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When most investors think of Glisten, they think of sweets, confectionary and candy. But Glisten is actually in many different areas of the health and nutrition market because ‘that’s where consumers are, that’s where the growth is and that’s where the margins are’. So argues Paul Simmonds, the man at the helm of the snacks and foods group, a venture he hopes to build into a £100 million company within a matter of years.

Simmonds places an emphasis on Glisten’s organic and healthy focus because sales of traditional sugar confectionary are in long-term decline. Indeed, Glisten’s research shows they fell three per cent last year, with 13 of the top 20 brands posting year on year declines. Potato- based snacks are also falling, down 1.2 per cent last year, with Walkers witnessing a seven per cent decline, Pringles an eight per cent and Golden Wonder collapsing. By contrast, low- carbohydrate and low-sugar ‘hand held’ healthy snacks are soaring, the organic food market is worth £1.3 billion (and growing at 11 per cent per annum) and the UK market for ‘in-home’ fruit-based snacks is worth £90 million, having grown 21 per cent year on year.

‘What all these facts tell you is that the big brands are under pressure and that Glisten, with its fingers in many areas of the healthy food and snack sector, is likely to thrive,’ he claims, with some justification.

The group floated back in 2002 with a focus on ‘relatively’ healthy snacks – chocolate-coated raisins, peanuts and the like, which it supplied to Tesco, Iceland and Aldi (amongst others). A couple of other acquisitions followed in October 2003 and January 2004.

However, it was the purchase of Halo Foods and Nimbus, an ingredients and ‘inclusions’ business, which really gave the group its healthy bent.

Halo, based in Newport, is an own-branded healthy bars and snacks business. Following a serious bout of restructuring to improve its customer base and perk up its margins, it is now a serious player in the supply of cereal and health food bars. Says Simmonds, ‘Halo is a terrific operation. It has come on leaps and bounds since we bought it. We have a terrific customer base, making an array of sophisticated bars for household names nationally and beyond. In all we ship well over 200 million bars per year’.

With Halo came Nimbus, a maker of such items as sprinkles and toffee pellets for the wider food industry. ‘In our bars business, we have to make sure we get the ingredients right, the calorie count right, the texture and taste right. At Nimbus, which supplies the ice-cream, biscuits and desserts market with additional ingredients, the challenges are just as tough. For instance, one muffin customer asked for a toffee pellet that melted at 70 degrees but not at 65 degrees. That we were able to do it gives you an idea of our technological sophistication.’ When it was purchased Nimbus was loss-making, but it is now cooking up a healthy profit.

In December last year, Simmonds bought Lyme Regis Fine Foods, a £4.5 million turnover venture. Its products, produced at Liphook just outside London, are branded organic cereal and fruit based snacks sold via the big multiples and other outlets.

‘We have great hopes for Lyme Regis, both in the wider market and in some very interesting niches. For instance, Government proposals will see products with excessive sugar and fat content prohibited from school canteens and vending machines. We hope to make inroads here as our products already conform to the new strict guidelines.’ This aspiration is likely to be met since, in a major coup, Glisten has already been named as a preferred supplier to UK schools.

In the half year to December 2005, Glisten improved sales from £14.2 million to £27.4 million and upped pre-tax profits from £1.1 million to £2 million.

The second half should see the group continue its growth trajectory and deliver full year results showing profits of £4.5 million on sales of £57.5 million.

The group is also likely to complete its £2 million capital expenditure programme in the second half, continue with the reinvigoration of its existing operations, fully integrate its new businesses and persist with further product innovations (Glisten confectionary, for instance, will move into yoghurt coatings and low sugar ranges). There is, of course, the ongoing goal of improving operating margins. These are expected to lift to 9.4 per cent this year, from 8.9 per cent last time.

‘Our strategy is to create a £100 million business, but we will do it in an anti-corporatist manner. We’re not interested in vertical business models and not interested in the egomaniac’s race for as much market share as you can get. The high-volume, low- margin strategies prevalent in this sector are often dashed against the rock when prices move against you. Our goal is to strengthen [what] we have, deliver great service and move into adjacent areas where our expertise gives us the edge. I call it the lateral approach to growth and so far it’s working.’

With another acquisition in the ‘healthy’ beverage sector on the cards, the current market cap of £46 million (forward p/e of 14.1, falling to 11.8 for next year) does not seem expensive for a group with focus, drive and great niche positions. Strong buy.

Glisten	AIM	£17.93m	128.50p	-1.00p
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