No seasonal cheer for Gibbs:The Investment Column

It is going to be a flat Christmas for shareholders in Gibbs Mew, the Salisbury-based brewer and pub owner that shocked the market yesterday with much worse profits than expected for the six months to September and a warning on prospects for the second half. Its shares, which have underperformed the sector for two years, tumbled a dramatic 90p to 209p as brokers complained they had been kept in the dark about problems.

Those problems focused on Centric, a chain of tenanted pubs in the North- west that Gibbs acquired 18 months ago to create a captive audience for its beers, which include Bishop's Tipple and Bridgers Gold Ale. Gibbs admits that, given the chance, it would have bought pubs nearer to home but it has plainly been unable to control events so far from its home patch.

Almost one in four of the 160 tenants Gibbs inherited with the acquisition has left during the period while 39 underperforming pubs that were sold have not been replaced, knocking a hole in the division's turnover. That has meant sales have failed to match an expanded cost base. The final problem has been the cost of closing Centric's head office in Nottingham. That litany of errors led to a fall in pre-tax profits in the half year from pounds 2.52m to pounds 960,000, taking everyone by surprise, including Gibbs's own broker. Forecasts for the current year were slashed from more than pounds 5m to maybe only pounds 2.5m, giving earnings per share of 16.5p and a same- again dividend of 10p.

Gibbs Mew has plainly mismanaged its business but yesterday's share price collapse really reflects the City's deep irritation at being taken unawares. Markets dislike nothing more than unpleasant surprises.

The latest fall means the shares have lost almost all the ground they gained so spectacularly since 1992 when the acquisition of fast-growing drinks wholesaler UK-D diluted the Gibbs family stake below 50 per cent and brought the Hedderson family into key management positions. From little more than 100p in 1992, the shares reached 468p in October 1994, since when they have more than halved.

On current forecasts, still largely guesswork, the shares trade on a forward multiple of 13. High enough.