HOPES that Hilton Group could release capital from its hotels and return it to investors saw the FTSE 100 leisure group reach a seven-year high.

The shares have enjoyed a steady rally ahead of full-year results on February 24, with last month’s data from Deloitte, the consultant, which showed a pick-up in hotel revenues in London and Scandinavia — two of Hilton’s most important markets — inspiring raised forecast optimism.

However, it was speculation over the future capital base of the company that was behind yesterday’s gains.

Deutsche Bank suggested that the return of capital to investors this year from William Hill — a rival to Hilton’s Ladbrokes division — and InterContinental Hotels would increase the debate on the appropriate balance sheet structure for Hilton.

Simon Champion, analyst, said that the company was conscious of the need to maintain its credit rating. But his analysis also suggests that “substantial levels of cash” could be returned to investors as hotel earnings recover — a scenario he subscribes to — if the asset value of its hotels portfolio is realised. Without asset disposals, Mr Champion calculates that the business could take an additional £650 million of debt, equivalent to 14 per cent of its current stock market value.

With Deutsche Bank moving from “hold” to “buy” with a 350p target on the view that Hilton’s hotels are undervalued and the group overcapitalised, the shares rose 10¼p to 318¼p.

The FTSE 100 finally attained the 5,000 level at the close, up 9.6 at exactly 5,000.0, helped by a 12 per cent jump in ICI, 29p dearer at 275p, on reassuring full-year results. As has become the hallmark of recent weeks, long-standing takeover rumours were given a fresh airing with yesterday’s favourite being Gallaher, 9p ahead at 837p. Royal Bank of Scotland added 40p to £17.97 on switching out of Barclays, off ½p at 593 ½p on yesterday’s prelims.

Compass Group dipped 1p to 257¼p, despite a repeated “buy” recommendation from Dresdner Kleinwort Wasserstein, which drew encouragement from upbeat first-quarter results from US rival Aramark. The German broker noted cost pressures in the US appeared to have moderated to more manageable levels. Elsewhere, Dresdner downgraded Bunzl, up 2¾p at 476¾p, from “add” to “hold”, citing concerns over the strength of current trading.

Sage Group improved 2p to 207½p, making a 24 per cent gain since the start of October. However, Panmure Gordon thinks that the accountancy software group is fairly valued at current levels and yesterday initiated coverage with a “hold” recommendation.

• NEW YORK: Stocks rose on Wall Street on the back of the release of strong economic data. The Dow Jones industrial average closed up 85.50 points at 10,749.60.

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