Profit on disposal of businesses and equity accounted investments
During 2005, the Group sold its market research business NOP World, and the Exchange & Mart and Auto Exchange titles. We also sold our equity investments in five, SDN and SIS. Total profits on disposal amounted to £417.0m after costs (see note 31 on page 96).

Restructuring and business reorganisation costs
UBM has implemented a number of restructuring and reorganisation projects across several businesses. The objectives of these projects are to simplify the Group structure following the disposals referred to above, to achieve greater geographical alignment of our publishing divisions, and to achieve greater customer and product focus whilst delivering lower operating costs.

The total cost of the projects is £37.2m, of which £7.2m has been spent in 2005. With the exception of amounts relating to vacant property, which will be incurred over the remainder of the lease terms, we anticipate spending the balance of the charge in 2006. The charge also includes the costs of integrating businesses acquired during the year.

The total charge for restructuring and reorganisation may be analysed as:

Capital expenditure for the year was £8.4m. This was again less than our depreciation charge of £9.3m. However as we reported last year, the two are converging. We expect capital expenditure to increase in 2006 to around £15m as we invest capital to improve revenue growth. The cash outflow in respect of surplus property was reduced to £12.7m from £16.1m. We paid tax of £17.4m, including consideration paid to five to acquire tax losses, and incurred restructuring and business reorganisation spend of £7.2m. We made additional contributions to our pension scheme of £17.2m which helped to reduce the deficit on the UK schemes to around £10m on a funding basis.

Balance sheet
Our balance sheet remains strong. The Group had net cash at 31 December 2005 of £246.8m. The disposals of NOP World, Exchange & Mart and Auto Exchange and our investments in five, SDN and SIS yielded £737.7m of which we reinvested £115.6m (including further consideration on prior year acquisitions) in acquisitions and returned £298.3m to shareholders via a special dividend.

We aim to increase the level of acquisitions from £105m achieved in 2005 to an annual level of £150m – £250m, whilst maintaining the Group’s strict financial criteria for acquisitions. The Board also intends to move the Group towards a prudent leveraged balance sheet over the next two years. Subject to trading over these few years, the Board expects to be in a position to return in excess of £300m of capital to shareholders during that period.

Our tax creditor is £219.4m. Representing our prudent assessment of the potential liability for prior years across different geographies we have necessarily made judgments as to the outcome of matters not yet concluded. This creditor has consistently been classified as short-term in line with our accounting convention. We do not expect the cash outflow in 2006 in respect of this liability to exceed £20m.

The Group is in dispute with HM Revenue & Customs with regards to a technical matter arising in relation to the sale of regional newspapers in 1998. We expect that the issue will be heard by the special commissioners later in 2006, although no date has been set. The tax in dispute is estimated at £80m. We remain confident that no tax will ultimately be payable. However we continue to make a prudent assessment in the accounts.

We continue to hold investments in ITN and the Press Association which continue to perform well.

Investment performance
The following table shows cash spent on acquisitions since 2003 and the returns on this capital in 2005:

2005 acquisitions contributed operating profit of £5.9m since acquisition and achieved a return of 17.7% on a proforma basis.

The performance of organic investments improved in 2005, with both revenue and operating profit increasing in line with expectations. In 2005 we achieved underlying revenue growth of 4.1% (2004: 3.2%) and we aim to accelerate that growth with further investment in 2006.

Impairment
We have reviewed the carrying value of our intangible assets (including goodwill) in light of current trading conditions and expectations and consider that no provision for impairment is required in the current year.

Pensions
The Group operates a number of defined benefit and defined contribution schemes based primarily in the UK but with some based overseas. The most recent actuarial valuations were undertaken at various points during 2005 and updated to 31 December 2005 using the projected unit method.

At 31 December 2005 the aggregate deficit under IAS 19 had decreased significantly to £52.3m from £96.0m, reflecting £17.2m of additional contributions made by the Group, strong asset returns, offset by adoption of more conservative assured mortality tables (longer life expectancy assumed) and a decrease in the discount rate used to value liabilities.

Additional contributions of £4.9m have been made in the first few months of 2006.

The IAS 19 interest charge was £2.5m in line with our expectations, reduced from £3.4m in 2004 reflecting the lower aggregate deficit.

Funding and financial risk management
The Group’s central treasury is principally concerned with managing internal and external funding requirements, the monitoring of working capital and the management of key financial market risks. Its activities are carried out in accordance with policies approved by the Board and are subject to regular review and audit. Contracts are entered into with approved counter parties and not on a speculative basis.

Following the disposals of NOP, five and others, partially offset by returns of capital to investors and acquisitions made during 2005, the Group has moved from a net debt position at the end of 2004 to a net cash position at the end of 2005. Net cash at the end of 2005 was £246.8m.

The Group borrows and invests centrally on behalf of its subsidiaries with the aim of maximising liquidity, security, flexibility and price competitiveness.

The Group’s debt at the end of 2005 is £242.6m (2004: £448.7m) comprising $165.4m of convertible bonds repayable in 2006, $5.7m of US senior notes, and €198.0m drawn from the Group’s £325m revolving credit facility. In 2005 the Group repurchased from surplus cash $234.6m of 2.375% convertible bond, and $179.3m of 7.75% US senior notes (for details on redemption and conversion and repurchases see note 21 on page 76).

Since 2002 the Group has repaid $625m of capital market debt from surplus cash. This debt carried an annual fixed cost of $47.5m per annum (average interest rate of 7.6%). The repayment of debt has significantly reduced the Group’s net interest costs.

The core bank facility was refinanced in 2005 raising funds for a further five years at lower cost, and on improved terms. The facility size was lowered from £500m to £325m reflecting the availability of liquid cash following disposals. The drawn margin on the new facility is 32.5 basis points.

The Group has established and retains strong relationships with a number of banks and financial institutions to facilitate future funding requirements and to ensure a balanced spread.

The Group’s debt contains a single financial covenant relating to interest cover.

Cash and short term liquid funds total £489.4m (2004: £379.9m) and are mainly short-term deposits with relationship banks or investments in AAA-rated money market funds. The Group operates strict investment guidelines with respect to surplus cash with the emphasis on the preservation of capital.

Exposure to interest rates is managed through the use of interest rates swaps. At the end of 2005, £436m (sterling equivalent) of interest rates swaps are outstanding with an average maturity of two years. All interest rate swaps require approval by the Finance Committee which includes the Group Chief Executive and the Chief Financial Officer.

Foreign currency transaction exposures are covered as they arise using forward foreign exchange contracts. There are no material contacts outstanding at the end of 2005. We do not hedge profits as they are accounting rather than cash exposures. Foreign currency borrowings are used where appropriate to provide a hedge against investment in overseas territories.

Our long-term credit rating remains investment grade with a Moody rating of Baa2 and Standard and Poor’s of BBB-, both with a stable outlook.

Going concern
Having reviewed the Group’s liquid resources, borrowing facilities and cash flow forecast, the directors believe that the Group has adequate resources to continue as a going concern for the foreseeable future.