LAUNCH OF DIVISIONAL STRATEGY
The Board of VTR plc has recently completed a review of its business.

The Group's four trading subsidiaries, Video Tape Recording, blue postproduction, The Machine Room and Clipstream have each achieved a high degree of recognition in their respective niche markets within the media services sector. Each of the companies has a reputation for delivering consistent quality and the Board has been seeking ways in which to utilise this success to benefit the group more as a whole, while preserving the individual characteristics of each business.

The Board believes that combining the businesses of the individual subsidiaries will result in economies of scale, increased efficiency and raised brand awareness, with attendant marketing opportunities and cost savings.

To this end, from 1 September 2004 the start of the Group's new financial year, the main trading activities of the Group will be provided through a new subsidiary company, VTR Media Services Ltd (VMS) with the former subsidiaries comprising operating divisions of this new entity. The Machine Room and Clipstream, whose activities complement each other closely and who share a similar target client base, will be combined into a single division.

This change will result in savings, through a reduction in staff numbers and other costs, of some £1.75 million per annum. The one-off cost of this restructuring is forecast to be in the region of £1 million, which will be taken as an exceptional charge in the financial year ending on 31 August 2004.

The Board sees these changes, and the resulting combination of new marketing opportunities and cost savings, enabling the Group in due course to return to profit levels achieved in the years prior to 2003.

After eleven months of trading the Board believes that the outcome for the current financial year will be in line with market expectations.

Philip Lovegrove
Chairman
24 August 2004