The Investment Column: Profits rise at Bass may slow roller-coaster ride

BASS, the brewing, pubs and hotels group, delivered better-than- expected half-year profit figures yesterday but refused to be drawn on any possible plans to muscle in on Whitbread's ambition to buy Allied Domecq's pub estate.

"We are monitoring the situation," said Sir Ian Prosser, the Bass chairman. However, he pointed out that he considers "brand strength as important as total pub numbers", and said its pub names such as All Bar One, O'Neill's and Harvesters, should be able to compete effectively.

The last six months have been a roller-coaster ride for shareholders. The group issued a profits warning last autumn. A cautious AGM statement in January further weakened confidence. But Bass shares rose 44p to 943p yesterday as the group produced half-year profits well ahead of many analysts' expectations. Operating profits on continuing operations rose by 17 per cent to pounds 352m although the pre-tax figure almost halved due to the absence of the previous year's exceptional gains.

Analysts are warming to the more global nature of Bass's business which, through the Inter-Continental Hotels business acquired last year, has worldwide exposure to improving trends in spending.

A third of Bass' profits come from overseas and the strategy is to build the hotels business while concentrating on its top beer and pub brands at home. Inter-Continental continues to look good with profits up by 43 per cent, helped by $30m of cost savings. In pubs, like-for-like sales fell by 2.5 per cent, but Bass' formats, such as All Bar One, continued to perform well and will receive investment.

Bass' main brewing headache is its investment in Czechoslovakia where the Staropraman brewery is being hit by an over-supplied market. Still, overall the second half should be better. There should also be scope for cost savings, which will help drive growth in a flat market.

On Merrill Lynch's upgraded full-year forecast of pounds 661m the shares trade on a forward multiple of 15. But after a near 10 per cent rise since the start of the year, the shares are a solid hold in a difficult sector.

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