Gallaher, the maker of Silk Cut and Benson & Hedges cigarettes, said that it expected full-year results to be "in line with expectations".

The group said that high levels of UK taxation had seen a 5% decline in UK duty-paid market volumes in the first six months of 2003.

Gallaher expects the UK cigarette market to decline by 3% on a full-year basis, due to the effect of increased personal allowances in the second half of 2002.

Volumes in Continental Europe grew by over 7% in the first 10 months of the year.

The group said the first 10 months of the year showed "vibrant growth" in Kazakhstan, Ukraine and Russia - where its average 2003 market share is 15%.