Market Watch: Imperial Tobacco rolls along with cheaper option

THE major FTSE 100 company to update the City this week will be cigarette giant Imperial Tobacco, which is expected to say it has partly benefited from more people rolling their own in the downturn.

The trading statement on Tuesday from Imps comes after it said in April that cheaper "economy" smokes accounted for 20 per cent of the 44 billion cigarettes a year UK market, and that smokers were also rolling their own to save money.

But Imps said it had capitalised on this trend, with loose tobacco volumes up 9.5 per cent in the half year to end-March. Interim UK revenues rose 7 per cent to 448 million as volumes grew and prices improved.

Bristol-based Imperial, which has a 45 per cent UK market share, revealed then that UK operating profits were also up 7 per cent to 295m at the halfway stage. The group is now led by former chief operating officer Alison Cooper, who took on the top post after chief executive Gareth Davis retired on 12 May.

Analysts said she has had a full workload in her first year, as Imperial fights new UK rules meaning large retailers will not be able to display tobacco products from October 2011.

The cigarettes giant is also appealing against a 112.3m fine from the Office of Fair Trading, the regulator ruling that Imperial, along with rival Gallaher and 10 retailers, engaged in price-fixing.

Harvester and All Bar One pub group Mitchells & Butlers delivers a pre-close update on Thursday that will be dominated by its ongoing overhaul plan.

The most recent deal came on Friday when M&B, which also owns Toby Carvery, announced the 19.5m purchase of 22 Ha Ha Bar & Grill sites that will be converted into All Bar Ones and Browns restaurants. The acquisition has been funded by some of the 500m proceeds from disposals such as the sale of 300 drink-led sites and the off-loading of the Hollywood Bowl ten-pin bowling business to AMF Bowling for 39m.

M&B's continued focus on the eating-out sector comes as the company's like-for-like sales growth since 2007 has been one percentage point higher than its previous longer-term trend.

However, M&B has already told the market that sales slowed during the World Cup as football fans turned to drinks-led pubs to watch matches, with like-for-like sales up 1.2 per cent in the nine weeks to 17 July, down on the 1.8 per cent seen over the previous 33 weeks.

But analysts at Numis Securities expect fourth quarter trading to pick up to at least 3 per cent growth, leaving full-year sales up 1.8 per cent.

Fashion retailer Alexon will be watched for further news on its recovery efforts when the group provides half-year figures on Thursday.

The firm, which owns brands including Ann Harvey, Dash and Kaliko, announced a 20m fundraising in March to bankroll the closure of a quarter of its stores and the launch of shops in better locations.

Despite a further 5.4 per cent decline in sales during the four-and-a-half months to 14 June, Alexon said that first half trading had been satisfactory given current high street conditions.