No Pain No Gain: In these sour days, Glisten may prove quite a sweet little treat or two for the portfolio

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The Independent Online

Even in these treacherous times it is still possible, I hope, to alight on a share offering inviting prospects of capital appreciation. Last week the no pain, no gain portfolio unloaded the Six Continents hotels and pubs giant; this week it has recruited a little confectionery company to take its place.

Glisten arrived on the junior AIM market only last summer. It is far from being a start-up but in stock market terms is very much an untested business, but with considerable potential. I believe investors need all the luck they can get these days, what with the war in Iraq, the looming threat of more terrorism and the increasingly uncertain economic landscape.

So I feel it is unwise to tempt fate by keeping the portfolio stuck on 13 constituents for long. I have been looking at Glisten for some time and, after a sound set of interim figures, I have taken the plunge.

When checking out of 6C ahead of its demerger, I realised I was waving goodbye to corporate excitement. Already two groups have publicly expressed interest in buying its Mitchells & Butlers pubs operation.

Others are doing their sums. At present there is, on the surface, little happening at 6C's hotel arm, InterContinental Hotels. But it is a deceptive silence; bidders will almost certainly appear.

I do not expect Glisten to attract takeover marauders, at least not for some time. But it could soon pad along the bid trail itself. Indeed, it was created with an eye to acquisitions. Thankfully, it is too small to attract the busybody competition bureaucrats of Whitehall who have turned the battle for my portfolio constituent, Safeway, into a confusing nightmare for all but my learned friends.

Glisten's capitalisation is just £9.7m. It was floated at 80p a share, nudged 120p and is about 114p. The business dates from the Thirties and last year was the subject of a management buy-in led by Paul Simmonds, who has been around the food industry for 25 years.

Intriguingly, the chairman is Jeremy Hamer who also heads Inter Link Foods, a cake-maker that has expanded impressively in a fragmented market by successfully absorbing acquisitions and streamlining distribution, marketing and production. Inter Link was a rewarding no pain, no gain constituent; I sold the shares at a decent profit last summer.

I must admit it is the similarity with Inter Link and the presence of Mr Hamer that first attracted me to Glisten. The company which, like Inter Link, is based at Blackburn in Lancashire, resembles the cake-maker in its early days. If its acquisition policy and subsequent streamlining is anywhere near as successful it is in for a rousing time as the stock market recovers.

Mr Simmonds is looking for targets with a £10m to £20m annual turnover. Initial deals are likely to be in the confectionery and snack industries, but the longer-term ambition is to become a broadly based food group specialising in niche areas. Its present confectionery business produces such sweet treats as milk chocolate eggs, chocolate-coated nuts and flavoured chews.

The big three, Nestlé, Cadbury Schweppes and Mars, have more than 75 per cent of the highly competitive confectionery market but Glisten, with its niche lines, should dodge much direct confrontation.

The group's half-year pre-tax profit emerged at £700,000 (after charging £152,000 for goodwill) from sales of £8.5m. For the full year it should achieve profits of around £1.35m, putting the shares on forward earnings of approaching ten.

Glisten in clearly a gamble on the ability of Mr Hamer to repeat his Inter Link trick, and the experienced management talents of Mr Simmonds and his team.

Of course buying shares, particularly in small companies, can be fraught with danger. In the present climate some might argue it is foolhardy buying any shares at all – whether blue chip or tiddler. But history shows that when the stock market is in the dumps long-term buying opportunities abound. I hope to add to the portfolio in the next few weeks.

One addition I have been thinking about is Wyatt Group, providing risk consultancy services, with a share price down from 65p to 27.5p. It is very much an early-stage business, highly speculative.

But having trodden the Inter Link trail with Glisten I am tempted to repeat the exercise with Wyatt. It is one of the companies run by Bob Holt, the man behind the Mears support services group, the portfolio's best investment to date. I will make up my mind in the next few weeks.

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