The company, which unveiled a raft of senior management changes, said profits were also bolstered as it captured a larger slice of national sales and trimmed costs.
The maker of Benson & Hedges and Silk Cut added that although the number of UK smokers was continuing to grow, a flood of smuggled goods was cutting legitimate cigarette sales by 8 per cent a year.
"A strong performance was assisted by the change in the timing of the duty increase announced in March 1999, when the implementation was effective immediately compared with December 1998," it said. "The first half benefited from additional profits arising from the sale of some stock on which duty had been paid at rates prior to the December 1998 duty increase."
In previous years, duty increases on tobacco products announced in the spring Budget were implemented later in the year. The most recent pair of duty rises totalled about 40p a pack. Gallaher delayed its own 6p-a- pack price rise to July from April, further fuelling first-half sales.
In the six months to June, pre-tax profit was pounds 184.7m (pounds 128.2m), on turnover of pounds 2.19bn (pounds 1.94bn). Earnings per share were 18.7p (12.6p). An interim dividend of 7.25p (6.8p) was declared. Analysts said that figures were in line with expectations, and saw a slower second half. Full-year pre- tax profits were forecast to rise 5 per cent to pounds 334m. Gallaher shares slipped 11.5p to 433.5p yesterday.
From January, Nigel Northridge, currently sales and marketing director, will replace Peter Wilson as chief executive. Mr Wilson will retain the chairmanship. The finance director, Philip Burchell, will resign his post at the end of the year and be replaced by Mark Rolfe, currently financial controller. Nigel Simon, currently international director, will be appointed business development director, with effect from January.
Gallaher's overseas operations, which account for about 13 per cent of total turnover, turned in a subdued performance as economic turmoil across Russia and neighbouring states sapped sales.
Gallaher reported operating profits of pounds 32.5m (pounds 31.7m) on its international businesses on turnover of pounds 298m (pounds 287.3m).
The company said that according to independent research, 23.1 per cent of UK adults now smoked, up from 22.2 per cent in the first half last year. Sales bottomed at 21.9 per cent in the first half of 1997.
"Government policy [to reduce smoking] is not working," Mr Wilson said. "Incidence is increasing."
Gallaher executives are preparing written evidence for the House of Commons Health Committee's investigation into the risks of smoking, set to be delivered this month. Oral hearings are scheduled for November.Reuse content