14-month period to April 30th would be "significantly below market expectations", Silk stated.

It is the second profit warning the company has issued in six months following disruption of the production schedule of United Fashion, the Costelloe business acquired by Silk for £1.25 million sterling (#1.83 million) in 1997. With Mr Costelloe working as a design director, the company is developing a menswear range.

Last November, the former chief executive of United Fashion, Mr Ian Herbert, had his employment terminated after differences arose. Mr Costelloe said at the time that the restructuring had moved too quickly.

Yesterday, the group's chairman, Mr David Tooth, said the Paul Costelloe autumn/winter 1999 collection had been well received at this week's London Fashion Week and in New York.

The group's core silk-weaving and printing business has suffered from the strength of sterling and the global economic slowdown.

Silk's interim results showed a pre-tax profit of £274,000 sterling (#398,140) on a £8.9 million sterling (#12.93 million) turnover, with United Fashion making a £202,000 sterling loss.