Why United Business Media is exciting the City at last

Lord Hollick's strategy of turning his consumer media empire into a business-to-business player had a painful birth.

By yesterday, however, the Labour peer, chief executive of the company now called United Business Media, could point to solid evidence of the strategy paying off. For the first time since the downturn in 2000, every division of the company showed revenue growth in yesterday's interim figures.

The company sold out of consumer media, divesting its ITV franchises and its Express group newspapers, just before the crash in media valuations. Even now, Lord Hollick can't resist thanking "those nice chaps at Granada" for the £1.75bn they handed him for United's ITV interests at the height of the boom.

What wasn't so sweetly timed was the $920m acquisition of a hi-tech US magazine publishing business, CMP Media, in 1999. That deal was followed by a crash in the technology sector that saw companies in the industries pull advertising budgets back savagely. Revenues in CMP Media plummeted and UBM was forced into some drastic cost-cutting. So the charge against UBM has been that although it sold well, it bought badly.

Aside from technology publishing in its "professional publishing" division, it also has an Asian trade shows business and a UK trade magazines unit. The other two divisions are market research and PR Newswire press release distribution - although added to recently, both these businesses were already in the group prior to 2000. It continues to add to its businesses, boosting its healthcare interests this year with the €283m acquisition of the MediMedia drug information publishing venture.

In fact, the poor conditions of the markets the company found itself in after 2000 has dominated sentiment towards UBM. This seems unfair.

Paul Richards, an analyst at Numis Securities, says UBM sold a lot more than it bought. "There's a growing appreciation of what they've achieved," he says. UBM raised a massive £3.2bn from disposals in 2000. Of this, shareholders received £1.25bn in a special dividend payment. Remember too that longer-term shareholders would also have got stock in a money-broking business that was demerged in 1998 and is now the mighty Icap.

The company has won plaudits in the City for the brutal way in which it was prepared to reduce costs. Since 2000, the cost-base has been cut by a third and 2,600 workers have been jettisoned.

Now the combined effects of that lower cost base and the upturn in its markets is showing. This year, for the first time since it has owned it, revenues at CMP Media should be up a little. But remember that turnover will still be less than half what it was when UBM bought the business.

What was exciting the City yesterday was the extent to which UBM has turned from a cost-cutting story, through to stabilisation, in the second half of last year, to tentative growth.

Lord Hollick was cautious. The interim results did, after all, show underlying group revenue growth of just 4 per cent. He said the company had seen a "steady" improvement and he saw things continuing at this sort of pace.

UBM as it exists today has some steadier businesses, such as the UK trade magazines and market research, and some that have very great recovery potential - CMP Media and PR Newswire. What is certainly true is that the company's shape was not really the result of strategy - UBM did not want to sell its consumer media businesses but decided to only after regulators blocked its attempt to become the number one player in ITV by merging with Carlton.

What troubles many commentators about the UBM that has emerged is whether we have now seen a structural shift in technology advertising that means companies in the sector will simply advertise less in future. Technology publishing is central to UBM.

Meg Geldens, an analyst at Investec Securities, says: "UBM has a good position in the technology market, where it is the leader, but there are question marks over that market and where it is going."

One further part of the UBM business may yet prove to be the most interesting of all: its 35 per cent stake in the terrestrial broadcaster Five. The station is now established and profitable. A merger of Five with its advertising-funded rival Channel 4 is currently being plotted. Lord Hollick says the logic of the deal is "pretty compelling" and that the merger would produce a "powerful new force" in British television.

Although UBM has been constantly asked when it would sell its stake in Five, it is now looking smart to have held on to it.

UBM should produce profits this year of some £130m. Lord Hollick is smiling again.

Bailey's 'Mirror' starts to turn the corner

Trinity Mirror, the newspaper publisher, has moved from recovery mode to growth, its chief executive, Sly Bailey said yesterday. That included the possibility of acquisitions, she said.

Reporting interim results, Ms Bailey, who has led the company since February last year, said the company's performance showed that her strategy was working. The group publishes national papers, including the Daily Mirror, plus a huge stable of regional titles.

Ms Bailey put together a three-stage strategy to turn around a company that was performing poorly. She characterised the stages as "Stabilise, Revitalise, Growth".

Despite continuing problems at the Mirror, Ms Bailey said she was now looking at the expansion phase. "Now we are turning our attentions to organic growth and thinking about the longer-term growth opportunities we have," she said.

Ms Bailey said this included the possible launches of new titles and acquisitions. She said a move into consumer magazine publishing was an option but one made no more likely by her own background in that industry.

With reference to buying regional newspaper groups, she conceded that not many would become available and that Trinity Mirror would have regulatory difficulties with any such deal - the company is already the biggest regional player.

The Daily Mirror has seen long-term circulation decline, along with much of the rest of the industry. However, the pace of that decline accelerated in May and June.

Ms Bailey pinned the blame for the further deterioration squarely on the scandal over fake pictures that the paper reproduced purporting to show British soldiers abusing prisoners in Iraq. "We were making progress [at the Mirror] but unfortunately the events of May and June have set that back," she said.

The company sacked the Daily Mirror's editor, Piers Morgan, over the affair. Ms Bailey said a subsequent internal investigation of its editorial controls had found "nothing untoward". She said the paper would "evolve" under its new editor, Richard Wallace. Ms Bailey's aim is to keep the Mirror's circulation decline within the industry average.

The interim figures showed group underlying pre-tax profit was up 27 per cent to £101.8m, for the six months to 27 June. Revenues grew 6 per cent, held up by cover price rises at both the national and regional titles.

The company increased its cost-savings target by £5m to £35m in 2005. It said this would result in only a further 20 to 30 job losses, on top of the 550 reductions already announced.

Ms Bailey said: "Today's results demonstrate our ability to meet objectives and show we are creating a fundamentally stronger and better-performing group... The strategy has created a substantially more robust platform from which we can look to future growth."