Benson & Hedges maker Gallaher said it was set to strike a licensing agreement with Shanghai Tobacco paving the way for a joint venture whereby Shanghai would make and distribute Gallaher brands in China while Gallaher would do the same for Shanghai’s products in Russia.

Gallaher’s interim pre-tax profit slumped from £188m to £162m due to restructuring costs. Sales were up from £4.1bn to £4.3bn for the six months to June 30.