Bottom Line: New mix for brewers

THE FREEZE on beer duties may look like good news for the brewers, but it deprives them of the chance to add a bit to a price rise of their own.

Bass, which yesterday announced a better-than-expected rise in annual profits, from pounds 473m to pounds 508m, recognises the challenge which, given low inflation, is likely to continue.

Since most cost-cutting avenues have been explored, brewers will have to turn to improving their product mix and the make-up of their pub estates. Fortunately for investors in Bass, the company's pubs are already among the best and it has the financial clout to continue to lead the market. But shareholders are going to have to be patient as earnings per share, excluding property gains, are set to grow just 1 per cent in 1993/4.

Bass does have the option of buying an established pub estate like Boddington. Its total pub estate is 300 shy of that allowed under the Beer Orders, so the need for sell-offs after acquisition should be less than with Scottish & Newcastle and Chef & Brewer.

Bass also has much work to do with its hotels. While the Americas and Asia-Pacific regions are fine, Europe remains a problem. And the 19 per cent currency gain on the dollar is unlikely to be repeated.

Bass shares have recently recovered from a year of underperformance, but the pressures on growth in the short term mean that is unlikely to continue. Against that, a projected 4.8 per cent yield, on City forecasts of a 4.7 per cent increase in the dividend to 20.74p, does provide some cheer.