Yates Group has revealed it is turning around its troubled Wine Lodge chain as it ponders the sale of the business.
It took "remedial action" after the pubs suffered a drop in profit margins, partly because of a policy of raising drinks prices at peak times.
Some of its newly opened Wine Lodges also failed to perform well enough, which last September led to a profits warning.
Today (June 14), the group confirmed that this led to a 11 per cent fall in pre-tax profits to £13.8m for the year to April 1.
But it added that the Wine Lodges, which have undergone a brand overhaul, showed improvements in gross margins in the first few months of 2001.
Chairman Peter Dickson said: "We are beginning to derive the benefits of tighter operational rigour in our Yates brand and focusing more on higher standards and customer service."
He stressed that weekly sales in the 141-strong branded chain were £19,700 - "among the highest in the industry".
Last week, Mr Dickson revealed that his family firm was in "preliminary talks" with an unnamed company which could lead to the whole business being sold.
Today, he added: "At this stage, it is not clear whether these discussions will lead to an offer being made for the company and a further announcement will be made as soon as possible."
Several pub operators have been linked with the talks, such as Luminar, SFI Group and Regent Inns, but none has confirmed it is interested. The management has previously considered selling the business to a private equity firm to take it off the stock exchange, where pub shares are generally weak.
Despite the talks, Yates is pressing on with refurbishing its core Wine Lodge brand, including new design formats, upgraded music and lighting and merchandising.
It is opening another six Wine Lodges over the next 12 months, plus another six branches of its Ha! Ha! Bar and Canteen.
The 15-strong chain of Ha! Ha! bars, which reported average weekly sales of £18,250, won the title of Retail Brand of the Year in the Publican Awards 2001. Like-for-like sales at the older bars were up eight per cent.
Mr Dickson said: "We are allocating more resources to the development of this business to build on its excellent progress."
Yates in talks over possible takeover offer (June 8, 2001)