THE troubled Silentnight group has warned that sales of its beds are falling and that prices are being squeezed by its key customers.

At the company's annual meeting, chief executive Nino Allenza told shareholders that trading conditions in its beds division continued to be difficult.

Only last month, Silentnight announced losses of £11.2million for 2002 compared with a £12million profit the previous year.

The Salterforth-based company blamed the losses on its furniture division and confirmed it would close factories at Andover, Chipping Norton and Edmonton.

Sales at the UK bed division, which includes the Silentnight factory at Barnoldswick which employs more than 900 people, had increased slightly.

But Mr Allenza admitted that the beds division was facing difficulties.

"In line with a declining market, our first half order book is down year on year, although we remain hopeful of a slight pick up for the second half of our financial year," he said.

"On top of this, we are experiencing an unprecedented level of margin pressure from our key customers which is exacerbating the effects of an already difficult trading climate."

Investors reacted swiftly to the announcement and the company's share price fell by 7.5p to 114p per share.

Mr Allenza said the rationalisation and relaunch plans for the branded furniture businesses were progressing, although they were running behind schedule.

The closure of the Ducal factories in Andover would be complete as planned in July, but the relocation of the cabinet-making plant in Edmonton had been delayed for three months and was now scheduled for September 2003.

The closure and relocation of Parker Knoll's upholstery factory at Chipping Norton had been further delayed from January to July 2004.