Six Continents announces plan to buy more shares

Six Continents bowed to pressure from major investors last week when it announced that it would buy back up to £1b-worth of shares by the end of the year if it had not found a sensible investment for its large cash pile.

The company, whose hotel, pub and bar empire stretches from Inter-Continental hotels to the All Bar One chain, made the announcement at its interim results.

The results themselves were mixed. The hotel division's operating profit fell 41.1% to £109m, while the restaurants, bars and pubs business increased operating profit by 8.1% to £146m. Overall the group's pre-tax profit fell 28.2% to £242m on turnover down 13.2% to £1.8b.

The group said that the fall in hotel profits, although large, was smaller than expected and was, therefore, relatively good news.

But most of the discussion after the figures were announced was about the decision to buy back shares. Six Continents, formerly known as Bass, has been under pressure to invest money ever since selling Bass Brewers to Interbrew for £2.3b two years ago. It has spent some of the money, but still has more than £1b available.

The most high-profile critic of the group has been fund manager Hermes, which has a 2.6% stake in Six Continents and has said that the £1.8b the group paid for Inter-Continental had "destroyed shareholder value".

Analysts were this week debating whether Six Continent's announcement that it would buy back shares in December, still six months away, was partly designed to put pressure on those with hotels to sell to make a deal before that date.

The share buy-back method would not return money to shareholders directly - unless they decided to sell their shares - but by leaving fewer Six Continents shares on the market its long-term effect should be to push up the price.

by David Harris