Gowrings, which has sold off most of its motors division to concentrate on its Burger King franchises, revealed yesterday that operating profit at its restaurants wing plunged almost £700,000 into the red for the six months to 30 June as like-for-like sales dropped 5%.

It warned investors that after "extremely tough trading conditions" for the first half of the year, early signs for the second half "are not showing any recovery" and conditions "will remain difficult for the rest of the year."

Restaurant turnover grew 2% to £15.2m, but operating profit fell from £287,000 to a loss of £684,000.

Gowrings, which operates 43 Burger King restaurant franchises, said sales had suffered in part because the drawn-out sale of the central Burger King operation by Diageo had led to "a lack of investment in the brand, weak marketing and management changes."

In addition, the fast food sector was having to cope with changes in customer preferences over the past two years, with a trend away from red meat and a growth in the cold sandwich market. Derek Coulson, Gowrings' chief executive, said: "We have seen a change in the mix of what we sell with some 30% of our sales now for chicken products.

"The introduction in April of the new Chicken Whopper product has been very well received and this has since been augmented by a low calorie version. There seems to be a trend towards healthier eating and new products aimed at this sector of the market appears to be what the customer wants."

John Fowles, the company's chairman, said Diageo's recent announcement of the sale of Burger King had removed "a major element of uncertainty" that would "allow management to concentrate on the relaunch and growth of the brand in 2003." He said there were a number of initiatives, both internally and externally through Burger King, to boost the brand.

Coulson said two of the restaurants the company opened in Birmingham last year have had disappointing sales. However, he said, the company opened a new drive-thru restaurant in Havant in May which is trading very well. It has agreed heads of terms for two new sites to open in 2003.

Finance director David Gray said Gowrings would be looking for new opportunities in the restaurant sector: "We need to grow in order to return to previous profit levels and improve the long-term prospects of the company."