UBM strategy

Our business model UBM’s marketplace Our strategy

1. Organic revenue growth 2. Growth through acquisition 3. People and culture 4. Responsible business 5. Processes

Our business model

UBM seeks to help companies make connections, communicate their proposition and do business effectively.

We transfer the skills, knowledge and experience we gain in serving one community across and between markets, transferring best practice and innovation from one community to another, from one geography to another and from one product type to another. From one company to many, we enable the flow of information, directing messages and assessing their impact on specific audiences.

Community understanding

As the graph in At a glance section highlights we operate in a variety of specialist communities which have attractive growth characteristics. We seek to know who’s who in the community, have relationships with key participants, create rich databases of relevance to those professionals, understand the key themes affecting their community, their information needs and how they operate. It is through this thorough understanding that we are able to service them most effectively.

Quality offering

By having a broad range of quality services and products we can create an offering specifically designed to meet the needs of the community being served. As described in more detail below, we think the media industry is shifting to a more integrated approach and therefore having a full range of products and services is increasingly important.

Geographic diversity

The transformation to a global economy coupled with the shift towards digital media leads us to believe that diverse geographic experience and infrastructure is advantageous. It also provides us with access to high growth opportunities in Emerging Markets and quality revenues from more mature markets.

Business model

UBM’s marketplace

The B2B marketplace which UBM operates in is extremely fragmented, reflecting the number and variety of communities and geographies we serve and the diversity of products and services we offer. Estimates of its size and growth prospects vary considerably. Outsell estimates that the ‘information industries’ marketplace (which includes HR information, Search, Aggregation & Syndication, Market Research, B2B Trade publishing and directories) is worth $366.3bn and is expected to demonstrate a compounded annual growth rate (‘CAGR’) of 2.3% between 2010 and 2013. PricewaterhouseCoopers meanwhile estimate the more narrowly defined ‘Business to Business’ market (which exclude live events, but include business information, trade magazines and directory advertising) at $141.3bn for 2010 and expect CAGR of 1.0% between 2010 and 2014.

There are two key influences on the long term development of the marketplace: the continuing impact of the ‘digital revolution’ and the shift towards the ‘Emerging Markets’.

Worldwide Enterprise IT spend is forecast to surpass $2.4 trillion in 2010, a 4.1% increase from 2009, with the communications, media and services industry expected to grow at a 4.6% CAGR between 2009–2014 (Source: Gartner Inc.). It is no surprise therefore that we are seeing a trend towards a more integrated marketing approach with digital at its core. Perhaps stimulated by the global recession, we are seeing a greater degree of client focus on efficiency and profitability; for example our customers want to be able to measure the impact of their marketing campaigns, or our audiences, who have access to a proliferation of content, are now looking for quality and accessibility. The distribution channels are changing, with mobile apps becoming increasingly important, and we are seeing a trend from solely traditional media platforms to a combination which offer a high level of engagement and are more embedded in the professionals’ work flow.

The importance of relationship marketing remains and we believe that face-to-face interactions will continue to be a crucial element of the B2B industry. One could even argue that in an increasingly environmentally conscious world it is appealing to attend a single event and meet a multitude of contacts, rather than travelling to meet each contact individually.

The other factor influencing the long term development of the marketplace is the macroeconomic environment and the shift towards the ‘Emerging Markets’. In the short term the industry as a whole should benefit from the global recovery – with improvements in the corporate spending environment and in the proportion of spend allocated to marketing. The speed of growth will vary, with the expectation that Emerging Markets will deliver the highest levels of growth.

The digitalisation trends and Emerging Markets shift are driving development both of new media products and services, and of new business models to support them, across all sectors and in all geographies. We view UBM’s diversity as a distinct advantage – our varied portfolio and breadth of geographic exposure enables us to be agile and capitalise on changes in our marketplace.

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Our strategy

Positioning UBM to benefit from these macro, long term shifts in the industry is our primary strategic objective. Our strategy is to take a leading role in the Live Media and B2B Communications markets, in chosen communities, by building businesses which are well positioned to prosper in the digital age and have the potential for global growth. The graphs above show how, over the last five years, we have re-shaped the portfolio and geographic exposure of UBM.

Whilst our strategy remains consistent, some of you may note that we’ve changed how we articulate it and are adopting a more granular approach. We have identified five priorities for delivering on our strategy:

1. Organic revenue growth
2. Growth through acquisition
3. People and culture
4. Responsible business
5. Appropriate processes

We have made good strategic progress in 2010 – evidenced through the financial key performance indicators:

KPI	2009	2010	Year on year change
Revenue (£m)	847.6	889.2	+4.9%
Adjusted operating profit* (£m)	171.2	171.8	+0.4%
Adjusted operating margin*	20.2%	19.3%	–0.9%
Adjusted EPS* (p)	55.1	51.0	–7.4%
Cash from operations (£m)	142.7	154.7	+8.4%
ROACE*	15.8%	14.7%	–1.1%pt
Net debt/ Adjusted EBITDA*	1.2x	2.6x

As you can see the Board have increased the number of financial KPIs they formally review to measure the health and progress of the business. They also review performance indicators which are more operational in nature (as detailed below).

* Further details given in UBM’s business measures section.

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1. Organic revenue growth:

We continually look to organically strengthen the products and services within our portfolio. Below we detail initiatives to improve the performance of each of the segments.

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Internal infrastructure

We continue to build our internal infrastructure to better support the businesses.

In China, which now accounts for 12.6% of total revenues, given its strategic focus, we have created a managerial role in Beijing to manage and coordinate our overall Chinese relationships and leverage the capabilities offered by the entire UBM portfolio of products and services.

Wiki usage

The UBM Wiki – online community, allows employees from all around the globe and different businesses to share ideas, information and best practice.

Wiki usage continues to increase – number of pages viewed in 2010

+28%

2. Growth through acquisition

We invest in strategic acquisitions in order to strengthen our existing portfolio or provide exposure to markets we feel are attractive.

Target selection

We select targets which are complementary to our existing business in terms of geography, segment or community. Below is a table showing the acquisitions made in 2010.

Integration process

In order to facilitate a smooth process, executives are given responsibility for integration. The integration of the Canon acquisition, completed in October, is progressing well.

Strict financial discipline

A target acquisition also has to satisfy financial criteria with projected post tax ROI* exceeding 8% within the first full year of ownership.

	Consideration	Pre tax return on investment %
	£m	2008	2009	2010
2008 acquisitions	49.9	12.4	6.5	7.8
2009 acquisitions	26.5	–	14.8	4.51
2010 acquisitions2	258.0	–	–	10.6
Total	334.4			10.0

2010 acquisitions	Geography	Segment	Community	Initial consideration net of cash acquired* £m	Expected contingent and deferred consideration £m	Estimated total consideration £m
E Commerce Expo	UK	Events	Technology	0.4	1.2	1.6
Sign China	China	Events	Other	6.3	4.3	10.6
DesignCon	USA	Events	Technology	0.9	–	0.9
Sienna – Concrete show	Brazil	Events	Built Environment	6.5	6.8	13.3
NavalShore	Brazil	Events	Trade & Transport	1.2	0.1	1.3
Children – Baby – Maternity – Expo	China	Events	Lifestyle	6.3	4.2	10.5
The Routes Development Group	UK	Events	Trade & Transport	6.8	1.3	8.1
Canon Communications	USA	Events	Technology/Health	182.9	–	182.9
Publishing Expo	UK	Events	Other	0.2	–	0.2
DNA-13	Canada	TD&M	News Distribution	4.0	0.6	4.6
PR Newswire do Brasil	Brazil	TD&M	News Distribution	0.7	0.1	0.8
PR Newswire Argentina	Argentina	TD&M	News Distribution	0.0	–	0.0
Corporate360	Hong Kong	TD&M	News Distribution	0.2	0.7	0.9
Hors Antenne	Europe	TD&M	News Distribution	5.3	2.7	8.0
SharedVue	USA	DS	Technology	0.2	4.9	5.1
CenTradeX	USA	DS	Trade & Transport	0.3	0.1	0.4
UM Paper	China	DS	Paper	0.1	0.2	0.3
JOC Exchange (Triton)	USA	DS	Trade & Transport	0.3	1.7	2.0
Lead-In Research	UK	DS	Built Environment	0.9	0.3	1.2
Game Advertising Online	New Zealand	Online	Technology	0.6	3.0	3.6
Astound	USA	Online	Technology	0.1	1.0	1.1
OBGYN.net	USA	Online	Health	0.5	0.1	0.6
Total				224.7	33.3	258.0

1 Performance reflects reported results for The Fuel Team which was integrated into PR Newswire in 2010. Excluding it, the pre tax return on acquisition would have been 8.6% for 2009 acquisitions.

2 2010 return on investment calculated on a full year pro-forma basis.

* Further details given in UBM’s business measures section.

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3. People and culture

Our people

A key element for creating long term growth is our ability to attract, develop and retain the most talented people at all levels. Our people are our most valuable asset. We do this through a variety of initiatives including:

• Talent management – most notably our Business Leaders Programme and European Leadership Development Programme
• Adopting employment policies which offer flexible working and paid leave
• Appropriate reward incentives – including bonus, long term incentives and Sharesave schemes
• Promoting the wellbeing of our people – wellness clinics and programmes, health checkups, healthclub reimbursement schemes etc

Our culture

Equally important is the culture of the Group – we have continued to make progress in developing a positive culture which is meritocratic, intellectually honest, entrepreneurial and innovative, which values respect and integrity, and which is agile and responsive to changes in our workplace. We believe that clear and open communication is fundamental to fostering this positive culture. We use a variety of means to communicate: the UBM Wiki, staff surveys, town hall meetings, e-newsletters etc. Encouragingly, our first UBM-wide engagement survey highlighted that we scored above the norm in areas such as recognition/respect in the workplace, encouragement to innovate and the sense that employee contributions are valued.

4. Responsible business

The issues of sustainability, climate change and corporate responsibility affect us all and, as a global company, we are committed to ensuring that we engage positively with society and minimise any negative and social impacts from our operations. Acting with respect is central to the way we do business, and we believe that acting in a responsible manner is key to delivering sustainable value for our shareholders.

Environment

As a leading organiser of events all around the world we recognise the impact that our business can have on the environment. We seek to reduce our carbon footprint over time and improve our recycling efforts.

Community

We recognise the importance of our relationship with the communities in which we operate. Over time we have been shifting our community focus away from more passive philanthropic activities, such as simple cash donations, to more active engagement, looking to bring our expertise to bear in how we serve the communities in which we operate.

See Corporate Responsibility section for further details.

5. Processes

Structure & Control

It is important to ensure we have the appropriate processes in place to carefully and efficiently measure and control performance within the business.

The CEO hosts monthly meetings/video calls with each of the divisional CEOs. We have a thorough quarterly review process in which the divisional CEOs update on performance and expectations against budget. Rewards are also aligned with strategy through incentives to achieve budget and specific personal objectives.

Focus on KPIs

As highlighted under Our strategy the Board review certain financial KPIs for the Group as a whole and operational performance indicators. The quarterly review process, mentioned above, also looks at the financial performance of each of the divisions.

Sound risk management

Sound risk management is an essential discipline for running the business efficiently and pursuing our strategy successfully. Our internal audit function manages a UBM-wide annual risk mapping exercise – reviewing with each division the risks they have identified and agreeing upon measures and controls to mitigate their risks wherever possible.

This process is reviewed by the Audit Committee and then by the Board, to ensure a consistent and coherent approach to the principal risk factors and to those other risk factors that may arise or which may become material in the future.

Divisional performance and associated risks are regularly discussed on CEO monthly calls.

See Risks and Uncertainties section for further details about how we manage risk.