The group’s UK-based one to one marketing businesses are closely aligned to the vagaries of the advertising industry and transcend the CRM and technology landscape as marketers increasingly focus on return on investment. In the highly fragmented UK market, which was severely affected by the worldwide slowdown in internet, technology and advertising spend, the one to one businesses (Primecom) came under tremendous pressure. In line with Primedia’s strategy to exit from the Primecom businesses in an orderly manner, Primedia’s interests in Mailcom, Alphamail, Virtutel, and DunnHumby were sold for cash and assumed debt amounting to R237 million prior to the 2002 financial year. During the 2002 financial year, C3 was sold for R13 million. The disposal of the majority of Primecom’s investments precipitated the closure of the bulk of the UK head office during the year.

DIVISIONAL PERFORMANCE
The major decline in the division’s profitability was largely due to the poor performance of Wheel Holdings and Spark Response.

Wheel Holdings Wheel is the UK’s largest independent specialist digital marketing agency focussed on the financial services, retail and entertainment sectors. It is a relatively small player in the highly fragmented sector, where it also competes with the major advertising agencies. Despite a pro-active approach taken by Wheel’s management to contain costs and effect a merger with Foresight, its sister company, Wheel experienced a steady decline in monthly revenues over the course of the year. This impacted negatively on margins and resulted in a R4 million loss before depreciation. Exceptional redundancy costs of R8 million were also expensed during the year. In 2001, Wheel generated an operating profit before depreciation of R19 million and exceptional redundancy costs of R33 million. The recent merger of Wheel and Foresight has not only created an improved focus on costs and shared infrastructures but has evolved a competitive digital marketing proposition which is beginning to bear fruit.

Spark Response
Spark operates in two service sectors: call centre and direct marketing fulfilment, the latter being the company’s core focus area. Whilst the call centre telephony business in the UK is highly competitive, Spark’s fulfilment operation has created an enviable position in the market as fulfilment has become an increasingly important part of the marketing solution, particularly with the move by marketers towards response-based advertising. During the year, the company’s call centre division performed unsatisfactorily mainly due to its unprofitable business-to-business service, which Spark is in the process of fully exiting. In the coming year, the company intends to strengthen its presence in the fulfilment sector following increased demand from new and existing clients.

The Database Group
The company currently sources most of its revenue from traditional database marketing services (collating and cleaning data), an area of business that is increasingly commoditised. A strategic shift is being implemented to move the business to the more high-value specialist consultancy arena, where data analysis is used to advise clients on fact-based strategies. The results for the year were satisfactory under the circumstances, though a R4 million exceptional redundancy charge was expensed as the company realigned its business model. In the 2003 financial year, the company faces the challenge of securing new business from consultancy work whilst remaining competitive in the traditional database business.

Knowledge Factory
Knowledge Factory is a South African based “customer insight” services company that is closely aligned with the technology and customer relationship management market. Following the down-turn in the technology and internet industries, a strategic decision was made during the year to integrate the businesses of Intact Solutions and The Knowledge Factory, with a view to capitalising on economies of scale and areas of overlap, whilst at the same time migrating their offerings up the value chain. The new company is now referred to as Knowledge Factory. With a revitalised business proposition centred around the increasing focus on return on marketing spend, the integated businesses are well positioned for the future.

Barry Stiefel Chief Executive Officer – One to One Marketing (UK)