Accounts for Fishers Group newly filed at Companies House show the company made a pre-tax loss of £3.5 million in 2011 com-pared with a loss of £1.8m in 2010.
The rise in losses was sustained in spite of Fishers recording 11% growth in the key hospitality sector. With headquarters in Cupar, Fife, Fishers rents essentials such as sheets, tablecloths and chef whites to customers.
In their report in the accounts, dated June 20, directors highlighted the "unprecedented challenges" posed by rising textile prices in 2011.
Global cotton prices more than doubled between August 2010 and March 2011 after a drought in India and floods in Pakistan and China hit production.
"The directors proactively amended the strategy of buying textiles to ensure continuity of supply at rates which ultimately proved favourable to those prevailing in the market place," wrote directors.
They added: "Despite securing below market price contracts, the cumulative effect of rising cotton and therefore textile prices bore down heavily on the business during 2011."
The company faced "extremely challenging" conditions in markets such as healthcare.
Turnover increased to £32m from £29.6m in 2010. However, operating profit fell from £3.8m in 2010 to £2m. The company recorded a £730,468 charge in respect of an under accrual for textile costs in prior years and £244,000 restructuring costs.
Total interest and finance costs increased to £5.6m from £5m.
Fishers Group had accumulated losses of £9.3m at December 31, 2011, four years after the group was the subject of a £40m management buyout led by managing director Bruce McHardy.
This was backed by the integrated finance arm of Bank of Scotland, which completed many deals in the debt-fuelled takeover boom that ended with the 2008 crash.
Founded in 1901, Fishers was the subject of a £23m buyout from the eponymous family in 2004. The MBO was led by ex-managing director Victor Ward.
Fishers Group had net liablities of £9.2m at December 31, 2011.
However, directors wrote that they had maintained Fishers in a strong position throughout 2011 and the group was "in good order to address the undoubted challenges yet to be tackled in 2012".
They added: "Revenue growth in the current year is ahead of plan and EBIT [earnings before interest and tax] reflects a similarly positive outlook."
The outlook for cotton prices is now lower and more stable.
Noting that financial projections indicate the group will continue to meet all its banking covenants, the directors added: "The directors are confident that the group's funding position is secure for the foreseeable future."