Video shop owner Home Entertainment said yesterday it was alarmed at the flood of counterfeit DVDs into the UK.
The owner of the Choices chain said it was suffering from the activities of criminal gangs who use illegal immigrants to hawk discs in pubs and restaurants.
Rentals slumped by 10.6 per cent on a like-for-like basis during the year to June 4, although Home Entertainment said a dearth of Hollywood blockbusters contributed.
Chairman Iain Muspratt said: "Piracy has become a major problem. The growth and extent is alarming and we are playing a leading role in initiatives to contain it.
"Piracy is a serious offence and it is clear much is orchestrated from supply chains dominated by organised crime, which use illegal immigrants as distributors.
" In recent weeks an increase in enforcement activity by Trading Standards officers and police has begun."
US giant Blockbuster warned earlier this month the spread of counterfeit DVDs in its global markets contributed to its plunge into the red during the second quarter.
Unveiling its annual results, Home Entertainment said trading in the new financial year had started slowly due to a lack of hit films and the June heatwave.
With consumer spending weak, Mr Muspratt told investors achieving its goal of maintaining operating profits at £4.6 million would depend greatly "on the economic climate during the increasingly important Christmas period".
Its operating profits before exceptional items were 3.3 per cent lower than a year ago, but turnover was nine per cent higher at £140.5 million due to the sale of more DVDs at lower prices and increased demand for computer games.
Pretax profits for the 52 weeks to June 4 were flat at £4.45 million, compared with £4.37 million for the comparative 53-week period.
Home Entertainment operates 228 Choices Video stores in the UK after opening a net 15 branches over the past financial year.
It has 25 stores in Greater Birmingham including Yardley, Olton, Edgbaston, Castle Vale and Sutton Coldfield.
The Peterborough-based firm distributes videos and DVDs to retailers through its Video Box Office arm and owns Choices Direct, which supplies mail order firms with entertainment products.
Last year it agreed to sell its MovieChoices customer database to online DVD rental firm Lovefilm as part of a deal that saw it take control of its rival's stock management and procurement operation.
The company was established in 1985 by Mr Muspratt, Diane Gardner and Geoffrey Hopkins, to effect the management buy-out of Video Box Office from the Guild Organisation, a specialist film production and distribution company.
It raised the final dividend to 4.5 pence from 4.4 pence a year ago for a total dividend of 6.8 pence, up from 6.6 pence.