FURNITURE retailer MFI has forecast a substantial improvement in results at its main business.

The group has been rocked by supply chain difficulties, but said an overhaul of the delivery operation and a reduction in costs would help it next year.

MFI's mood has been lifted by an improving trend for its UK retail business, where orders in the second half of the year are down two per cent - compared with a decline of four per cent in the first half.

The group, which employs 600 people at its Hygena factory, in Stockton, said its current trading performance remained in line with expectations. It has already warned of a substantial loss for its UK business this year.

The test for the company will be its winter sale - starting on Boxing Day - when orders will reach levels not experienced since updated systems became operational.

Chief executive John Hancock said: "Recent improvement in our home delivery services and a cost-reduction programme should produce a substantial improvement in the results of UK retail in 2005, despite an increase in pension and other costs.''