Investment: Gallaher's profits run out of puff
Wednesday 03 March 1999
Underlying profits edged up 4.2 per cent to pounds 390m, but higher interest payments cut pre-tax figures from pounds 337m to pounds 318m.
Peter Wilson, chairman and chief executive, said the number of smokers in the UK had risen by half a million due to cheap imports, but the "legitimate" market had fallen by 8 per cent. Bootleg cigarettes led to a 4.7 per cent fall in Gallaher's cigarette sales in the UK, which account for 85 per cent of total sales. Its share of the market slipped from 39.6 per cent to 36 per cent.
This is the Gallaher conundrum; it is heavily reliant on the UK but this market is shrinking. It is trying to expand its international operations, but those too seem to have run out of puff. Germany is difficult, Russian profits have evaporated and France is highly competitive.
Management is right to avoid spreading itself too thinly, but it must be a worry that it has so little presence in the cigarette "hot spots" of the Far East and South America. Managers are looking at "niche" opportunities in the Asia-Pacific region.
On the plus side, UK margins jumped from 42.7 per cent to 46.2 per cent as price rises countered the cheaper rivals and costs were held.
On HSBC current-year forecasts of pounds 335m, the shares - down 2.75p to 447.5p yesterday - trade on a forward multiple of 13, a big discount to the market. HSBC and Charterhouse Tilney, rating the shares at "outperform", believe this will narrow.
- 1 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 3 UK weather: Snow to fall in the coming week with sub-zero temperatures to last until early February
- 4 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 5 Men behaving badly: Urinating while standing, 'manspreading' and the gendering of selfishness
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
British Muslim school children suffering a backlash of abuse following Paris attacks
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...