London focus could help Thistle shares

City analysts believe Thistle's 20% leap in interim pre-tax profits will help boost its ailing share price, which dropped below its flotation price after takeover talks were terminated.

The company's difficulty in converting increased sales into profits, which led to the ousting of chief executive Robert Peel, was reversed in the six months to 12 July when profits climbed to £44.5m on sales up 5.4% to £168m (£96.9m from London properties).

Analysts are saying that the recent sale of 30 provincial hotels to Peel Hotels has improved the quality of Thistle's earnings with the shift to the more resilient London market which now accounts for 75% of profits (against 60-65% before).

Thistle intends to keep shareholders happy through a return of capital of £185m (30p per share) in two blocks during November and April. It will also rename most of its hotels "Thistle" followed by an indication of where the hotel is situated. The new names will be phased in over the next three years, starting with the Bayswater Hospitality Inn, which becomes the Thistle Kensington Gardens in October.

The change will affect 44 Thistle and four Mount Charlotte properties, with another 10 Mount Charlottes to be evaluated for conversion into four-star Thistles.

During the half-year average room rates climbed by 10% but overall occupancy remained static at 65.4%. A 2% increase in the regions to 57.4% was offset by a 2.4% drop to 73.6% in London as the strong pound hit some European business and Far Eastern business declined.

London hotels boosted gross profits by 12% to £46.7m, while regional properties improved by 15% to £24.6m.

By Angela Frewin