Bradford-based logistics firm Expect Distribution has closed its two-man e-retail delivery operation, following a number of “operational challenges”.

The service, which it established in 2012 to handle large and bulky items, was shut down last week with the loss of 12 jobs, MD Neil Rushworth confirmed. Sixteen other staff employed by it have been redeployed elsewhere in the business, however.

Rushworth told the two-man operation had been turning over around £1.5m but lost approximately £200,000 in the last financial year. “We’d got it to just under breakeven but didn’t feel there was enough potential there to invest any more time and money,” he said. “The thing with two-man is that it’s very much about achieving the volumes and the drop density – and we didn’t manage that.

“It became a bit of a distraction from our core business… so we took a decision to refocus the business,” he added.

Alongside higher wages costs, the financial performance of the two-man operation contributed to a 27% fall in profit before tax at the firm last year.

In the 12 months to the end of November, Expect Distribution raised turnover by 7% to £21.22m (2013: £19.81m) but pre-tax profit sank to £664,800 (2013: £915,800).

In its financial report for the year, the firm’s directors said both the distribution and warehousing divisions remained profitable, but that the two-man delivery service “continued to present many operational challenges”.

According to the accounts, staff costs at Expect Distribution rose from £5.9m to £6.7m during the year, with the average number of employees up by nine to 227. Administrative expenses, meanwhile, rose from £2.8m to £3.5m.

On the upside, Expect won a number of new contracts during the year, including a three-year deal for national distribution with beer importer James Clay; a five-year contract renewal with Boost Drinks; and a two-year extension to its contract with office furniture manufacturer Mobili.

The firm’s directors said they remained “confident the next 12 months will see further substantial growth across all divisions”, adding that they remained “focused on increasing profits and margins”.

Rushworth said he expected to see an increase in profit this year “but not a huge one, given the closure of the two-man operation”.