May 25, 2001
Bass Reports 4% Rise in Net Profit,
Looks to Step Up Its Hotel Activities
By Paulo Prada
Staff Reporter of The Wall Street Journal
Bass PLC, citing limited impact from the U.S. economic slowdown on its hotel activities, posted a 4% rise in net profit for the six months ended April 14. But the company, which is widely expected to make a major hotel industry acquisition this year, failed to shed any new light on its plans for growth through consolidation.
The group, operator of the Holiday Inn, Intercontinental and Crowne Plaza hotel brands world-wide, said that earnings at its hotel operations -- despite a slowdown in U.S. business travel -- helped fuel an across-the-board rise in revenue for the period. Modest growth in profit from its leisure retail operations, weighed down by major renovations at some of the group's restaurants and food-oriented pubs in the U.K., coupled with strong earnings at its soft-drinks business to also boost group earnings.
But other than repeating often-stated goals to use acquisitions to boost its upscale presence in the U.S. and increase the reach of Holiday Inn in Europe, Bass gave no indication of how soon it would take steps toward those ends. The company's 810 million pounds (1.34 billion euros) acquisition in April of the 79-property Posthouse hotel chain from Compass Group PLC will help it boost Holiday Inn in the U.K., but for months Bass has been at the center of a whirlwind of rumors regarding other potential acquisitions.
Most recently, people familiar with the company's plans said last week that Bass is in talks regarding a possible bid for Wyndham International Inc. of the U.S. Though Bass has declined to comment on the matter, those people said the move would be in line with the company's strategy since many of Wyndham's hotels could be rebranded to fit the profile of Bass's upscale brands. But a bid, if made, remains at least several months away and the talks could lead to nothing, those people said.
"We are in no particular hurry since we feel we've made lots of progress to date," said Richard North, the company's finance director, citing the Posthouse purchase and the company's moves in recent years to shed brewing and some pub assets to focus more on hotels.
He added: "You never know how long these acquisitions are going to take, but we're confident there will be some real opportunities." The economic slowdown, especially, should help lower hotel valuations in the U.S. and create more attractive buying scenarios, he said.
The U.S. slowdown, Bass said, is already affecting earnings at its own hotel operations, with key business travel markets like New York, Chicago and San Francisco having weakened since last year. Nevertheless, Mr. North said, the group's operations in Europe and elsewhere around the world so far are helping shield it from the downturn. And unless the spillover hits European economies, he added, the group remains largely confident.
Despite the U.S. problems, the company said that profit at its hotel unit -- which makes up just over half its overall earnings -- helped net pretax profit for the entire group climb 4% to 337 million pounds, from 324 million pounds in the year-earlier period.
Operating profit climbed 9.6%, not counting profit at divested pubs and drinks operations during the comparable period one year ago, to 365 million pounds. Earnings per share grew 5.6% to 28.3 pence from 26.8 pence, the company said, while a dividend per share will increase by 3% to 10.4 pence per share from 10.1 pence per share.
Though analysts showed some concern about further problems from the U.S. economy, most industry observers said the figures were toward the top end of market expectations. "The big-picture numbers are good," said Mark Abramson, an analyst with Bear Stearns in London. "Considering the expenses involved with renovations and changes, the figures are slightly better than the market consensus."
Meanwhile, the market continues to wait and see how the group plans to further increase the reach of its primary hotel operations. "Bass faces two big challenges right now," said Fraser Ramzan, an analyst with Lehman Brothers in London. "They have to ride out the downturn in the U.S. and show how they are going to grow the hotels." |
