Friends disappoints hopes of asset sales as profit drops

By Clara Ferreira-Marques

LONDON (Reuters) - Friends Provident FP.L disappointed investors hoping for an indication on Thursday that it is close to selling off non-core assets, as it warned that suitors needed more time to raise cash in turbulent markets.

The insurer, which has been overhauling its business since the start of the year, has already shelved the sale of adviser Pantheon on the back of poor market conditions. On Thursday, it said only that it had seen "satisfactory progress" with the sale of its stake in fund manager F&C and "continued to explore options" for Luxembourg-based unit Lombard.

It still hopes to sell both or either of these this year, but also confirmed its strategy does not depend on the sales.

Shares in the group, which have halved since the start of the year and already trade at the lowest multiple in the UK sector, fell further on the sales news, combined with a 20 percent drop in first-half profit as margins tumbled.

At 10:55 a.m. the stock was down 3 percent at 88.9p, making it one of the top losers among UK bluechips.

"As long as you believe there is a reasonable prospect for (suitors) coming up with the right price... you carry on," outgoing Finance Director Jim Smart told reporters, when asked when Friends would decide to call time on the sales.

"What we are flagging up is that those people are finding it very difficult to raise the funding and there is no certainty they will get the funding in place. We want to give them time to get their arrangements in place before we draw stumps."

According to people familiar with the situation, Lombard, which Friends bought in 2005 for around 400 million pounds including earnout clauses, is attracting offers below that, with only two private equity firms left in the running. Friends said on Thursday it has received "a number of proposals".