Bass under growing pressure to demerge as pub division sales fall

Speculation was mounting yesterday that Bass is set to demerge its pubs unit after the leisure company's full-year results showed a strong performance from the core hotels division contrasted with a decline in like-for-like sales at the pubs business.

Speculation was mounting yesterday that Bass is set to demerge its pubs unit after the leisure company's full-year results showed a strong performance from the core hotels division contrasted with a decline in like-for-like sales at the pubs business.

Bass, the world's second-biggest hotels group and owner of the Inter-Continental brand, reported an 18.9 per cent rise in underlying pre-tax profits to £756m. The results were boosted by a one-off gain of £1.2bn, from the earlier sale of the company's brewing business for £2.3bn to Belgium's Interbrew.

Profits at the 3,000-strong hotels unit rose 18 per cent in the year to 30 September. But the pubs side of the business suffered from the double effect of poor weather and the fuel crisis, with like-for-like sales down by 2.8 per cent in the full year and 3.7 per cent in the second half.

Mark Reed, an analyst at Teather & Greenwood, said: "What's the point of one company having such mixed results? ... We think there will be a demerger in the next couple of years." One fund manager, with a Bass holding above 2 per cent, said: "The strong hotels performance compared to the pubs side is bound to increase calls for the group to get out of pubs."

Bass has announced a strategic review of its smaller Inns division, which comprises 1,029 unbranded pubs. It is expected to sell about 900 pubs for around £700m. Asked whether the board was considering a full demerger, Tim Clarke, Bass's new chief executive, said: "We have no fixed ideological view on the issue.... If we saw an alternative way of increasing shareholder value, we would clearly act on it."

Bass shares yesterday closed up 25.5p at 694p.