The internet investment company has admitted that one of its main investments, children's ISP KZN Media, is operating in a 'challenging' market. The growth of flat rate internet access rivals has meant that it is very difficult to derive income from telephone charges, or to grow a large user base. This in turn makes it tricky to earn advertising income. However, the management has decided that the route to profitability may lie via syndicating the content on the site. In any event, according to the Medi@Invest directors, KZN will not need any more cash from the holding company. The other companies in the group are Creation, a computer games developer, Andromeda, a book publisher and packaging business, Trademark, a licensing and merchandising company and Callserve, an internet telephony service provider. In the six months to 30 September, losses rose to £8.96m compared to £58,000 last year, largely as a result of a £6.4m hit on the value of the KZN stake. There was £3.4m cash in the bank at 30 September.