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Company overview Imperial Tobacco Group PLC is the world's fourth largest international tobacco company. It is the second largest UK-based tobacco company by global sales. Imperial Tobacco's corporate headquarters are in Bristol. The Group's core activity is the manufacture, marketing and sale of tobacco and tobacco related products. Imperial is the world leader in roll-your-own, rolling papers and tubes. Group brand names include Lambert & Butler, Davidoff, Rizla, John Player, Navy Cut, Woodbine, Richmond, Golden Virginia, Embassy, Regal, Super Kings and many others. Trading in many markets around the world, the group is market leader in the UK and holds second place in Germany. The company has 56 manufacturing sites and around 38,000 employees. The Company is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Positive Points: Management highlighted "another good quarter" performance. Retail footfall for the group's properties rose by 0.5%, outperforming the market benchmark which was down by 2.4% (source: Experian). Retail occupancy in the UK rose by 0.2% to 98.5%. Rents in administration had fallen from 1.0% in May (after Clinton Cards administration) to 0.8% at 30 June 2012. The group is currently in active discussions to re-let/assign 53 of the 69 stores which remain in administration. For its Office portfolio, management noted that "we benefited from both the quality of our buildings and from our focus on London". Occupancy rose by 0.1% to 98.1% over the quarter with further leasing activity strengthening income. The majority of its leasing activity over the quarter had been at Broadgate, London where it has 388,000 square feet of deals agreed/under offer with existing occupiers who are either extending their leases or are taking additional space. An announced acquisition will further enhance the company's presence in the West End. Unlike rivals such as Hammerson, the group offers diversity in property type, owning both Retail and Office properties. The board noted that "developments were progressing well, with good levels of pre-letting interest". A further 85,000 square feet of development pre-lets were agreed, with total income secured through pre-lets at £41 million. The group's weighted average interest rate on its finances was marginally lower at 4.5%. The dividend payment is currently attractive in a low interest rate environment, with a 1.5% increase being announced compared to that paid in Q1 2011.

Negative Points: The group's relatively small European property portfolio has suffered challenging conditions. Its business in Southern Europe has been impacted by increased occupier administrations along with higher levels of letting incentives and concessions. Net borrowings on a proportionally consolidated basis remained virtually unchanged from that reported as of the full year results at £4.9 billion (30 June 2012). The outlook for UK and European consumers remains uncertain. The group's Retail portfolio provides exposure. The outlook for the UK's Financial Services industry remains uncertain. The group's Office portfolio is exposed. As of the full year results, management remained cautious about the overall economic environment. The board expected property capital values in the UK to be variable in the near term. Despite some exposure to Europe, rivals such as Hammerson offer greater geographical diversificati

Financial Highlights: Retail occupancy in the UK up by 0.2% to 98.5% Offices portfolio occupancy rose by 0.1% at 98.1% 650,000 square feet of lettings and lease extensions First quarter dividend of 6.6 pence, 1.5% ahead of the prior year

First quarter update: Management highlighted what it saw as "another good quarter". Retail footfall rose for the group's properties in contrast to the broader market, while overall, 650,000 square feet of lettings and lease extensions were agreed. In addition to the update, the group also announced the £130 million acquisition of the Clarges Estate, a 191,500 square feet office/residential development opportunity in Mayfair, London. The acquisition will further enhance the company's presence in the West End. Asset sales continued to be made in order to fund new investments, whilst the first quarter dividend will be increased by 1.5% compared to the prior year period. In all, the group's income generating ability in a low interest rate environment weighs against concerns for the economic outlook.

British Land is one of Europe's largest Real Estate Investment Trusts (REITs) with total assets, owned or managed, of £15.8 billion (British Land share £10.3 billion), as valued at 31 March 2012. Its property portfolio is focused on prime retail locations and Central London offices, with the aim of attracting high quality occupiers committed to long leases. Retail assets account for 61% of the British Land portfolio with around 27 million square feet of retail space across 89 retail parks, 97 superstores, 12 shopping centres and 10 department stores. Only 3% of their portfolio is based in Europe, compared to 34% (rising to an estimated 40% on completion of current developments) of the portfolio made up from offices located in the City of London and West End.

Positive Points: Profits have broadly exceeded analyst forecasts. ARM enters the second half of 2012 with a record order backlog. Management outlook comments noted “building on our strong performance in the first half, we expect overall group dollar revenues for the full year 2012 to be in line with market expectations.” A progressive dividend policy continues to be followed. An interim dividend of 1.67 pence per share was announced, an increase of 20% over the 2011 interim dividend of 1.39 pence per share. The company enjoys diversity in both the products in which its designed chips are used and the geographical footprint of its customers. Microsoft previously announced that it was well advanced in developing its Windows operating system for ARM processors, a move which would leave ARM better placed to challenge Intel in the PC market. ARM’s processors are used as the main central processing unit (CPU) in many mobile phones, handheld devices and GPS navigation systems, including those manufactured by Apple, HTC, Nokia, Sony Ericsson, Samsung and Nintendo.

Negative Points: Intel continues to try to compete against ARM, offering technology of a similar nature and attacking its core smartphone and tablet arena. The high valuation is seen by some analysts as providing little scope for disappointment. Given valuation concerns, some scepticism towards previous takeover speculation has been voiced.

Financial Highlights: Revenue grew by 15% to £135.5 million compared to Q2 2011 Operating margin rose to 46.4% compared to 44.5% Profit before tax increased by 23% to £66.5 million 23 processor licenses signed across key target markets from microcontrollers to mobile computing

Second quarter results: In the wake of disappointing updates from rivals such as Intel, ARM surprised to the upside. Revenue and profits came in at the higher end of analyst forecasts, fuelled by healthy demand for its chips used across a host of devices and including smartphones and tablet computers. Management noted that "ARM's royalty revenues continued to outperform the overall semiconductor industry as our customers gained market share within existing markets and launched products which are taking ARM technology into new markets". ARM customers include both Apple and Samsung. The group shipped 2 billion ARM-designed chips during the quarter, up 9% from a year earlier. This compared to a 4% fall in broader industry shipments over the quarter, according to management. In all, with demand for the group’s low powered chip designs set against wider concerns for consumer health and the economic outlook,

Founded in 1990, ARM is a leading global designer of microprocessor chips. The partner companies who adopt ARM technology pay an up-front licence fee to gain access to a design and also a royalty on every chip that uses the licensed design. A single licence is the starting point for many different ARM Powered® chip designs and in 2010, ARM partners shipped over six billion ARM Powered chips. Its designs are used in the majority of the world's mobile phones, along with a growing range of other digital electronic products. The group is headquartered in Cambridge in the UK and is a constituent of the FTSE-100 index.

Positive Points: Despite current global economic uncertainties, management conveyed its desire to continue to expand its manufacturing capacity around the world and to invest further in R&D, remaining confident of the group's continuing growth potential. Johnson Matthey would benefit from tightening emission legislation which is driving demand for auto catalysts and emission reduction technology. In a statement management confirmed the group's order book for the next few months was "strong". The group's reaffirmed its strong balance sheet. Net debt was £470 million at the end of June.

Negative Points: The group's Precious Metal Products division's performance is dependent upon precious metal prices and should the recent fall in prices continue, this, will impact on the division's services businesses. Overall, sales were down 8% at £139 million. Johnson Matthey's performance is closely linked to the automotive industry. A stalling of the recent recovery in the US and European autos volumes would negatively impact sales estimates. The UK and Europe currently account for around 35% of group sales. Higher rare earth prices can adversely impact profit margins. Worldwide, the group had a net pension deficit of £169.4 million at 31 March 2012 (2011 - £130.4 million).

Financial Highlights: The group posted underlying profit before tax of £99.9 million (Q1 2011/12: £98.2 million). Revenues in the first quarter were up by 6% from the previous year at £657 million, weighed down by weakness in the Precious Metal Products Division. Last month Johnson Matthey said it arranged new long term loans for approximately $250 million in the US private placement market.

First Quarter Interim Statement: Johnson Matthey published a flat set of results, as the impact of lower platinum and palladium prices offset the benefit of increased car and truck sales in North America. The group's core environmental technologies arm, which makes catalysts for cars and heavy industry and accounts for almost half group profit, saw sales in the quarter rise 12% and operating profit was "well ahead of last year", as the sale of diesel catalysts for trucks grew strongly in North America. "If market conditions and precious metal prices remain as they are today, the outlook for the group in the second quarter of 2012/13 is expected to be broadly similar to that of the first quarter," said Chairman Tim Stevenson. For the year as a whole, the group expect that growth in Environmental Technologies and Fine Chemicals divisions will be offset by continued weakness in the Precious Metal Products division.

Headquartered in central London, Johnson Matthey is a specialist chemicals manufacturer whose activities are divided between three divisions: catalysts (manufacture of automotive catalytic converters, pollution control systems and components for fuel cells), manufacturer of pharmaceutical compounds and refiner and distributor of precious metals such as platinum and gold. Its stock is traded on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Positive Points: The tobacco industry is increasingly turning to Asia, Africa, Eastern Europe and the Middle East for growth opportunities, as recessions and government austerity measures force consumers in the West to cut back their spending and switch to cheaper cigarette brands. BAT has by far the greatest geographical diversification of any tobacco company. BAT, Imperial, Philip Morris and Japan Tobacco account for about 75% of the total cigarette market excluding China, where state-controlled China National Tobacco Co. has a virtual monopoly. The company's dividend policy is both progressive and attractive for the investor in a current low interest rate environment. The Group resumed a share buy-back programme in February 2012.

Negative Points: Global tobacco companies are raising prices regularly to protect their margins as volumes dwindle. The unsettled economic climate and currency headwinds continue to present a challenging trading environment. BAT could suffer from large excise tax rises. The risk of litigation remains an ongoing threat. Foreign-exchange risk is significant for BAT. If some of its emerging market currencies fall, it may be subject to worse-than-expected transactional headwinds. The integration of the recently acquired businesses in Turkey, Scandinavia and Indonesia may be problematic. Changes to packaging could hit sales of best selling brands.

Financial Highlights: BAT reported a net profit in the six months to 30 June 30 of £1.93 billion up from £1.87 billion a year earlier. Revenue edged up to £7.45 billion from £7.44 billion. The Board has declared an interim dividend of 42.2p, an 11% per cent increase on last year. The group repurchased 18 million shares at a cost of £553 million during the period.

Half year results: The world's number two tobacco company delivered a good set of results despite the global economic uncertainty and the adverse impact of exchange rates. British American Tobacco posted a slight rise in profit, as cigarette companies continue to rely on emerging markets and price increases to prop up profit amid flat volumes. Volumes for the half, comprising cigarettes only, were flat at 344 billion. That compared with a rise of 1.3% in the first quarter and a drop of 1% in the same period last year. The company said volumes in the same period last year benefited from increased sales in tsunami-hit Japan, which affected production at competitor Japan Tobacco Inc. Volumes of BAT's best-selling brands rose 4%, with Kent up 2%, Dunhill up 3%, Pall Mall 3% higher and Lucky Strike up 19%. We believe that the current market consensus opinion of a buy will remain in place for the time being.