Second half puts the froth on Bass: Stock market toasts brewer's pounds 508m result after improvements across the board

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The Independent Online
BASS, Britain's biggest brewer, yesterday produced results much higher than expected, with an increase in annual taxable profits from pounds 473m to pounds 508m.

The company, which is also the largest hotel operator in the world, with the Holiday Inn chain, saw its shares surge 34p to 537p.

Stockbroking analysts, who had predicted profits of less than pounds 500m for the year ended 30 September, upgraded forecasts for this year from pounds 525m to pounds 535m inclusive of an extra week's trading.

Ian Prosser, chairman and chief executive, said: 'Bass has shown good progress across all its businesses, particularly in the second half of the year. In the second half, operating profits have moved ahead by nearly 6 per cent and there has been a cash inflow of pounds 230m.'

Earnings per share improved by 1p to 36.3p. The dividend total is increased by 4.8 per cent to 19.8p through a 14.35p final payment.

Bass increased its share of the UK beer market by half a percentage point to 23 per cent, amid 'intense price competition'.

The brewers have been discounting heavily on wholesale beer prices - by as much as pounds 100 a barrel - to recoup the trade lost from the 11,000 pubs they had to sell to comply with the Beer Orders.

Despite the overall profits advance last year, Bass was cautious about short-term growth prospects. 'It appears unlikely that the economic environment will offer much assistance to our trading in the first half of the year,' Mr Prosser said, adding: 'It will be tough to get much through in the way of price increases on beer.'

Analysts said yesterday that the Government's decision not to increase excise duty made it almost impossible for the brewers to raise bar prices without incurring a backlash from consumers.

While Mr Prosser welcomed the Government's stance, he said: 'We will continue to lobby the Government to mitigate the damage which is being done to the industry by the unfair discrimination compared with the rest of the European Union. This can only be achieved by an actual reduction in the level of duty.'

In the year to September, Bass increased volume beer sales by 0.9 per cent to 8.38 million barrels. The Carling brand remained number one in the on and off-licence trades.

Operating profits from Bass Brewers fell by 8.2 per cent to pounds 156m, reflecting a pounds 6m reorganisation charge, a pounds 6m increase in bad debt provisions and a pounds 6m cost from the change in the way excise duty is levied. The excise position, which has forced brewers to reduce alcoholic strengths on dozens of beers, will cost Bass another pounds 12m this year.

In retailing, Bass Taverns' profits dipped 4.2 per cent to pounds 205m but the subsidiary operated with 521 fewer pubs, mainly because of the Beer Orders.

Favourable currency movements, particularly in the dollar, enabled the Holiday Inn hotel business to report a 15.3 per cent increase to pounds 128m. In dollar terms, profits dipped by 2.4 per cent to dollars 195.4m.

Hotels in the Americas experienced strong profits growth of 7.6 per cent in dollar terms to dollars 174m, and Asia-Pacific operations advanced 10.2 per cent to dollars 6.5m. Europe and the Middle East slumped 55.6 per cent to dollars 14.3m.

Britvic soft drinks saw profits fall by 14.6 per cent to pounds 35m. Bass declined to comment on recent speculation that Britvic was for sale.

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