BAR and nightclub operator Ultimate Leisure has pledged to spend £4m on refurbishments despite issuing a profits warning at the end of last week.

The Newcastle company, which operates 33 venues across the North-East, said trading over the festive period had been very difficult, blaming fierce competition and a long-term lack of investment in its outlets.

In a trading update ahead of its interim results next month, Ultimate said some of its clubs saw a slump in sales where new competitors opened and it therefore expects a shortfall in sales against forecasts.

Oriel Securities, Ultimate's broker, cut its forecast for pre-tax profits in the year to June 30 to £1.6m from £5.2m.

In the year to June 2005, the group reported a six per cent fall in profits to £8.4m and warned that this year's profits would be lower.

As a result, five board directors resigned last August and Mark Jones, previously chief executive at Yates Group, and chartered accountant Colin Rowlinson were drafted in as chairman and business development director to revive Ultimate's fortunes.

According to a national newspaper Ultimate intends to spend £4m on club refurbishments this year and has put aside £2m for next year.