You’re better off staying friends with this life insurer

THE fi rst question an investor has to ask about Friends Provident is why does it exist?

The company has been plugging along as a mediumsized life insurer for a few years now at a time when many rivals have either given up the ghost or found a new home courtesy of (usually) foreign owners with deep pockets.

Friends looked a dicey proposition post-float and suffered along with the rest of the industry from the stock market’s deep depression in the early part of the decade.

But now it is beginning to show signs of some life. The company does not have the fi repower to buy anything significant overseas such as, for example, Skandia – even though it would make a much better owner for that business than likely buyer Old Mutual.

It has instead focused on acquiring niche, offshore businesses that help wealthy people to shelter their money from tax. Such businesses now account for more than a third of its profits, no bad thing given that the Government and the Financial Services Authority have made the UK life insurance market so unattractive.

At home, Friends has chosen to focus on parts of the UK market where companies are still allowed to make money, and yesterday’s interims showed that the strategy is working well enough.

The company is not yet a surefi re winner. Its interims were good although unspectacular – the figures being flattered by the stock market recovery. Majorityowned fund manager F&C Asset Management is losing funds at an alarming rate and its figures on Wednesday were worrying.

Friends yields a generous 4.5pc but the company has warned that its dividend will not increase at much more than inflation.

However, it trades on 11 times next year’s earnings and about 1.2 times the value of its existing policies, which makes it cheaper than most of its rivals.

Questor said buy at 167p in May and the shares edged up ¼p yesterday to 173¼p. Hold on.

Build with Redrow

REDROW may not be the biggest listed housebuilder but it has laid some solid foundations for growth. The £670m group, which this year diversified into low-cost homes, has stumped its rivals George Wimpey and Taylor Woodrow, both of whose fi rst-half profits took a hammering.

The past six months has been tough for housebuilders but Redrow is sitting on a good grab of 17,000 plots of land and says there’s room to move where fi rsthome buyers outnumber affordable housing options.

Redrow’s aptly named Debut range has the potential for decent incremental growth – especially as it ties in well to the Government’s aims to increase the supply of affordable housing.

Redrow is bidding for English Partnerships’ regeneration projects at Milton Keynes, Northampton, Basingstoke, Maidstone and Allerton Bywater near Leeds.

Management has shown it is able to maintain margins – down only slightly to 19.6pc for the year – and it has also addressed the historically low dividend yield, which is now a respectable 3.1pc based on yesterday’s unchanged share price of 420p.

What happens next largely depends on consumer confidence. Redrow chief executive Neil Fitzsimmons reckons 2006 could see an improvement, helped by pent up demand and new rules allowing people to buy property as part of their pension.

Trading on an unchallenging forward earnings multiple of 7, Redrow is one of the best bets in the sector.

Glisten tastes sweet

CHOCOLATE and sweets maker Glisten has a ferocious appetite for acquisitions. It gobbled up several fun-sized rivals last year plus a gobstopper that helped to double sales.

Buying Halo Foods at the end of 2004 gave the company a foothold in the fast-growing cereal bar market as well as an ingredients business called Nimbus.

Any investors that feared a toothache were yesterday relieved to see Aim-listed Glisten report pre-tax profits up 22pc to £1.62m. The shares jumped 7pc on news that Halo has been integrated faster than expected.

Glisten has cut its reliance on Christmas with the acquisition of Halo and Nimbus, which are nonseasonal businesses. Now it’s free for a fresh dive into the pick ’ n’ mix but further acquisitions are more likely to be bolt-ons rather than something the size of Halo.

Glisten is still keen to move into new areas such as savoury snacks. Chief executive Paul Simmonds also wants to bolster the export business, which is ticking along soundly. With relatively low gearing, Glisten is well placed for more deals, provided it doesn’t get greedy and over-extend itself.

The shares, up 20 to 284½p yesterday, are trading at 14 times forecast earnings and, while the prospective yield is an anaemic 0.5pc, there is plenty of room for growth. Suck it and see.