Profits have surged at Imperial Tobacco, the UK's top cigarette maker whose brands include Lambert & Butler and Embassy.

The tobacco firm said a 26% rise in annual profits was down to the "transforming acquisition" of German cigarette maker Reemtsma in May.

The UK-based group is in the midst of moving its manufacturing headquarters to Germany though it will keep its corporate head-office in Bristol.

Imperial reported pre-tax profits jumped from �509m to �642m ($998m) in the 12 months to 28 September 2002, after adjustments for one off costs relating to the purchase of Reemtsma.

'Step change'

Sales were stronger too, up 40% at �8.3bn.

"The numbers are beginning to reflect the step change in operations following the successful acquisition of Reemtsma earlier this year," said Imperial chief executive Gareth Davis.

Reemtsma, which cost Imperial �3.6bn to buy, contributed �107m to the group's operating profits in four and half months.

Mr Davis said "robust" performances across the tobacco giant's businesses, particularly in Western Europe and Africa, had also contributed to profits growth.

Imperial Tobacco's other brands include Rizla cigarette papers, the Van Nelle brand of tobacco and Davidoff cigarettes.

Restructuring

Imperial Tobacco has previously unveiled plans to make savings of at least �170m in 2004 following the takeover of Reemtsma.

Mr Davis said he was "very confident" the target would be reached.

As part of its restructuring plans, Imperial Tobacco is cutting 800 jobs and closing factories in Nordhausen in Germany and Mazeres in France.

Mr Davis said the integration of Reemtsma was "progressing well".

Shareholders will share the benefits with a 15% increase in Imperial's full year dividend payout to 33 pence.

Shares steady

The firm's share price held up well in a falling market after the profits announcement but analysts said the shares were fully valued and unlikely to rise much.

Imperial Tobacco's shares were up 1 penny at �9.73 at 1016 GMT, while the FTSE 100 index of blue chip stocks was down 35 points at 4139 points.

"The results were at the top end of expectations, but we see the shares as fully valued and see better value to be had elsewhere in the tobacco sector," one industry analyst said.

Imperial is the world's fourth largest tobacco company and employs about 18,000 staff.