Mitchells & Butlers, the owner of All Bar One and Harvester pubs, which is in talks with the property tycoon Robert Tchenguiz over a £4 billion joint property venture, today revealed that sales were still growing despite rising interest rates and an imminent smoking ban in England.

Its shares added another 12.5p to 890p, a record for the company since it demerged from SixContinents in early 2003.

First-half operating profit grew 13 per cent to £161 million, although profit before exceptionals fell 2.2 per cent to £89 million.

Tim Clarke, the chief executive, said growing spending on meals and soft drinks had more than offset continuing falls in beer sales.

This trend was excacerbated in Scotland, where a smoking ban has been in force for over a year.

He said: "Large, high-quality pubs, with the ability to serve good meals at high volumes with attractive prices, can benefit from the ban." Like-for-like sales in Scotland were up 1.8 per cent since the ban, with food up 7.4 per cent and drinks down 0.4 per cent.

In Wales, where a ban has been in force for only seven weeks, sales growth had slowed modestly to 2.5 per cent.

In England, a fifth of M&B's pubs were already non-smoking and the adverse effect had been very limited, Mr Clarke said.

Overall like-for-like sales in the half year to May 12 were up 3.2 per cent and Mr Clarke said the company was well placed to "withstand the impact of successive rises in interest rates and inflationary pressures on consumer spending".

He said the success of central London All Bar One outlets and other city centre restaurants was offsetting a slowdown in the company's more "mid-market" pub-restaurants.

Mr Clarke stressed again that there could be no certainty that M&B could reach a deal with Mr Tchenguiz, who has built a 15 per cent stake and threatened a hostile takeover should he not get his way. The company revealed it was in talks with Mr Tchenguiz's R20 vehicle at the weekend.

Mr Clarke said the company's estate could bear paying annual rent of £270 million and that Mr Tchenguiz had "emerged as the most competitive bidder at this time".

He ruled out converting the property into a tax-efficient real estate investment trust (Reit) since the market in such vehicles "is as yet insufficiently developed to provide shareholders with certainty of material and sustainable value".

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