Beer trade crisis costs 400 more jobs at Bass: Price wars and shrinking market squeeze profits

BASS, the UK's largest brewer, is to shed around 400 more jobs in its brewing operations this summer and reduce capital investment as fierce price competition and a declining market continue to squeeze beer profits.

A 7 per cent fall in brewing profits to pounds 68m held back Bass in the six months to 9 April, although the company reported a better-than-expected 6 per cent increase in interim pre-tax profits to pounds 242m.

Profits growth was led by Bass Taverns, the group's managed pub estate, which advanced by 6 per cent to pounds 104m or by an underlying 13 per cent after adjusting for pub disposals.

Holiday Inns showed a strong recovery, lifting operating profits by 22 per cent to pounds 61m, but Bass Leisure, encompassing Gala bingo and Coral bookmakers, increased profits by 10.5 per cent to pounds 42m, mainly because of a one-off pounds 5m dividend from Satellite Information Services.

Ian Prosser, chairman and chief executive, said he expected further progress in pub retailing and hotels in the second half but profit growth in the leisure business would be more difficult to achieve.

'In our brewing business I approach the second half with a degree of caution given the structural changes in the industry. These are exacerbated by duty-paid imports coming across the Channel and the need for further revenue investment to remain the lowest-cost producer in the UK.'

The half-year dividend was increased by 21.1 per cent to 6.6p but the company explained that this represented a rebalancing of the interim and final dividend payments and did not reflect any view of the payout for the year. However, a real increase in annual dividend remained the board's policy.

Since the Government imposed reductions in the tie between brewers and publicans in 1991 Bass has sold 3,000 pubs. Over five years its brewery workforce has been cut from 9,000 to less than 6,500 as another 350 jobs went in the latest six months with the closure of the group's Hope Brewery and two stocking depots.

Mr Prosser said restructuring charges, which were pounds 6m in the first half - against pounds 5m last time - would be higher in the second half of the year, implying a greater number of job losses than in the first six months.

Brewing profits were hit by a pounds 9m charge for changes in the method of calculating duty and pounds 1m costs of overseas investment. Pressure on margins from the wholesale beer price war and a shift to less profitable take-home trade were partly offset by a pounds 10m cut in bad debt charges to pounds 9m.

Bass claimed to be winning in the tough beer market, holding volume almost intact against a 2 per cent industry decline and lifting share by 0.3 points to 23.3 per cent.