MFI Furniture Group has slumped to a first half loss and said talks about the possible sale of its struggling UK chain are "progressing".

The group revealed on May 19 it had received "expressions of interest" in all or part of its 200-store UK Retail business from a number of third parties.

Yesterday it said: "We are evaluating several detailed proposals for our retail business, all of which would involve the group continuing to supply it for a transitional period and the group providing material financial support to the purchaser.

"In addition, the group would retain its pension obligations to Retail employees and former employees in respect of past service."

Reports have identified private equity groups Apax, Argyll Partners and Merchant Equity Partners as potential buyers.

For the 24 weeks to June 10 MFI made a loss before tax and exceptional items from continuing operations of £5.7 million compared to a profit of £19.5 million last time as total revenue fell 11.8 per cent to £597.1 million.

The loss before tax after exceptional items from continuing operations was £45 million compared to a profit of £57 million last time.

UK Retail saw its underlying operating loss widen to £14.2 million from £0.3 million last time on sales down 25.1 per cent to £311.8 million.

The 300-store Howden Joinery business made an underlying operating profit of £50.9 million - only a slight fall from £51.5 million last time, despite the absence of a June promotion this year and the acceleration of the depot opening programme. Its revenue increased 5.5 per cent to £272.9 million.

The group's Supply division saw underlying operating losses widen to £25 million from £17.4 million.

As at June 10 MFI had net cash of £92.9 million, compared with net borrowings of £55.5 million at the end of 2005. No dividend was proposed compared to a 2p payout last time.

MFI also announced the appointment of Will Samuel as a non-executive director with immediate effect and as chairman designate. He will succeed the retiring chairman Ian Peacock during the next few months.

MFI is valued at £667 million.

The company, which started out in the 1960s making flat-pack furniture, is less than six months into a recovery plan involving store closures, job cuts and the possible retail sale.

The business is also adapt-ing to changing consumer tastes as the public increasingly buy ready-made higherspec kitchens and furniture rather than do-it-yourself products.

"Our first task was to stabilise the group, which we achieved, and we now have greater visibility of the three businesses - UK Retail, Howdens, and Supply," said chief executive Matthew Ingle, who replaced the sacked John Hancock last October and immediately launched the review.

It has so far seen UK Retail cease trading from 13 stores, while seven have been relocated. Factories at Stockton and Scunthorpe and three regional delivery centres have also been closed.

"In a rapidly changing market place, Retail remains challenged, but we are committed to finding a way forward, even if it remains a long road ahead. Supply is changing to align itself with the market.

"Howdens continues to perform well and we are accelerating our expansion programme," said Mr Ingle.

In February MFI reported a year to December 25 loss before tax and exceptionals of £0.6 million compared to a profit of £54.5 million in the previous year.

Shares closed down 21.25p at 85p.