The Orkney business recorded a £77,336 loss in the 12 months to January 31, 2012, compared with a profit of £111,452 the previous year.

The loss came in spite of a slight rise in turnover from £7.27 million to £7.3m.

Managing director Alistair Gray admitted retailers are facing "very challenging" circumstances.

He said: "It is equally tough this year and we don't see any immediate signs of an upturn.

"We are running 1% ahead of last year on a like-for-like basis so it is not a disaster. It is not just us. Everyone in the jewellery sector has faced the double whammy of the downturn and recession plus very high raw material prices compared with where they were historically at."

The company cut net debt during the year from £2.08m to £1.96m.

Staff costs declined from £2.14m to £2.12m with average employee numbers down from 159 to 152.

Directors' remuneration rose slightly from £191,525 to £192,700.

Notes in accounts filed at Companies House show the company restructured its share capital and issued 5295 new ordinary shares.

Mr Gray confirmed to The Herald no additional money was injected into the firm through this, but the move was done to distribute equity more widely. He

said: "It was really to do with our funding going forward. We have a number of shareholders outside of the [Gray] family and it was to give everyone a bit more comfort in terms of their security."

Mr Gray is currently preparing for the key Christmas season and hopes Ortak's investment in design can pay off.

He said: "Our business is very seasonal. We generate about 40% of our annual turnover in November and December.

"We have been continuing to invest very heavily in new product. It is easy when times are tough to cut back on investment in design.

"But we have just launched more than 200 designs for the Christmas season and are revamping our displays and merchandising in store."

Along with its factory and headquarters in Kirkwall, on Orkney, the company has a further office in Edinburgh plus 13 retail outlets in Scotland and two in England.

Mr Gray has no plans to increase the number of sites at the moment.

He added: "It is clearly challenging times and it would be a very brave person at the moment who would be investing in a larger retail estate."

Ortak was founded in the 1960s and sells to customers around the world through its website and a sales office in the United States.