Bass's bigger splash proves a winner

It has taken a long time for the City to come round to Sir Ian Prosser's view of the world, but finally he seems to be winning over the sceptics. Over the past year, Bass shares have outperformed the rest of the stock market by around a tenth; support for the stock is growing by leaps and bounds. It was not always thus. When it splashed out more than pounds 1bn on the Holiday Inn hotel chain in 1989, there were cries of horror. Why on earth was a brewer expanding into hotels, was the question on everyone's lips.

Bass's approach to the beer orders - to sell most of its tied estate as rapidly as possible - drew an equally hostile response. Both strategies are in the process of being vindicated. Holiday Inn is producing all the right numbers while the company's swift and robust response to the beer orders has succeeded in wrong-footing most competitors.

There is still some residual doubt about whether such a powerful brewer should be expanding into the leisure industry as aggressively as Bass is, but even this is beginning to go. The main strands of the leisure market are rapidly converging. Sir Ian's vision of a company that tries to tap profitably into all aspects of discretionary spending and personal leisure time, be that pubs, bingo halls, betting shops or fitness centres, must be the right one. Bass is proving to be a master of extracting the last penny of loose change from customers' pockets. Selective bolt-on acquisitions - such as the recent purchase of the Harvester pub chain - have enriched the formula.

The ability to throw pounds 10m of capital spending a week at existing businesses underlines the company's financial strength. The result of the high capital spending in the year to 30 September was an 11.3 per cent leap in taxable profits to pounds 599m, despite the effects of the lottery. Analysts have pencilled in pounds 650m for next year. With gearing at just 23 per cent, Bass plainly has scope for a big acquisition. Anything is possible, but the current rumour, Ladbroke, seems unlikely. Bass simply does not need hotel property assets like Ladbroke's. Much more logical would be Carlsberg Tetley, but the rationalisation of the beer industry involved might be too much even for this Government's relaxed approach to mergers policy.

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