Imperial warns on `punitive' duty rises

Imperial Tobacco, Britain's second-biggest cigarette group, warned yesterday that recent "punitive" duty increases would continue to hit the UK market and boost smuggling.

Gareth Davis, chief executive of the group, said already 60 per cent of UK demand for hand-rolling tobacco was supplied through re-exports from the Continent. Sales by Imperial, recently demerged as an independent company from the Hanson conglomerate, along with market leaders Gallaher to European countries like Belgium were immediately being turned round and returned to the UK because of the big tax differential involved, he said. He claimed the third-largest brand in the UK was being sold illegally as the Dutch owners did not own the brand name.

Mr Davis warned that one of the more serious effects of the decision by the Chancellor, Kenneth Clarke, to put another 15p duty on a packet of cigarettes would be to give further encouragement to this trade. "Currently smuggling, principally hand-rolling tobacco, is costing the Exchequer pounds 560m a year," he said.

Meanwhile, he forecast that the home market for cigarettes would face another 2 to 2.5 per cent decline, similar to last year, as a result of the duty increases and prompt smokers to "down trade" to cheaper brands.

Despite the adverse background, Imperial reported a 5.2 per cent increase in pre-tax profits to pounds 366m in the year to September, its first as an independent entity since being acquired by Hanson 10 years ago.

The profits, which were struck on sales raised 7 per cent to pounds 3.82bn, were described by Mr Davis as "a good achievement in the context of the total market". The shares have been pulled in different directions by bid speculation on the one hand and a lawsuit brought by lung cancer sufferers on the other since they floated at around 375p in October. Yesterday, they gained 4.5p to 373.5p, although the company was silent on any bid approaches.

Imperial said market share rose from 37.1 to 38.2 per cent in the period, just behind Gallaher on around 39 per cent. Mr Davis said it was the sixth successive year that they had grown profits and market share.

The group now claims three of Britain's top five selling brands in Lambert & Butler, Regal and Superkings. Lambert & Butler had particularly benefited from the move down market by smokers, Mr Davis said, and now accounted for over 11 per cent of the market.

Profits from overseas, an area earmarked for expansion, rose 55 per cent to pounds 70m and now represented 19 per cent of the total, just 5 percentage points below the company's target level for the end of the decade. Volumes grew in both Europe and the Far East.

Mr Davis shrugged off the likely effects of the impending flotation of Gallaher and reiterated his confidence that the company had good defences against the ground-breaking legal action brought by 12 cancer sufferers last month.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: DBA Developer - SQL Server

£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Customer Service Administrator

£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

Recruitment Genius: Dialler Administrator

£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

Ashdown Group: Contracts Manager - City of London

£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen