VCI warns of slowdown in trading

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The Independent Online
VCI, the video distribution group which recently attempted to make an audacious pounds 300m bid for Manchester United, yesterday warned about a slow start to its key Christmas selling period.

In a trading statement, VCI said: "Early indications are that the critical Christmas shopping season has been slower than the last year to gather full momentum in the markets in which we operate."

Although scheduled, the trading update took analysts by surprise. "It was premature for them to put out a statement," said one. "The bulk of VCI's sales come in the final six weeks of the year."

VCI's shares, as high as 349p in July, closed 13p lower at 275.5p as brokers trimmed their profit forecasts from about pounds 9.5m to pounds 9m for this calendar year. In 1995 VCI made pre-tax profits of pounds 8m on sales of pounds 77m.

VCI, chaired by Michael Grade who is also chief executive of Channel Four, said it would issue an update of Christmas trading in January "as usual".

VCI publishes videos ranging from the Men Behaving Badly comedy series to Thomas the Tank Engine and Riverdance - The Show.

In January it bought the rights to Manchester United's book and video publishing interests for pounds 2.4m.

Four months later HSBC, VCI's advisers, approached United's chairman, Martin Edwards, to discuss a possible pounds 300m bid for the club.

Talks continued for about a month, but they were overtaken by events when the bid premium VCI was prepared to pay disappeared as United's share price soared on news of a four-year deal worth pounds 670m between the Premier League and BSkyB, the pay-TV broadcaster.

Last night analysts suggested VCI needed the deal with United to improve the company's earnings visibility.

"VCI is a product-led company where profits can disappear overnight," said one. "If anything, it needs something more stable."

Shares in VCI, a management buy-out from quoted Prestwich Holdings in 1989, were floated on the stock market two years ago at 150p, valuing the company at pounds 58m.

Under chief executive Steve Ayres, VCI has avoided the video rental market, which is in long-term decline following the advent of cable and satellite television, to concentrate on the sell-through side of the business.

It is now the UK's leading independent video, book and audio publishing group.

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