Mixed reaction to Rothmans' interim results: Tobacco disappoints, Vendome pleases

SHARES in Rothmans International and the Vendome luxury goods business moved in opposite directions after the release of maiden interim results from the restructured tobacco and luxury goods companies.

Rothmans dipped 2p to 411p with a rise in taxable profits from pounds 209.3m to pounds 233.4m falling short of analysts' expectations. The company comprises the original Rothmans tobacco businesses and certain trademarks previously owned by Dunhill and Richemont.

Vendome, however, climbed 15p to 334p with a 25.5 per cent fall in pro forma profits to pounds 104.4m not as bad as feared.

The drop was exacerbated on conversion of the results into sterling, with the underlying picture in Swiss francs showing an 8.8 per cent rise to Sfr233m.

The company's luxury goods brand names include Cartier, Montblanc pens and Chloe and Karl Lagerfeld fashions.

The difference between Rothmans' performance and analysts' predictions was mainly due to pounds 16.7m of reorganisation costs. Interim profits were also struck after pounds 29m of currency gains.

Rothmans' second-half figures will be depressed by pounds 48m of costs arising from group restructuring.

Volume cigarette sales in the first half to 30 September fell by 9 per cent, reflecting a drop in demand in Europe. The biggest declines were in France, the UK and the former Yugoslavia.

Rothmans said sales in the Philippines were also 'significantly lower' due to the closure of Alhambra Industries last December.

Price increases and a change in the mix of brands sold helped to improve results in Malaysia.

Nyren Scott-Malden, an analyst at BZW, the investment bank, has lowered his full-year forecast for Rothmans, before restructuring costs, from pounds 510m to pounds 500m.

He has, however, upgraded his profit view on Vendome from pounds 196m to pounds 210m, again before pounds 23m of restructuring costs.

While the trading outlook for Vendome was not brilliant, he said the expensive end of the jewellery market was improving.

Vendome said that, of its four main product lines, sales of jewellery and pens had improved. Sales of watches, though, fell 3 per cent compared with the same period last year and leather goods fell by 11 per cent.

As stated during the restructuring, Vendome and Rothmans are not paying interim dividends but will make single payments at the year-end.

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