Shop Direct has reported making a loss in the year to June 30th, due to financing customer claims relating to PPI mis-selling.

The group made a loss before tax of £24.7m, compared to a profit of £24.9m in 2017, and was forced to pay out £128m to cover PPI claims to customers who paid for purchases using store credit.

Costs associated with the construction of a new distribution and returns centre, set to open in 2021, were also said to have contributed to the loss.

Revenues at Very increased 10 % to £1.4bn, but fell 15% at Littlewoods to £570m.

Very’s performance was helped by a 9% rise in customers, an increase in transactions via the brand’s app and growth in electrical and seasonal categories. The company said that losses at Littlewoods were an effect of the closure of the brand’s customer rewards scheme, as well as disappointing furniture and homeware performance.

Overall, group revenue rose 2% to £2bn, in a “challenging external environment”, however, the group’s debts grew 3.4% to £1.7bn. Shop Direct’s gross margin also declined by 0.9 percentage points to 40%, due to a higher proportion of electrical sales, challenging trading conditions and the “continued decline of Littlewoods.”

“Four months into my role as CEO, I’m hugely excited by the potential of Shop Direct,” said chief executive Henry Birch.

“We’re trading in line with our expectations and preparing for the important peak season. It’s a changing and competitive market but our growth trajectory and differentiated customer offer gives us confidence for the year ahead.”