Smoking ban clouds Ultimate Leisure investment drive

LONDON, Feb 27 (Reuters) Britain's Ultimate Leisure Group Plc warned that the soon-to-come smoking ban could dent sales in one-third of its bars and night clubs, just as it is benefiting from an extensive refurbishment programme.

''On the drink sales side and particularly in the nightclubs we do see some threat post the smoking ban,'' Chairman Mark Jones told Reuters by telephone today.

England is to implement a smoking ban in enclosed public spaces on July 1 after Scotland introduced a smoke-free environment in restaurants and bars last spring.

''It is the day-on-day change that I am concerned about, especially in those bars or night clubs where we do not have a solution to the ban,'' Jones said, adding that two-thirds of the sites could have smoking areas.

The late-night bar and night club operator will finish a two-year investment programme in June that includes spending 7.3 million pounds on making 33 of its 35 sites more stylish, with upgrades to the sound and light systems as well as introducing food service.

Ultimate Leisure has started to see results for these efforts as like-for-like sales in the invested sites increased by 6.3 per cent in the first five weeks of the year, while overall like-for-like sales went up 2.3 per cent.

''We are encouraged by the sales performance of the start of the second half and our general like-for-like sales should increase more in the future as we see our core business growing,'' Jones said.

Revenues of the Newcastle-based firm were up 4 per cent to 18.2 million pounds (35.70 million dollar) in the six months to December 31 with a pretax profit of 2,000 pounds - results that were hit by sites closed due to refurbishment and by promotion costs.

The only near-term caveat was the smoking ban, Jones said. He hoped to offset the possible drop in drink sales with food.

''We introduced food to most of the places and the overall experience in post-ban Scotland was that the drinks-led market was hurt more than the food-led market,'' Jones said.

Ultimate Leisure shares were unchanged at 186 pence, valuing the firm at 46.5 million pounds.

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