In addition to the £110m operational cost savings – on the 2000 fixed cost base - announced at the UBM Preliminary results in March 2002, a further £55m of cost reduction has been identified. These reflect action on costs across the board. Headcount has been reduced by a further 500 employees across all businesses, representing a reduction of 30 per cent or more in PR Newswire, CMP Media and CMP Information.

Against the 2000 base, £61m in savings was delivered in 2001 and a further £60m has been achieved in the first half of 2002. An additional £34m has been secured for the second half of 2002 with another £10m planned for 2003.

DIVISIONAL REVIEW
NOP World - Market Research

Revenues at NOP World increased by 33.4 per cent to £101.5m, and profits improved by 7.5 per cent to £11.4m, reflecting the benefit of the Allison-Fisher, Roper Starch and Cozint acquisitions completed last year. On an underlying basis, removing the effects of acquisitions and currency translation, revenues and profits declined by 6.8 per cent and 5.9 per cent respectively, reflecting weaker market conditions particularly in the US and in the healthcare sector.

NOP World Health, the leading supplier of primary research to the global pharmaceutical industry, was impacted by the difficult market conditions in the pharma sector, in particular caused by the slower approval of new drugs by the Federal Drug Administration in the US. This is however a fundamentally strong sector and NOP remains well positioned with its own pipeline of new products and strong client relationships. The acquisition of Cozint, the online healthcare business, proved very timely given the rapid growth in internet-based healthcare market research.

Although revenues at NOP Research Group were marginally lower than last year, profits have increased. Revenues were lower due to the discontinuation of some low margin automotive work. The NOP Business division benefited from the early effects of the BT customer satisfaction census. This and other new business combined with a lower cost base across, led to an increase in profits for NOP Research.

Despite difficult conditions persisting in the US print market, Mediamark Research maintained revenues and profits. It achieved higher renewal rates and increases in new business for its core syndicated product.

RoperASW, a leading US-based research and consumer trends company, achieved post-acquisition integration benefits. It produced revenues and profits below last year’s performance because of continuing difficulties in the US economy. Despite the more challenging market conditions the other acquisitions made last year, Allison-Fisher and Cozint are on track to deliver their targeted contributions.

The period was generally a strong one in terms of new client wins. In addition to the BT census, new clients included IKEA, New Jersey Transit, World Gold Council, Radio Shack and Mitsubishi.

PR Newswire - News Distribution

PR Newswire’s reported revenues decreased 20.5 per cent to £57.5m and profits fell 42.8 per cent to £12.3m.

Continuing sluggishness in the US economy and greatly reduced M&A and IPO activity has caused a downturn in the volume of releases issued by PR Newswire’s customers, especially those which are discretionary in nature. Overall, message volume was 13.2 per cent below the same period last year, in line with the 14 per cent decline for the full year in 2001. The turmoil in the world’s stock markets has led corporations to be more publicity averse than normal. PR Newswire’s customers have also chosen lower-priced news distribution options, causing a reduction in average revenue per message of 5.6 per cent. More rigorous disclosure practices look set to increase the length of earnings releases.

In the US the “evaluation” products, a growing range of products which provide feedback on the response to corporate communications, grew to 15 per cent (13 per cent) of turnover, with the continuing success of the Online MEDIAtlas™ and with MultiVu alone generating over $1m in revenues in its first two months of operation.

PR Newswire has maintained its impressive market share at around 60 per cent of the US Fortune 500 and with its message volumes at higher levels than its main competitor.

In the UK, following the April 2002 ending of the monopoly in regulatory news distribution market, PR Newswire was immediately established as the number one rival to the incumbent RNS and now has a market share of over 10 per cent of all releases issued, with over 25 per cent of the FTSE 100 and almost 30 per cent of the FTSE 250 companies signed up.

Professional Media

Professional Media revenues were £224.3m, a decrease of 28.0 per cent over 2001. Operating profits decreased 74.3 per cent to £5.8m.

Financial results at CMP Media, the leading US high tech media group, continued to suffer the effects of the technology market downturn in which CMP’s major customers remain cautious in committing their marketing and advertising budgets. Revenues in this business fell 37.8 per cent to £136.5m while profits were down to an operating loss of £9.2m. This includes a loss of £3.8m (£11.9m) from online activities, now re-integrated into offline for both operational and reporting purposes.

During the first half of 2002, CMP Media’s continuing high tech ad page volumes have continued to trend down around 40 per cent on 2000 levels (note not 2001), down 43.8 per cent for the month of June. In such a difficult market, CMP Media has held its yield decline to similar levels to those in the second half of 2001. Maintaining a relatively strong yield position remains a priority for CMP Media.

CMP has further consolidated its market leading position. It now has a 29 per cent share of the market for the period, ahead of last year’s 25 per cent, and still maintains well over twice the market share of its nearest competitors.

Although CMP Media’s high tech events business again moved in line with publications, actual attendance levels showed some resilience with key events holding their own in a difficult market. TechXNY attracted over 35,000 visitors; the Embedded Systems show achieved attendance levels of over 8,000 – above last year. The influential Games Developer exhibition in San Francisco was only marginally down on last year’s event and attracted just under 6,000 delegates.

CMP’s Healthcare division delivered revenues ahead of last year, benefiting from a strong events portfolio.

CMP Asia, the largest private exhibitions group in Asia, delivered a good performance, with reported turnover up 5.8 per cent to £25.5m, augmented by the strong performance of KSS in Japan, acquired last year and three new show launches which have deepened its presence in China, Japan and Thailand. The slight decline in underlying turnover and profit – stripping out acquisitions – reflected weaker performances from those US events which are managed by CMP Asia. These included the cruise and leather exhibitions in Miami, which were both affected by the general economic situation in the US. Excluding the US business, CMP Asia achieved an underlying profit improvement of 5.8 per cent. CMP Asia is a high margin business and its underlying margins were increased by 1.7 per cent.

The business enjoyed a good performance from its jewellery events and CMP Sinoexpo joint venture exhibition business, the jewellery events enjoyed a record performance for the third year.

CMP Information has reaped significant cost benefits from a comprehensive business improvement plan, this has transformed the business’s profitability. Revenues were 8.1 per cent lower at £62.3m reflecting the closure of some titles and events and continuing weakness in some markets, especially in US Entertainment Technology. More than countering the US slowdown, CMP Information achieved greatly improved overall profits of £7.3m for the first six months, compared with £0.4m from the same period last year. Operating margins were transformed to 11.7 per cent, compared with last year’s 0.6 per cent.

The markets that have delivered an improved profit performance are Interiors, Print and Packaging, Ingredients and the UK Agriculture market, rebounding strongly from the foot and mouth crisis of last year. The Directories and Events businesses showed particular strength, with the Furniture and Fire Safety and Security shows, all leading events in their markets, attracting significantly higher visitor numbers.

The pharmacy market, covered by CMPi’s Chemist and Druggist publication has taken additional market share to lead with an all time high share of approximately 40 per cent.

UAP - Consumer Media

UAP’s consumer titles achieved a profit increase of over 40 per cent, thanks to growth in the motor sector in Exchange & Mart and the breakthrough to profitability of Auto Exchange which is freely distributed regionally. Dalton’s Weekly also grew following the recovery from foot and mouth. Revenues were maintained at the same level as last year but profits have benefited from significant cost savings.

MARGINS
UBM’s business-wide cost reduction programme has delivered an overall group margin improvement. Operating margin for the first six months of the year is 8.8 per cent, marginally ahead of last year’s 8.7 per cent for the full year and well ahead of the 4.9 per cent margin level in the second half of 2001.

DIVIDEND
As announced in October 2001, the current group dividend policy is to pay 7 pence per share in 2002, subject to the usual conditions of no significant changes. An interim dividend of 3 pence per ordinary share will be paid on 24th October to shareholders on the register on 16th August.

EXCEPTIONAL ITEMS
The £14m exceptional item represents the net cost of the settlement with Carlton. There are no other exceptional items in the half-year as costs related to further restructuring in 2002 have been expensed to operating profit.

BALANCE SHEET AND CASH CONVERSION
UBM continued to maintain its strong balance sheet during the period. Net cash balances at the end of June 2002 were £50.4m. Operating cash conversion was equivalent to 113.5 per cent of operating profits.

Group capital expenditure was only £5.8m during the period.

Following the impairment review in 2001, a reappraisal of the estimated useful lives adopted for goodwill and intangible assets has been undertaken. As a result, the estimated useful lives of the goodwill relating to certain businesses have been reduced. The impact of this revision has been to increase the amortisation charge for the period by £17.0m to £65.8m

FIXED ASSET INVESTMENTS
UBM holds investments in Channel 5, ITN, SIS, SDN, Paperloop and the Press Association.

UBM invested only £6.0m of working capital in Channel 5 during the period, lower than anticipated at the start of the year due to the substantially improved operating performance of Channel 5. Channel 5 has had an excellent first six months of 2002 and is outperforming its rivals. Revenues for the business over the period were £113.7m, a 15.8 per cent improvement over last year, while the operating loss has been reduced from £17.8m to £2.2m. Channel 5’s audience share has grown from 5.6 per cent to 6.4 per cent, while its share of advertising has grown from 6.2 per cent to 7.3 per cent.

STRATEGY
UBM has continued its strategy to invest in and acquire companies to strengthen its three core B2B areas of market research, news distribution and professional media, all in long term high growth markets.

UBM remains cash positive with a strong balance sheet with the financial flexibility to fund further development. It remains cautious however in its approach to acquisitions, preferring to target those which fulfil strict financial criteria and which will add value or attractive new products to its existing businesses and increase its presence in key markets. UBM will continue to build and to maximise value of its non-core assets.

CURRENT TRADING AND OUTLOOK
The UK, European and Asian businesses continue to perform robustly and the outlook is encouraging.

NOP has been performing strongly in the UK and in its US syndicated businesses, but the environment is more challenging in Healthcare and in US ad hoc. NOP UK’s revenues are up 3 per cent to the end of July, with British Market Research Association industry figures showing a UK general market decline of 2.6 per cent to the end of June.

At PR Newswire, corporate scandals and cost pressures are curtailing customer expenditure and clients are continuing to trade down to lower cost distribution options. We anticipate that recent stock market concerns over accounting matters will result in higher requirements for company disclosure and that this will in turn cause earning releases to become longer.

With CMP Media dollar revenues currently running at 43 per cent down on 2000 (note not 2001) our planning assumption is now for 45 per cent for the full year 2002. On this basis, and with the substantially increased level of cost savings, CMP Media should be approaching breakeven in the second half of 2002.

In the light of current revenue trends and our leaner cost base, we are on target to improve group margins in the second half of 2002, where we have a target margin rate for the half of 9 to 10 per cent. In 2003, we anticipate margins to rise in excess of 11 per cent.

©2002 United Business Media plc. All rights reserved.