Hertfordshire-based brewer and pub group McMullen's has reported a drop in

profits after a "challenging year" that saw rises in energy costs, the minimum wage and property rates.

The company saw profit before tax drop to £7.4m in the year to 30 September 2006, compared to £7.7m the year before.

Turnover was £52.1m compared to £52.4m the year before. Chairman Charles Brims said: "The year 2006 has proved to be another challenging one for the company and the pub market generally. The continued declining trend of pub visiting has not been helped by the aggressive discounting initiatives of the supermarkets."

Brims reported that costs had been adversely affected by a 35% - over £300,000 - increase in energy costs and

a £100,000 increase in its rates bill.

Comparable sales in the managed division were down by 0.2% - liquor sales declined by 0.4% and food sales by 0.1%.

Operational changes since have reversed the trend on food sales which are now

up by 8% in the current financial year.

In the company's tenanted division like-for-like beer sales were down by 5.3%, slightly worse than the

overall decline in the UK

pub market.

Brims said: "Traditional, predominantly drink-led community pubs are finding business particularly difficult as regular and frequent pub visiting declines."

McMullen's repaid £8.5m of debt in the absence of suitable acquisitions, reducing its loan balance to £9.5m. The company has reported

a 5% increase in overall like-for-like sales for the year

to date.

McMullen's managing director Peter Furness-Smith said: "We are very pleased with the performance we have achieved so far this year.

"Even in the last month with the adverse weather

and the start of the smoking ban we have matched our sales figures from last year, which included the football World Cup."

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