OPERATING PROFIT at Campbell Bewley slipped back last year as the group fought an expensive legal battle with the landlord of its Grafton Street premises.

Accounts just filed at the Companies Office show that group operating profit fell to €637,000 last year, down from €3.8 million in 2006.

Campbell Bewley, which employs more than 1,000 people, said its Dublin-based coffee roasting and foodservice distribution operation had delivered a strong trading performance in 2007, with "robust" sales growth in all customer channels, while its Java City café operations in the US achieved a 25 per cent growth in sales.

The performance of its coffee and tea retail operation was "satisfactory", it added, but the flagship Grafton Street café had "a challenging year" in the face of lease forfeiture proceedings brought against it by its landlords, Treasury Holdings, and rent review negotiations on the property.

"Both matters are now finally behind us," chairwoman Síofra Campbell said in her statement accompanying the accounts. "We are confident that the issues adversely impacting on the 2007 financial performance have been addressed and we believe that 2008 will see strong profit growth in the business despite the challenges of the current economic environment," she said.

Group turnover in 2007 was €88.2 million, down from €94.3 million in 2006.

About €38.4 million of this came from its business in the Republic, while the UK business contributed €4.5 million and the growing US operation generated turnover of €45.3 million.