The Week In Review: US lawsuit casts long shadow over cigarette industry

Shares in British American Tobacco, the cigarette manufacturer behind the Pall Mall, Lucky Strike and Dunhill brands, have lit up investors' portfolios since the turn of the millennium.

Shares in British American Tobacco, the cigarette manufacturer behind the Pall Mall, Lucky Strike and Dunhill brands, have lit up investors' portfolios since the turn of the millennium. If you bought shares then, you have made a capital gain of 132 per cent and harvested another 42 per cent in dividends. Not bad for an industry in terminal decline.

Because its customers are all addicted, there is a predictable amount of cash coming in to fund those chunky dividends, plus vital acquisitions. These deals are about expansion in the Far East or Africa, and about cost savings closer to home. The question is always whether these can offset the financial pain caused as the developed world slowly kicks the smoking habit. So far yes. Strip out the effects of sterling's strength, and operating profit growth this year is 7 per cent.

Trading in Canada is the latest nightmare spot: a jump in excise duty has pushed people to lower-cost cigarette brands. Russia, though, is a growth area, as the locals trade up to posh Western brands.

BAT's newly merged US operations, in which it keeps a 42 per cent stake, are subject to the Justice Department's $280bn (£153bn) lawsuit against the industry, the darkest cloud hanging over BAT. But the 5.2 per cent dividend yield should help you sleep. Hold.

FIRST CHOICE HOLIDAYS

First Choice Holidays should be the first choice for investors looking to put a bit of money into the leisure sector. The company has flown through the turbulence in global travel markets since the advent of the terrorist threat, and profits are climbing steeply again. The pilot, chief executive Peter Long, set a course that has taken First Choice away from dependence on the traditional sun, sea and sangria family holiday and into more niche areas. It has increased its offering to long-haul destinations, pushed into specialist holidays such as cruises and established a reputation in adventure holidays.

BRAEMAR SEASCOPE

Braemar is a shipping broker, responsible for arranging cargo and container ships for customers who need to haul raw materials and manufactured goods around the world. Despite stock market fears that a rising oil price could tip the economy back into the doldrums, trading across a wide range of industries is buoyant. Braemar said that demand for ships was still so high that freight rates in the crude oil and bulk freight markets were rising again, and more shipping firms were buying additional vessels. Keep buying.

ALTERIAN

Disappointing figures from Alterian, the technology company whose software helps marketing departments come up with better customer offers. The BBC, Vodafone and Royal & SunAlliance are among the users of its products, but sales have been shy of forecasts. Existing shareholders should look through the new uncertainty. The company has an impressive product which is getting a foothold in the US market now, too. Hold.

ST JAMES'S PLACE CAPITAL

With a new Government cap on the size of a pension pot, the rich are going to need to take more advice on how to best vest their retirement savings. And all the while, recovering equity markets are restoring confidence in saving. St James's Place Capital, which provides advice and financial products for the wealthy, looks in good shape to survive the wider industry shake-up. The shares are a solid play for the longer-term investor. Buy.

EXEL

Exel is in the business of supply chain management, by which it means making sure that customers such as Marks & Spencer get supplied with all the goods they need at the time they want them - transporting, warehousing and tracking the produce on the customer's behalf. It is a business crucially dependent on global trade, which is strong, although the company has struggled to pass on the rising cost of fuel to its customers. The shares have a dividend yield of 3.7 per cent, suggesting they are fairly priced.

HITACHI CAPITAL

Hitachi Capital has been making the most out of debt-crazy Britain over the past two years, luring in ever more consumers with its "buy now, pay later" deals, which it provides for retailers such as DFS Furniture. There must be an end to the debt boom, but Hitachi believes it can continue its stellar growth rate. There are hundreds of retail industries it can break into, from caravans to health care to home improvement. Buy.

GLAXOSMITHKLINE

We have nearly crossed the desert, says Jean-Pierre Garnier. The chief executive of GlaxoSmithKline, the UK's biggest drug maker, means that a period with few new drug launches is about to come to an end. Profits have been withered by the collapse of sales of two antidepressants and an antibiotic, all of which lost patent protection within 18 months. The next generation of drugs to replace them failed to arrive in time. But there are now signs of green in the middle-distance.

In particular, a vaccine against the viruses that cause most cervical cancers, which was previously expected to go before US regulators for approval in 2008, is now going to be ready in 2006. Further out, there are potential blockbuster drugs for rhinitis and other cancers. The downside, after years of underperformance by GSK shares, is limited, and the stock yields a 3.6 per cent dividend. Buy.

AMVESCAP

Amvescap's customers are deserting. The fund management group is finding it very difficult to reverse outflows of money from its US funds. Don't let it blame the phenomenon entirely on its reputation-trashing run in with Eliot Spitzer, the New York state attorney-general over the market timing abuse scandal. Amvescap's fund managers have simply not been as good at generating returns for their clients as most rivals. Investors who have followed our poor advice to buy over the past year should hold on to see whether the business can be turned around, and in case of a bid. Outsiders should stay on the outside for a while yet.

Will advertisers skip ITV?

While ITV has been having a jolly old time thanks to the regulators, who continue to bestow huge benefits to the commercial broadcaster, a huge pitfall lurks on the horizon.

The danger is the growth of a device called a Personal Video Recorder or PVR. ITV is funded by advertising. A PVR allows viewers to fast forward the ads altogether. So with fewer eyeballs looking at the latest soap powder or margarine promotion, surely advertisers will start to look for other ways to sell their messages to consumers? Sky has aggressive targets to push its PVRs, which it aims to have in 2.5 million homes by 2010.

Investors are at last starting to become worried about the impact of PVRs, but they are far from being the only storm cloud on the horizon for ITV. The long-term trends were going against the broadcaster anyway. ITV has been losing audiences at a pretty alarming rate for the last 20 years as new terrestrial broadcasters (Channel 4, more recently Five) have come on the scene and multi-channel television arrived from cable, satellite and now digital terrestrial.

ITV will continue to grow profits sharply over the next few years, from a short-term ad recovery and the much easier regulatory environment it has skillfully negotiated. There will also be disposals of non-core businesses that might trigger returns of cash to shareholders.

The big picture, though, is that revenue growth will be much harder. Given the accumulating negatives, long-term investors should avoid putting ITV into their share portfolios.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
news

Emergency call 'started off dumb, but got pretty serious'

Sport
Erik Lamela celebrates his goal
football

Argentinian scored 'rabona' wonder goal for Tottenham in Europa League – see it here

News
The cartoon produced by Bruce MacKinnon for the Halifax Chronicle-Herald on Thursday, showing the bronze soldiers of the war memorial in Ottawa welcoming Corporal Cirillo into their midst
news
News
peopleFox presenter gives her less than favourable view of women in politics
PROMOTED VIDEO
Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into disastrous conflicts
News
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
Voices
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
News
i100
Arts and Entertainment
Taylor Swift performs at the 2014 iHeart Radio Music Festival
musicReview: 1989's songs attempt to encapsulate dramatic emotional change in a few striking lines
News
Mario Balotelli has been accused of 'threateningly' telling a woman to stop photographing his Ferrari
peoplePolice investigate claim Balotelli acted 'threateningly' towards a woman photographing his Ferrari
Arts and Entertainment
Paul Anderson plays Arthur Shelby in Peaky Blinders series two
tvReview: Arthur Shelby Jr seems to be losing his mind as his younger brother lets him run riot in London
Voices
Don’t try this at home: DIY has now fallen out of favour
voicesNick Harding, who never did know his awl from his elbow, is glad to see the back of it
Arts and Entertainment
Miranda Hart has called time on her award-winning BBC sitcom, Miranda
tv
Sport
Phil Jones (left) attempts to stop the progress of West Bromwich Albion’s James Morrison on Monday
Chelsea test can be the making of Jones and Rojo, writes Paul Scholes
Arts and Entertainment
Saw point: Bradley Cooper and Jennifer Lawrence in ‘Serena’
filmReview: Serena is a strangely dour and downbeat affair
Life and Style
The Zinger Double Down King, which is a bun-less burger released in Korea
food + drinkKFC unveils breadless meat beast
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    COO / Chief Operating Officer

    Competitive (DOE): Guru Careers: A COO / Chief Operating Officer is needed to ...

    SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

    £350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

    Chief Financial Officer

    120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker