RNS Number : 5210I
Leisure & Media VCT PLC
19 November 2008
LEISURE & MEDIA VCT PLC
INTERIM MANAGEMENT STATEMENT FOR THE QUARTER ENDED 30 SEPTEMBER 2008
Investment Objective
The objective of Leisure & Media VCT PLC ("the Company") is to maximise tax-free capital and income distributions to shareholders,
principally from the realisation of its investments in the leisure and media sectors.
Financial Highlights
At 30 September At 30 June 2008
2008
Total assets less current �6,940,000 �7,316,000
liabilities
Net current liabilities �(588,000) �(593,000)
Net asset value per Ordinary Share 75.8p 79.9p
Revenue dividend paid 0.8p 0.8p
2001
Capital dividend paid 14.0p 14.0p
2004
Capital dividend paid 5.0p 5.0p
2006
Total cumulative return per Ordinary Share 95.6p 99.7p
Initial placing price net of issue costs 95.0p 95.0p
Increase in total cumulative return since launch (%)
Middle market quotation per Ordinary Share 44.0p 44.5p
Market discount to net asset value (%) 42.0% 44.3%
The reduction in net asset value since June 2008 of �376,000 (4.1 p per share) is principally attributable to a �250,000 reduction in
the valuation of the investment in Creative Experience Company, combined with a number of smaller downward valuation adjustments aggregating
about �80,000, and net fund management expenses.
Update on Portfolio
In this difficult economic climate, your investment manager is carefully evaluating the impact on sectors in which the Company is
invested, and on the realisation timing of its portfolio investments.
The realisation of our investment in children's nursery operator NuNu is progressing and, despite the current economic uncertainties, we
have seen no indication that it will not be completed in the near future. This is expected to result in proceeds of more than �750,000. The
valuation reflects a small adjustment to reflect the proceeds we now expect to receive.
As previously reported, the sale of Cross Border Publishing did not take place, and we now expect it may be some time before it is sold
since many of its subscribers, sponsors and advertisers are in the financial services sector. The company has no debt.
However, two other investments are planned to be realised in the next few months, Tomahawk Pubs and health and fitness operator Odyssey
Holdings.
Tomahawk has good freehold gastro-pubs that have not been much affected by the smoking ban and cheap supermarket beers, and we believe
it should hold up reasonably well in the economic downturn. It is expected that the sites will be marketed within the next couple of months.
The business has no debt.
The Odyssey Clubs' note is coming due for repayment, and we expect this may occur in early 2009, but this could be delayed if Odyssey
seeks to find a buyer for its health club, and to repay the note from the sale proceeds.
While these realisations will be welcome after a lengthy period without any disposals, we are obviously concerned about the impact of
the very difficult economic situation on a number of our portfolio companies, and the timing of their disposal. Although our intention is to
pay dividends from sale proceeds, once the Company's debt has been repaid, we anticipate the need to retain some funds from realisations to
enable us to respond to any funding difficulties within the portfolio. While we have some defensive investment positions, others are clearly
more susceptible to declining consumer spending and credit pressures.
Health and Fitness sector
Fitspace is a budget-priced concept, which should be well-positioned in the current climate. It has expanded to eight sites through the
acquisition of clubs from Fitness First and the next stage of development is now under consideration. Fitspace has no bank debt.
Our other health club investment, in Balance Leisure, was written off earlier in the year, and we are seeking to dispose of our
interest, although any proceeds are likely to be modest.
Pubs
In addition to Tomahawk, we have food-led freeholds at British Country Inns that should hold their value, although we expect some
negative impact from the tightening economy. We have made a small downward revision in the value of this investment following the sale of
one pub and a reduction in bank debt.
Our leasehold pub chain, The Bar Group, was restructured in the summer through a Company Voluntary Arrangement, and it is now on a more
sound footing, but it is more susceptible to the economic downturn than our other pub investments.
Media
We have an excellent investment in Audio Network, whose business model positions it well to take advantage of music licensees'
tightening budgets. The business is not subject to the pressures from illegal file sharing and reduced retail sales of recorded music that
are affecting many music catalogues. It has a good cash position to fund expansion.
However, radio production company Somethin' Else is likely to be affected by reduced commissioning, and we are exploring ways of
repositioning the business.
Children's play centres
With two successful sites, Kidspace is developing well, but since September we have seen some reduction in secondary spend and
children's parties. A third site has been identified, and we are evaluating funding sources for it.
Visitor attraction
Our tourist attraction in Venice, Creative Experience, has had a very difficult time getting established, with tourist numbers down 40%
in Italy this year. While we are working hard on a restructuring of the business, and still hopeful of eventual success, the prognosis is
not encouraging and we have therefore written down the investment by 50%.
AIM-listed investments
The share price of Bingo operator Top Ten Holdings remains severely depressed, and reflects the decline in stockmarket valuations. The
sector may benefit from a recent favourable VAT ruling.
Similarly, shares of TSE Group continue to trade at a minimal price.
Management Agreement
As mentioned in the Half-Yearly Financial Report and as part of the Board's efforts to reduce the running costs of the Company, the
Investment Management Agreement has been amended to reduce the basic management fee from 2% to 1.5% of net assets, and to replace the
current performance fee structure with an arrangement whereby 5% of all future capital dividends exceeding 100 pence per share will be paid
as a performance fee to the Investment Manager. These arrangements, which took effect from 1st July 2008, are expected to result in a
reduction in the total fees payable to the Investment Manager whilst providing an incentive to maximise returns to Shareholders.
Investment Portfolio at 30 September 2008
Cost Valuation Cost Valuation
30 September 30 September 30 June 30 June
2008 2008 2008 2008
� � � �
Audio Network plc 251,000 1,125,000 251,000 1,125,000
Audio Network plc* 16,000 81,000 16,000 81,000
Balance Leisure 500,000 - 500,000 -
Limited
Balance Leisure 205,000 @ - 205,000 @ -
Limited*
The Bar Group 787,000 @ 301,000 787,000 @ 301,000
Limited
The Bar Group 150,000 - 150,000 -
Limited*
British Country Inns 502,000 570,000 502,000 600,000
plc
The Creative Experience Company Limited 500,000 250,000 500,000 500,000
The Creative Experience Company 100,000 - 100,000 -
Limited*
Cross Border Limited 224,000 518,000 250,000 582,000
Cross Border 7,000 16,000 9,000 18,000
Limited*
Echo Publishing 328,000 - 328,000 -
Limited
Echo Publishing 212,000 @ - 212,000 @ -
Limited*
Fitspace Limited 670,000 670,000 670,000 670,000
Kidspace Adventures 716,000 @ 909,000 716,000 @ 909,000
Limited
Nu Nu plc 628,000 723,000 628,000 741,000
Nu Nu plc* 31,000 37,000 31,000 38,000
Odyssey Group 423,000 @ 423,000 409,000 @ 409,000
Holdings Limited*
Somethin' Else Sound 750,000 750,000 750,000 750,000
Directions Limited
Tomahawk Pubs 901,000 1,135,000 901,000 1,135,000
Top Ten Holdings plc 250,000 � 5,000 250,000 � 17,000
Top Ten Holdings 265,000 � 6,000 265,000 � 21,000
plc*
TSE Group plc ** 300,000 � 9,000 300,000 � 12,000
Total 8,716,000 7,528,000 8,730,000 7,909,000
@ Including
capitalised interest
* Non-qualifying
investment
� AIM quoted
* Formerly Sandford
plc
The financial information for the quarter ended 30 September 2008 contained within this Interim Management Statement has not been
audited.
By order of the Board
Bonita Guntrip, for and on behalf of
J O Hambro Capital Management Limited as Company Secretary
19 November 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
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