In a trading statement on the first 48 weeks of the year, the maker of Carling and Grolsch lager said that its pub and drinks businesses had been hit by wet weather, the UK economic slowdown and two product recalls. Sir Ian Prosser, chairman, said: "We have experienced difficult trading conditions over the summer due to the poor weather, a general softening in consumer demand and other external economic and social factors."
The announcement prompted City analysts to slash their forecasts for 1998 profits by nearly pounds 50m to around pounds 650m, compared with pounds 477m last year. The downgrades triggered a wave of selling, which left Bass shares 97p or 11.8 per cent lower, at 725p.
Bass said its 2,600-strong pubs businesses had suffered from a slowdown in demand. Worst hit were houses in the Midlands and the North, where the combined effect of the manufacturing recession and bad weather caused a loss of sales and a fall in margins. The slump in the North offset a good performance by the upmarket restaurants and slowed down profits growth to 4 per cent from 13.6 per cent in the first half.
Profits in the brewing division were dealt a pounds 12m blow by the recall of millions of cans of lager and bitter in the middle of the World Cup after a contamination scare at one of its plants.
On the export front, the strength of sterling and lower sales of the Hooch alcopop wiped pounds 11m from the profits of the international division. In soft drinks, unit sales of Britvic juice were hit by the wet summer weather and by a product recall which cost pounds 3m.
One City analyst said the warning contained "three surprises: the problems with the pub business, the extent of the impact of the product recall and the problems with Britvic. Pubs were the biggest surprise, especially when you consider all the capital Bass has spent on the division."
Richard North, Bass finance director, said most of the negative items were one-off and added that the problems with the pub business vindicated the company's decision to sell 1,750 houses earlier this year.