The company announced profits of £834m for the year, up from £477m last year.

Shares rose on the news by 11.5p to 824.5p.

Chairman Sir Ian Prosser said: "Although trading remains tough in Bass leisure retail, it has recovered partially from the weather-impacted levels experienced in July and August and we continue to gain market share."

Bass bought the Inter-Continental chain of hotels for £1.78bn in March, and is looking to expand its hotels division in Europe, Asia and North America.

The company will invest half its planned £800m annual group expenditure for 1998-99 in the hotels division. Last year, the group spent £155m on its hotels.

Hotel expansion

"We're looking at everything from small single hotels up to some medium-sized chains," said group finance director Richard North.

Fears of benzene contamination led to a £12m Britvic product recall

Bass has been mentioned as a possible buyer for the Mandarin Oriental and Shangri-La chain of hotels.

Bass's hotels division, which includes the Holiday Inn and Crown Plaza brands, now accounts for over a third of group operating profits.

Mr North said that while the UK hotels market had "peaked", continental Europe was "still on an upcurve."

"We're very positive about Europe. It has made a strong start to the new financial year," he added. The market in North America is currently nearing its peak, he said, while there is no sign of any recovery in the Asian market.

Operating profits from the group's Asian hotel division collapsed from $10m to just $1m in the year to Sept 1998.

Drinks flat

Some £250m of capital expenditure has been allocated to the group's branded pub and restaurant division, which has felt the full force of the bad summer weather and a loss in consumer confidence.

The company's retail operations, which recorded a 4.3% rise in operating profits to £269m, have been hit by tough trading conditions.

High-street competition

Like-for-like sales of the branded high street operations - which include the O'Neills, It's a Scream and All Bar One concepts - were up by 7% during the period.

"Its tough out there at the moment, but we're confident of outperforming our competitors," North added.

On the brewing and branded drinks side, sales collapsed by 10% in July and August. The group's share of profits at Britvic slipped 28.3% as it suffered from product recalls after fears of Benzene contamination.