Tandem's annual turnover to the end of January 2005 was £52.68m. It was £56.90m in the previous year.
Despite the profits increase, Tandem said it was "disappointed" with its overall results after it said it had failed to "take advantage of an improved sales position."
While Falcon and Dawes suffered, MV Sports prospered.
The distributor of low-end children's bikes, with licenses from Barbie, Thomas the Tank Engine and Bob the Builder, had a "successful year" and "additions to the range are being sought."
MV has a "strong management team" which has "developed new products whilst controlling overheads and working capital utilisation."
Tandem chairman Graham Waldron said: "Inevitably we have to improve and changes are being made around our group with the introduction of new operating standards with clear targets that will demand better performance from all our staff.
"I am fully aware of the challenging market that we operate in and this calls for a strong performance from all managers and staff. I regret that we fell short of what was possible.
"With retailers reporting a slow start to the year, it will be a tough time ahead for the managers and staff in our operating businesses. Despite this and the cost of the changes being made, we still expect to have a satisfactory year. Our challenge is to improve our performance, further enhance our balance sheet and be in a position to reward our shareholders."