Forte turns in a mixed bag

The recovery story has been in place at Forte for some time so yesterday's trading update from the hotels group was a worryingly mixed bag.

The message from the hotels division was good, but was undermined by disappointing noises from the roadside Little Chef and Welcome Break restaurants.

Good weather boosts the hotel trade, but discourages drivers from getting in the car at all or makes them press on to their destination without a tea break.

Star performer continues to be the London hotels, where the market has been extremely buoyant due to a combination of a good year for tourism and a shortage of space.

Forte's concentration on room rates rather than occupancy continues, with prices up 13 per cent and occupancy static.

Trading at the provincial hotels has been lagging but there are signs of improvement with room rates 4 per cent ahead and occupancy marginally up. The international hotels have also enjoyed a modest improvement with strong performances in the US offset by difficult trading conditions in Paris. The Meridien hotels acquired last November have turned to profit.

Forte's once strained cash position is also improving, with pounds 300m of disposals in the first half. The group yesterday announced the disposal of two hotels in Spain and two in Ireland as well as four UK pubs to Greenalls for a total of pounds 14m.

The sales follow the announcement of a pounds 165m deal to sell the Harvester chain to Bass and the pounds 145m received from the remaining shareholding in Gardner Merchant. The White Hart chain of 70 hotels should also be off Forte's books by Christmas.

BZW has left its full-year forecast unchanged at pounds 182m,putting the shares on a forward rating of nearly 14. Fully valued.

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