The loss of a substantial contract with the Royal Mail earlier this year knocked Bradford marketing group Real Affinity off course in its bid to return to profitability.

Delivering its interim results yesterday, the company said the contract - to provide promotional activity for Parcelforce Worldwide - had demonstrated the Staithgate Lane firm's vulnerability by relying too heavily on one client.

But the board said it was confident it head learned the lesson from the experience and was rapidly growing through acquisitions to provide a more profitable future for shareholders. In the six months to September 30, the group suffered pre-tax losses of £250,923, up from £22,461 in the same period last year. However, sales increased slightly to £2.51 million, with gross profit growing to £1.42 million.

Newly appointed chairman Stuart Pearson said the highlights of the year included the acquisitions of firms Holly Benson, Evolve and Langham Works, with the company keen to increase the size of its portfolio further.

Mr Pearson paid tribute to former chairman Tony Douglas, from whom he took over on October 1, saying "the fact that Real Affinity is around and poised with quiet confidence for significant growth is testament to his leadership".

He said Holly Benson, which provides specialist communications advice to a variety of clients including BP and Npower, had performed well despite ending the period showing a loss.

The firm's brand development and direct marketing subsidiary Ladders - with clients including Imperial Tobacco, Proctor & Gamble and Green Flag - recovered from the loss of the Royal Mail contract to secure more work in the second quarter.

And sports marketing group Real Affinity had "continued to prosper, making a higher than expected contribution to first half performance". "We believe there is significant scope for acquiring businesses which can strengthen our existing position in the sector, take us into new and exciting areas and reduce our vulnerability to client losses," said Mr Pearson.

"The board has rightly concluded that it is essential to increase our present size to minimise the impact caused by the loss of any one client and give us more muscle when we enter negotiations for new work.

"The loss of the Royal Mail work at the beginning of the year demonstrated our vulnerability, throwing our financial objectives off course."