Bass profits rise brings back the fizz

Investment: Shift of focus in hotels and pubs pushes earnings up 75% to pounds 834m
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The Independent Online
BASS PROVIDED the beleaguered brewing and leisure sector with some welcome relief yesterday when it reported a 35 per cent rise in profits at its new Inter-continental Hotels division. The group also said there had been some recovery in its pubs and brewing business following a poor summer.

Including pounds 173m of exceptional items, pre-tax profits in the full year increased from pounds 477m to pounds 834m. Bass said that hotel demand in the UK was softening but remained strong in the US and continental Europe.

Like-for-like sales in its pubs and beer business are showing year-on- year declines in current trading, but the performance of its key managed pub brands such as O'Neill's and All Bar One is encouraging, the company said.

It has been a year of major corporate activity for Bass, during which it acquired Inter-continental Hotels for pounds 1.8bn in March and sold businesses worth pounds 1.3bn, including Gala bingo, its betting business and 300 smaller, managed pubs.

Under Sir Ian Prosser, the group's chairman, Bass is gradually shifting the focus of the business. First, it is becoming more international, with 30 per cent of profits now coming from outside the UK following the Inter- continental Hotels deal.

Second, the growing hotels business now accounts for 34 per cent of operating profit compared to 23 per cent last year, and other acquisitions are planned in distressed markets in Asia.

Third, the focus of the pub estate is being shifted towards branded, managed pubs in the more resilient South-east of England.

Bass's 655 branded pubs, which include Bar Coast and It's a Scream, account for a quarter of the group's 2,650-strong pub estate but 40 per cent of its sales. They take an average of pounds 16,000 a week, which is double the portfolio's average. The top brands continue to out-perform, with underlying sales rising by 4.4 per cent in the Harvester outlets and 3.9 per cent in All Bar One, compared to the 2.7 per cent rise across the group's pub estate.

The 108 O'Neill's pubs are being shifted away from the Irish theme as that trend starts to wane. The pubs are now being changed into "party pubs", with a further eight of these planned.

The new favourite is the Edwards bars, which change character through the day from coffee and croissant cafe bar in the early evening through to loud pre-nightclub pub by 10pm. So far there are 30 Edwards outlets. Bass has earmarked a possible pounds 250m to invest in its branded estate this year, with the Edwards brand likely to take a considerable chunk.

The shares, which rose 17p to 830p yesterday, are well off their 1,175p peak in the spring but have enjoyed a good bounce since their 635p low a month or so ago.

Analysts estimate that, strong though the Bass brands are, the fragility of the UK economy is likely to mean that the shares will tread water for now.