Bottom Line: Stay tuned in to London Weekend TV

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The Independent Online
SHAREHOLDERS in London Weekend Television should resist the temptation to follow their chairman, Sir Christopher Bland, and his fellow executives all the way to the bank.

Sir Christopher made it clear that he and 43 colleagues, who are set to obtain a total 15 per cent stake once their options are exercised next month, will be cashing in part of their holdings for a cool pounds 20m.

That will still leave their collective stake in LWT at about 10 per cent - worth another pounds 40m. But even so, the move is a shrewd attempt to make the most of the television sector's current popularity.

Television stocks have soared since the beginning of the year on rising hopes that the Government will ease ownership rules, which bar the nine biggest channel-three broadcasters from taking control in each other.

Meanwhile, the companies have been busy positioning themselves for a shake-up by taking a bewildering number of stakes in each other, the latest example being Granada's pounds 90m purchase of a 20 per cent holding in LWT at 500p a share three weeks ago.

However, it is still highly uncertain what the Government will do, if indeed it chooses to do anything at all. But for those with a longer view, it could be an attractive opportunity to buy. Taxable profits at the group jumped by more than a fifth to pounds 16.5m, on 3.8 per cent improvement in advertising revenue, slightly below the average for the ITV network.

The profits advance reflects the company's continued progress in cutting costs which has boosted underlying margins from 19.6 to a hefty 26.6 per cent. With much of its rationalistion complete, LWT is unlikely to raise its margins by a similar extent in the future.

However, LWT's high operational gearing should make it an early beneficiary of any significant upturn in consumer advertising spending. Its 20 per cent investment in GMTV, the breakfast channel, which is heading for a pounds 10m loss this year, is the only blot on the horizon, but LWT's management remains confident about its long-term potential.

Above all, Granada's stake in the company provides a powerful floor for the bears. A p/e of 22 on full-year profits of pounds 35m at 483p, up 14p, is not too high given the benefits of recovery and a possible industry shake-up.

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