Wolverhampton & Dudley Breweries said it was having to increase its contributions to its employees' final salary pension fund by 2% to make up for falling stock markets, which have hit the value of the fund's investments.

The increase in to 18.5% of an employee's salary, a rise in the cost of insurance by approximately 40%, and higher employer's national insurance contributions will add some £2.5m to the company's costs, chief executive Ralph Findlay said.

However, he said, "good, well maintained pubs will continue to attract customers even in times of uncertainty, and overall we are confident of prospects for the year ahead."

Findlay, unveiling a trading statement for the year to September 28, said trading conditions improved during August and September after poor weather in the early summer.

Uninvested like-for-like sales in the Pathfinder Pubs managed pub division were 1% up on last year, and 3% up taking refurbishments into account. The performance of the Pitcher & Piano bar chain has improved after Mike Dowell's appointment as managing director of the chain and like-for-like sales in the final quarter were up on the comparable period last year, Findlay said.

In the tenanted pub division, Union Pub Company, average turnover per pub increased by 6.5% and estimated average profit per pub rose by around 8%. Just over 100 smaller managed pubs were transferred to the tenanted pub division at the end of September.

Net debt at 28 September 2002 was approximately £500m.