Market Report: Breweries sector loses froth ahead of its results season

Beer shares weakened as doubts reappeared about the profits likely to be rolled out in the brewery reporting season which starts today with Whitbread producing year's results.

The breweries and pubs sector suffered one of the day's worst falls with the stock market worrying about the huge investment the industry is ploughing into new pubs and the continuing drift in beer production.

Comments last month from Greenalls, the hotels and pubs chain, and the Wolverhampton & Dudley Breweries have tended to increase uncertainty, which has been evident for much of the year as beerage shares have underperformed the rest of the market.

Whitbread, off 15p to 790p, should offer some reassurance. Year's figures could nudge pounds 200m against pounds 178m. Yet Whitbread has devoted much of its energies towards developing older-style pub restaurants, such as Beefeater, and stand-alone restaurants, Cafe Rouge and TGI Friday, as well as the Pizza Hut chain.

Many other brewers have splashed out on trendy City and town centre outlets; an area which is becoming increasingly crowded and capital intensive. The big debate is whether the brewers and pub companies have reached the stage where continuing capital outlay in developing new outlets and keeping existing ones up to scratch is becoming difficult to justify.

The problems at Greenalls are entirely due to difficulties in its pubs estate; Wolves put more than 100 pubs up for sale, complaining about the tough trading climate.

Bass, little changed at 838p, and Scottish & Newcastle, off 26p at 678p, are due to report in the next two months.

Allied Domecq, which comes under the alcoholic beverages classification, reports year's figures next week. It no longer brews, concentrating on retailing and spirits. Year's profits, believe NatWest Securities, will be up a modest 4 per cent to pounds 596m.

The rest of the stock market had another uneventful session with Footsie ending 9 points down at 4,897.4. Interest rate worries clouded trading. Domestic rates are expected to be unchanged after this week's Monetary Policy Committee meeting but anxious eyes are being cast at the US and Far East.

Next recovered from Monday's shake-out, gaining 47p to 734p as Morgan Stanley suggested a switch out of Marks & Spencer, down 10p at 600p, following results.

Takeover rumours continued around Norwich Union, up 6p at 351p, and an SBC Warburg push lifted Glaxo Wellcome 29p to 1,309p. Sun Life & Provincial, up 17p at 282p, was encouraged by NatWest moving from sell to hold.

Hong Kong's overnight weakness put the likes of HSBC, off 59p at 1,493p back on the treadmill. Zeneca, 40p lower at 1,855p, was hit by cautious comments, thought to be from ABN Amro Hoare Govett. Thames Water ran into profit taking following its results, falling 37p to 873p.

Senior Engineering, with analysts in the US, shaded to 163.5p. Panmure Gordon has switched from hold to buy. It believes the shares could be worth 219p. Chemical group Courtaulds rose 2p from a year's low to 277p after stockbroker Sutherlands declared: "Negativism is overdone."

Tullow Oil, deeply involved in Pakistan, jumped 9.5p to 123p as takeover speculation returned. BG has long been rumoured to be interested. Tullow produced an upbeat drilling report last week.

Perkins Foods was another attracting attention. The shares have edged ahead, gaining a further 2p to a year's peak of 102p. The chilled and frozen food group has occasionally attracted bid speculation. Profits this year are expected to be around pounds 28m against pounds 23.5m.

Wellman, an engineer, rose 6.75p to 37p after admitting it was in talks which could lead to a bid and stockbroker Charles Stanley, paying up to pounds 2.5m for rival Shaw & Co, jumped 29p to 171.5p. Interim profits sharply higher at pounds 1.7m helped.

Holmes Place, a keep fit operation, made a muscular debut, ending at 170p against a 128p placing.

Waterfall, the snooker club chain, ticked up 6.5p to 73p. The shares have climbed 15.5p since European Leisure acquired an 18.5 per cent interest last week.