Icelandic retailer Baugur has increased its stake in fashion chain French Connection, which yesterday reported a 68 per cent slump in first-half pretax profit.

Baugur bought more than 6 million shares - about 6.5 per cent - of the company, raising its total stake in the business to 9.5 per cent and making it the second-largest stakeholder.

French Connection's biggest shareholder, founder and chairman Stephen Marks, has denied reports that he may plan to privatise the company.

Baugur, meanwhile, has vowed it will hold off buying any more public businesses until chief executive Jon Johannesson clears his name of a fraud charge.

The company, which owns big stakes in fashion companies such as Mosaic, Jane Norman, MK One and Shoe Studio Group, is known for ploughing its efforts into British retailers believed to be potential targets to be rejuvenated or taken over.

A few hours earlier, the retailer reported poor financial results for the first half of the year and said that profit for the whole year was likely to be at the lower end of the predicted range of £20m - £25m.

French Connection said that the disappointing profit was partially attributable to the collapse of small-scale wholesale customers.