Gallaher on track for second half

After a strong first half, Gallaher says its on track for growth

UK tobacco firm Gallaher Group has posted a rise in profits, saying it is on course to meet its target of up to 10% earnings growth for the year.

The company, whose cigarette brands include Benson and Hedges and Silk Cut, reported pre-tax profits of £241m ($378.7m) in the first six months of the year.

The results beat analyst forecasts of profits of £227-237m.

Chief Executive Nigel Northridge said: "We are very confident that we will meet our expectations to achieve high single-figure earnings growth for the full year."

He added Gallaher had gained market share in key European Union countries such as France, Spain and Italy and in the former Soviet Union.

All change

He also said the firm had agreed a joint licence deal with Shanghai Tobacco for China and Russia, which would provide new opportunities for growth.

But, the firm did add that the marginal improvement in UK cigarette market share came as turnover at its UK operations declined 6.3% to £1.7m.

Gallaher blamed the fall mainly on lower cigarette sales and on smokers downtrading to cheaper cigarettes.

The firm also announced that the £38m bill for restructuring during the first half had actually seen bottom line profits dip 14% to £162m.

Under the shake-up plans announced in May the firm is to axe 430 jobs - mainly affecting its activities in Ireland and Northern Ireland.

But Gallaher said the move was expected to save at least £15m.

At 0906GMT Gallaher shares stood 3p higher at 573p.