Lord Hollick's United Business Media yesterday lost nearly a fifth of its value after the company put out a stinging warning on hi-tech advertising and revealed that it had cut a further 500 jobs.
The group indicated the size of the downturn would be deeper than it had suggested and that next year would not see any growth. UBM has focused on technology trade publications, especially in the US, through its CMP Media division but the company said yesterday the decline in hi-tech advertising expected this year would be greater than its previous guidance, spooking a market that is already jittery about the strength of any US economic recovery. Some 65 per cent of group revenues come from the US. UBM said its NOP market research unit and its PR newswire press release distribution business were also suffering in the US.
Lord Hollick said: "There has been no let-up in the difficult market conditions ... The outlook for the UK, European and Asian businesses remains encouraging. The outlook for the US business is mixed, with continuing pressure on revenues, no upturn is anticipated during the rest of 2002."
Reporting interim results, UBM said that CMP Media would see a 45 per cent decline in revenues this year, compared with the peak spending days of 2000, and not the minus 40 per cent that the company previously forecast. This was taken as very negative news, given the high operationally geared nature of this business, where $0.75 of each additional dollar flows through to the bottom line. Furthermore, the company indicated that the situation would be no better than flat in 2003, leading analysts to cut group profit and sales forecasts for this year and next.
Johnathan Barrett, at Teather & Greenwood, said: "Any disappointment is taken very negatively nowadays. If CMP Media doesn't recover, it's pretty grim for the company."
Further cost-cutting by UBM, usually welcomed by the City, only served to underline concerns, demonstrating that the deep cuts already made were not enough to arrest the severity of the decline. UBM announced it had made an additional £55m of cost savings during the six months to 30 June, knocking 24 per cent off the cost base compared with 2000 levels, and leading to a further 500 redundancies on top of the 1,400 already announced. The cuts are thought to be the deepest of any UK media company.
Meg Geldens, an analyst at Investec, said: "All divisions are seeing underlying declines in sales, which look like flowing into next year. This is one of the hardest hit revenues lines of any media company."
UBM shares fell 18 per cent to 257.5p, the lowest point in more than 10 years. First-half pre-tax profit, before exceptionals, was down 72 per cent at £40.7m, as turnover sank from £490.7m last year to £412.8m.
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