The Grocer Gold-winning independent grocery chain Tates says it is putting plans in place to double its profit margins in the next few years after seeing its bottom line badly hit by a surge in energy costs.

MD Geoff Hallam told delegates at the chain's annual managers conference in Blackpool that its net profit fell from £4.3m to £4m for the year to 30 April on sales up 20.6% to £260.6m.

The cost of lighting and heating its 205 stores had soared by 50% to £3.3m over the past year, he said. Over the previous 12 months it had been £2.2m.

But Hallam said he was confident the Spar retailer could achieve profits of £5m for the year ahead if all managers and HQ staff, including himself, "worked a bit smarter".

If purchasing procedures were tightened and wastage was reduced, it should be able to almost double its profit margin from 1.55% to 3%, he added.

"Business is good but it could be better," he said. "Obviously its not going to happen overnight. First we need to work towards making it 2% then 2.5% then 3%."

Financial director David Pannell said the company planned to carry out its own test-purchasing scheme to monitor how successfully stores were clamping down on alcohol sales to minors.

The move was a response to an increase in sting operations by local authorities and more of its stores failing these tests, he said.

"In many ways it is inevitable that as the number of test purchases rises so will the failure rate," said Pannell.

"The only way we can defend ourselves is to be able to prove good due diligence at every stage."

During a recent test purchase operation in Birmingham, of the six stores that failed only the Tates outlet was able to successfully defend the charge, he said.

Meanwhile, Tates is trialling a new chilled room concept for its beers, wines and spirits fixture at its Bradley Cross store in Grimsby.

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