Profits jump at Imperial Tobacco

Imperial Tobacco has reported a better-than-expected leap in profits, driven by last year's purchase of the German cigarette maker Reemtsma.

Pre-tax profits excluding one-off items for the six months to the end of March jumped 40% to £377m ($605m).

The tobacco group - whose brands include Lambert & Butler and Embassy cigarettes - said it was making "significant progress" in integrating Reemtsma's operations.

It said the process had delivered £45m of savings so far, and it remained on schedule to meet its overall targets of £140m of savings this year and £170m in 2004.

"It is now nearly a year since we completed the Reemtsma deal and the rationale for the acquisition is being clearly demonstrated," said Imperial Tobacco's chief executive Gareth Davis.

Drawing on strength

Last year's acquisition of Reemtsma added the West and Davidoff brand to Imperial's portfolio.

Mr Davis said the deal had made Imperial a stronger company, and added "the combination of our improved international reach, enhanced product portfolio and strong management, provides an excellent platform for continued profitable growth".

Turnover jumped to £5.3bn from £3.1bn in the same period last year, while operating profit rose to £401m from £310m.

Although Imperial saw its UK market share rise to 43.8% the total market size fell from 58 billion cigarette sales in July last year to current levels of 54 billion.

The company said this appeared to be due to changes in the number of cigarettes that travellers are allowed to bring back into the UK.

UK operating profits fell to £177m from £188m last year, which was partly due to an increase in spending on marketing ahead of the ban on tobacco advertising.

In Germany, declining sales from some traditional brands was offset by growth from the Davidoff and West brands and Imperial's market share stabilised at 20%.