THESE days FTSE 100 chief executives get sacked as regularly as Premiership football managers. So Gareth Davis, the boss of Imperial Tobacco, the world’s fourth-biggest tobacco company, is something of a rarity — a long server, clocking up ten years in the job.

There is much to celebrate from that decade of service. Imperial has expanded — through a combination of organic growth and a £5.2 billion acquisition spree — from a local British player into a global empire spanning 130 countries and 14,500 employees.

The share-price growth has been equally impressive: £100 invested in 1996 would be worth nearly £800 today, making it one of the best performers in the FTSE 100.

Yesterday’s full-year results continued the solid growth trajectory — pre-tax profits were up 8 per cent to £1.17 billion, on revenues up 4 per cent to £11.7 billion. To make sure that growth continues, Imperial remains on the hunt for more acquisitions — bolt-ons, such as the recent acquisition of Gunnar Stenberg, the Norwegian tobacco products distributor, and the blockbuster deal that Mr Davis, 56, has promised before he retires.

There is nothing firm on the agenda at present, so Imperial has been using the reams of cash that it generates to buy back its own shares at a rate of £600 million a year. The City believes that Imperial could afford to raise that to as much as £1.2 billion a year.

There are undoubtedly plenty of growth opportunities in emerging markets for Imperial to exploit, but perhaps equally exciting is the United States, where Imperial has sought preliminary approval to enter the market. At present it merely distributes papers and filters and it is likely to be late 2007 or early 2008 before it gets approval, but this could provide plenty of opportunities. In Britain, the group’s biggest market, a ban on smoking in public places in 2007 will dent revenues, but the impact may not be as bad as people think. In Ireland, where such a ban is in force, revenues have started to recover, albeit partly helped by population growth and an influx of East European immigrants.

The shares are trading at 15 times full-year earnings and generate a 3.3 per cent dividend yield, putting them at a slim premium to the sector average. Yet this is a solid, well-run business and while the short-term prospects are not without risk, Imperial has not run out of puff yet. Buy.

:image:

RHM

RHM’s financial update triggered some relief in the City yesterday, as the maker of products from Hovis bread to Sharwood’s sauces gave reassurance that recent trading had been in line with expectations.

The shares showed decent gains in early trading and, at one point, almost looked in danger of breaching the 275p price at which they floated last autumn.

It has been an uncomfortable journey for investors in RHM’s maiden year. That September and October delivered no nasty surprises pleased the City. After all, the group said at its last annual meeting that the hot summer had weighed on demand for its Bisto gravy and Sharwood’s curry sauces. Reassurance was welcome that the sauces and gravy were back in demand in the run-up to Christmas, the group’s most important trading season.

Cakes, too, are proving popular, despite an apparent shift in consumers’ tastes to healthier foods. RHM has played that shift well, making the most of the Hovis brand to drive sales of premium ranges. Consumers have been “upgrading” their loaf to seeded varieties, which offer more health benefits — and more profit for RHM.

Yet for all the company’s attempts to make the most of its brand and get away from the idea that bread is only a commodity, profit margins remain a worry. Wheat prices have risen enormously in recent months — prices are up 25 per cent since the middle of September.

The company has enjoyed some success passing on the higher costs to retailers, but there must be question marks over how much more they can tolerate.

There must also be a danger that the company’s margins will come under pressure.

The group is facing high energy costs as well. Its ability to pass on these costs, and any change in commodity prices, will also be key to its near-term performance.

These are clear risks to the group’s short-term financial health, but the shares are cheaper than sector peers and the 6.5 per cent prospective dividend yield helps to underpin the price. Hold.

Savills

ALMOST 20 per cent of Savills, the commercial and residential property consultant, is up for grabs after Trammell Crow, its strategic partner in the United States, agreed a $2.2 billion (£1.15 billion) takeover by CB Richard Ellis, the world’s biggest real estate consultant.

The alliance, formed in 2000, aimed to exchange business opportunities. Trammel acquired a 10 per cent stake in Savills, which was later doubled. CBRE plans to sell the stake, which theoretically could be used as a platform for a takeover. Yet Savills shares are already pricey and the obvious buyer, CBRE, is selling. CBRE will seek to maximise value from the stake and there is likely to be a placing to a mix of investors.

For Savills the end of the American partnership is no loss — it never took off and generated annual fees of only £1 million, small fry in the context of a £450 million-plus annual revenue stream. Savills will now try to build its own US presence, which is crucial if it wants to provide a global service to its Asian clients. Savills remains an ambitious, well-run business with a good track record. Buy.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive