SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6 - K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the date of August 28, 2003
YELL FINANCE B.V.
(Translation of Registrant's Name Into English)
QUEENS WALK, OXFORD ROAD, READING, BERKSHIRE RG1 7PT, ENGLAND
(Address of Principal Executive Office)
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--- ---
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3 - 2(b) under the Securities Exchange Act of
1934.)
Yes No X
--- ---
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g 3-2(b) : 82 - ______ .
EXPLANATORY NOTE
On August 28, 2003, Yell Finance B.V. issued a press release announcing its
financial results for the three months ended June 30, 2003. A copy of the press
release, the Operating and Financial Review and Prospects at and for the three
months ended 30 June 2003 and the Financial Statements for Yell Finance B.V. and
Yell Group plc for the three months ended 30 June 2003, respectively, are
attached to this report.
EXHIBIT INDEX
Exhibit no. Description
- ----------- -----------
99.1 Press release dated 28 August 2003, regarding Yell financial
results for the three months ended June 30, 2003
99.2 Operating and Financial Review and Prospects at and for the three
months ended 30 June 2003
99.3 Financial Statements for Yell Finance B.V. for the three months
ended 30 June 2003
99.4 Financial Statements for Yell Group plc. for the three months
ended 30 June 2003
EXHIBIT 99.1
YELL
August 28, 2003
NEWS RELEASE NEWS RELEASE NEWS RELEASE NEWS RELEASE NEWS RELEASE
YELL FINANCIAL RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2003
CONTINUED STRONG PERFORMANCE
US REVENUE INTEGRATION BENEFITS COMING THROUGH
STRONG TURNOVER GROWTH IN UK AND US
o Group turnover up 5.5% to (pound)262.2 million; 10.7% at a constant
exchange rate
o UK printed directories up 4.7% to (pound)134.9 million, after RPI-6% price
cap
o US printed directories up 18.7% at a constant exchange rate reflecting
same-market growth of 7.7% and a full quarter's results of Yellow Book West
IMPROVED PROFITABILITY BEFORE EXCEPTIONAL IPO COSTS
o Group EBITDA up 13.3% to (pound)80.0 million before exceptional IPO costs
and up 17.3% at a constant exchange rate
o US EBITDA margin before exceptional IPO costs up 5.2 percentage points to
21.5%
STRONG UNDERLYING CASH GENERATION
o Operating cash flow, before exceptional IPO costs and after capital
expenditure, of (pound)49.6 million, down from (pound)73.2 million. As
identified at the year end, the decrease was driven entirely by timing of
payments around the year end, and underlying cash generation remained at
strong levels
JOHN CONDRON, CHIEF EXECUTIVE OFFICER OF YELL, SAID:
"With this strong set of results, we are well on track to meet full year
expectations.
"We continue to deliver strong organic growth, both in the UK and the US, with
improved profitability and good underlying cash generation. Our focused win,
keep and grow strategy achieves increased customer numbers, stable retention
rates and increased average advertising spend.
"In the US, we are seeing the expected improvement of the former Yellow Book
West (McLeod) operations, which are now performing broadly in line with our
overall US same-market growth rate, excluding Manhattan, of just over 10%,
reflecting the success of its integration and the adoption of the Yellow Book
East sales approach. We are confident these benefits will continue.
Yell Group plc. Registered Office: Queens Walk, Oxford Road,
Reading, Berkshire RG1 7PT. Registered in England No. 4180320.
"UK printed directories revenue grew 4.7%, after the price reduction under
RPI-6%. Following extensive consultation we are now planning to create ten new
London Yellow Pages directories out of five previous titles for publication in
our next financial year. This ensures that the directories reflect changing
demographic patterns, enabling them to continue attracting new advertisers and
users.
"We are delighted to be listed on the London Stock Exchange and we welcome our
new shareholders. By delivering value to our customers, we are creating value
for our shareholders through growing revenue and profits with sustained high
levels of cash generation."
JOHN DAVIS, CHIEF FINANCIAL OFFICER OF YELL, SAID:
"Strong revenue growth is accompanied by improved profitability with Group
EBITDA margin up 2.1 percentage points to 30.5%. This is driven by a 5.2
percentage point increase in US EBITDA margins to 21.5%, reflecting the
operational leverage of our business and integration benefits.
"As identified at the year end, the final quarter of last year benefited from a
higher than normal level of 2002/03 expenses not being paid until the first
quarter this year. As a result, cash generated in the first quarter this year
was (pound)49.6 million, down approximately (pound)24 million on the first
quarter last year. However our strong underlying cash generative characteristics
remain unchanged. Over the last twelve months to June 30, the Group converted
over 80% of EBITDA into cash.
"Operating cash inflow in the quarter of (pound)49.6 million more than covered
the cash costs of interest, financing fees and tax totalling (pound)19.8
million.
"As a result of the IPO a new capital structure is now in place which reduced
our debt to (pound)1.3 billion. Coupled with the deleveraging that will result
from strong cash generation, this will further improve our financial
performance."
2
CONTACT
INVESTORS
Jill Sherratt
Tel +44 (0)118 950 6984
Mobile +44 (0)7764 879808
jill.sherratt@yellgroup.com
- ---------------------------
MEDIA
Richard Duggleby
Tel +44 (0)118 950 6206
Mobile +44 (0)7860 733488
richard.duggleby@yellgroup.com
- ------------------------------
Jon Salmon
Tel +44 (0)118 950 6656
Mobile +44 (0)7801 977340
jon.salmon@yellgroup.com
- ------------------------
CITIGATE DEWE ROGERSON
Anthony Carlisle
Tel +44 (0)20 7638 9571
Mobile +44 (0)7973 611888
This news release contains forward-looking statements. These statements appear
in a number of places in this news release and include statements regarding our
intentions, beliefs or current expectations concerning, among other things, our
results of operations, revenue, cost synergies, financial condition, liquidity,
prospects, growth, strategies, new products (such as colour advertising), the
level of new directory launches and the markets in which we operate. Readers are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward-looking statements as a result of
various factors. You should read the section entitled "Risk Factors" in our
March 31, 2003, annual report on Form 20-F filed with the SEC on July 1, 2003
for a discussion of some of these factors. We undertake no obligation to
publicly update or revise any forward-looking statements, except as may be
required by law.
A copy of this release can be accessed at:
www.yellgroup.com/goto/announcements.html
Yell Finance BV filed its results for the three months ended June 30, 2003 with
the US Securities and Exchange Commission on Form 6-K. This filing can also be
accessed on the Yell Group website.
3
OPERATING PERFORMANCE BEFORE EXCEPTIONAL IPO COSTS
HEADLINE RESULTS
-----------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30
- ---------------------------------------------------------------------------------------------------------------------
2002 2003
(POUND)M (POUND)M CHANGE
- ----------------------------------------------------------------------------------------------------------------------
Group turnover 248.5 262.2 5.5%
- -------------------------------------------- ----------------------- -----------------------
Group EBITDA before exceptional IPO costs 70.6 80.0 13.3%
- -------------------------------------------- ----------------------- -----------------------
Operating cash flow, before exceptional
IPO costs and after capital expenditure 73.2 49.6 (32.2)%
- -------------------------------------------- ----------------------- -----------------------
Percentage of Group EBITDA before
exceptional IPO costs converted into
cash 103.7% 62.0%
- -------------------------------------------- ----------------------- -----------------------
TURNOVER
This quarter's results showed continued good progress in the UK and strong
growth in the US. Total Group turnover for the first quarter rose 5.5% to
(pound)262.2 million, or 10.7% on a constant exchange rate.
UK OPERATIONS
Turnover from the UK operations increased by 4.3% to (pound)144.9 million.
Printed directories turnover grew 4.7% to (pound)134.9 million, after the 4.4%
decline in prices under the regulatory price cap of RPI-6% (applied only to
Yellow Pages).
The number of unique advertisers was up to 136,400 with a marginal increase in
turnover per unique advertiser, after the price reductions, to (pound)989.
Yell.com grew revenues by 16.7% to (pound)5.6 million. A small decrease in other
UK product and services turnover arose from the discontinued activities of Yell
Data and the repositioning of Talking Pages as Yellow Pages 118 24 7, with the
introduction of a new pricing structure in March 2003.
US OPERATIONS
US turnover increased 7.0%, to (pound)117.3 million. The exchange impact reduced
revenues by (pound)12.8 million and on a constant US dollar basis, US turnover
grew by 18.7%. The effective exchange rates were approximately $1.63:
(pound)1.00 and $1.47: (pound)1.00 in the previous year.
Same-market growth was 7.7%, up from 5.3% last year, in spite of continuing
difficult economic conditions in Manhattan, affecting the largest US directory
in the quarter. Excluding Manhattan, same-market growth would have been just
over 10%.
The former McLeod directories are now performing broadly in line with this level
of same-market growth. This reflects the benefits of integration of Yellow Book
West into the Yell Group and the adoption of the Yellow Book sales
4
approach. The first quarter included only one metro-market relaunch directory in
Yellow Book West. The benefits from the four remaining relaunches will be
realised in future quarters.
Remaining growth was due to one new directory launch and the inclusion of a full
quarter of results of the acquisitions of McLeod and NDC, offset primarily by a
few directories which were moved into future periods for inclusion in rescopes
and to balance production schedules as a result of the integration of Yellow
Book West.
Unique advertisers increased by 6.6% to 105,070 with average turnover per unique
advertiser up 11.4% to $1,820.
EBITDA BEFORE EXCEPTIONAL IPO COSTS
Group EBITDA increased 13.3% to (pound)80.0 million. Excluding the impact of the
weaker US dollar, growth would have been 17.3%. Group EBITDA margin increased
2.1 percentage points to 30.5%, reflecting a strong performance in the US.
UK EBITDA rose 4.0% to (pound)54.8 million, reflecting primarily the continued
progress of Yell.com, which increased EBITDA to (pound)1.1 million from a loss
of (pound)0.4 million. UK EBITDA margin was 37.8%, a similar level to last year.
US EBITDA increased 40.8% to (pound)25.2 million, or up 56.4% at a constant
exchange rate. US EBITDA margin increased from 16.3% to 21.5%.
CASH FLOW BEFORE EXCEPTIONAL IPO COSTS
Net cash inflow from operating activities, before exceptional IPO costs and
after capital expenditure, was (pound)49.6 million, compared with (pound)73.2
million for the same period last year. As indicated at the year end, the final
quarter last year benefited from a higher than normal level of 2002/03 expenses
not being paid until the first quarter this year. This resulted in first quarter
cash conversion of 62.0%. However our cash generation characteristics remain
unchanged, and we expect cash conversion to return to the normal, higher levels
in the second quarter.
Operating cash inflow more than covered the cash costs of interest, financing
fees and tax totalling (pound)19.8 million.
5
NET RESULTS AND EXCEPTIONAL IPO COSTS
---------------------------------------------------------------------------------------------
THREE MONTHS ENDED 30 JUNE
---------------------------------------------------------------------------------------------
2002 2003
(POUND)M (POUND)M
---------------------------------------------- ----------------------------------------------
ORDINARY Exceptional ORDINARY Exceptional
ITEMS IPO costs Total ITEMS IPO costs Total
---------------- ----------------- ----------- --------------- ----------------- ------------
EBITDA 70.6 (15.0) 55.6 80.0 (47.3) 32.7
Depreciation and amortisation (28.9) - (28.9) (30.3) - (30.3)
---------------- ----------------- ----------- --------------- ----------------- ------------
OPERATING PROFIT 41.7 (15.0) 26.7 49.7 (47.3) 2.4
Net interest payable (57.6) - (57.6) (52.9) (30.0) (82.9)
---------------- ----------------- ----------- --------------- ----------------- ------------
Loss on ordinary activities
before taxation
(15.9) (15.0) (30.9) (3.2) (77.3) (80.5)
Taxation (4.0) 2.3 (1.7) (3.1) 27.8 24.7
---------------- ----------------- ----------- --------------- ----------------- ------------
LOSS FOR THE PERIOD (19.9) (12.7) (32.6) (6.3) (49.5) (55.8)
================ ================= =========== =============== ================= ============
The first quarter results represent the period prior to the IPO on July 15, 2003
and do not therefore include the benefits of the capital structure put in place
on the IPO. Loss before the exceptional IPO costs was reduced to (pound)6.3
million primarily as a result of strong US growth.
Net interest before exceptional IPO costs was (pound)52.9 million. Net interest
comprised (pound)29.2 million cash-pay interest, (pound)22.1 million of interest
rolled-up into our long-term debt and (pound)1.6 million of amortised financing
costs.
Taxation before exceptional IPO costs was (pound)3.1 million. We are paying tax
because certain goodwill amortisation is not allowable for determining tax.
The exceptional IPO costs we have incurred in the first quarter are as follows:
o (pound)47.3 million pre-financing costs of which (pound)39 million were
non-cash costs relating to a terminated US management incentive plan. This
plan was put in place at the time of the buy-out from BT in June 2001 and
was contingent upon the IPO. As the IPO has now taken place, the cost has
been charged to the profit and loss account;
o (pound)30.0 million of financing costs arising as a result of the IPO from
the repayment of the old senior credit facilities and the redemption of 35%
of our senior notes; and
o the above costs were partly offset by a (pound)27.8 million tax benefit
relating to the IPO costs.
The remaining IPO costs will be incurred during the second quarter. On a pre-tax
basis, the amounts charged to the profit and loss account will be slightly less
than those in the first quarter.
6
GLOBAL OFFER AND REFINANCING
On July 15, 2003, we raised (pound)433 million (gross proceeds) through a global
offer of shares to institutional investors. Net debt immediately following the
IPO was approximately (pound)1.3 billion.
As a result of the IPO, we redeemed 35% of the senior notes on August 18. We
also refinanced the senior bank facility on July 15.
7
APPENDICES
TURNOVER BY SEGMENT
-----------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30
-----------------------------------------------------------------------
2002 (1) 2003
(POUND)M (POUND)M CHANGE
- -------------------------------------------- ----------------------- ----------------------- -----------------------
UK printed directories 128.8 134.9 4.7%
Other UK products and services 10.1 10.0 (1.0)%
- -------------------------------------------- ----------------------- -----------------------
TOTAL UK TURNOVER 138.9 144.9 4.3%
- -------------------------------------------- ----------------------- -----------------------
US printed directories:
US printed directories at constant
exchange rate (2) 109.6 130.1 18.7%
Exchange impact (2) - (12.8) -
- -------------------------------------------- ----------------------- -----------------------
TOTAL US TURNOVER 109.6 117.3 7.0%
- -------------------------------------------- ----------------------- -----------------------
GROUP TURNOVER 248.5 262.2 5.5%
- -------------------------------------------- ----------------------- -----------------------
(1) Prior year results include McLeod from April 16, 2002 when it was acquired
and excludes NDC (acquired on December 31, 2002).
(2) Constant exchange rate states current year results at the same exchange
rate as that used to translate the previous year's results for the
corresponding period. Exchange rate impact is the difference between the
results reported at a constant exchange rate and the actual results
reported using current year exchange rates.
EBITDA BEFORE EXCEPTIONAL IPO COSTS BY SEGMENT
-----------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30
----------------------- ----------------------- -----------------------
2002 2003
(POUND)M (POUND)M CHANGE
- -------------------------------------------- ----------------------- ----------------------- -----------------------
TOTAL UK OPERATIONS 52.7 54.8 4.0%
- -------------------------------------------- ----------------------- -----------------------
US operations:
US printed directories at constant
exchange rate (1) 17.9 28.0 56.4%
Exchange impact (1) - (2.8) -
- -------------------------------------------- ----------------------- -----------------------
TOTAL US OPERATIONS 17.9 25.2 40.8%
- -------------------------------------------- ----------------------- -----------------------
GROUP EBITDA BEFORE EXCEPTIONAL IPO COSTS 70.6 80.0 13.3%
- -------------------------------------------- ----------------------- -----------------------
GROUP EBITDA MARGIN BEFORE EXCEPTIONAL IPO
COSTS (%) 28.4% 30.5%
- -------------------------------------------- ----------------------- -----------------------
(1) Constant exchange rate states current year results at the same exchange
rate as that used to translate the previous year's results for the
corresponding period. Exchange rate impact is the difference between the
results reported at a constant exchange rate and the actual results
reported using current year exchange rates.
8
KEY OPERATIONAL INFORMATION
--------------------------------------------------
THREE MONTHS ENDED JUNE 30
--------------------------------------------------
2002 2003
----------------------- --------------------------
- ------------------------------------------------------------------------
UK PRINTED DIRECTORIES
Unique advertisers (units) (1) 130,637 136,400
Directory editions published (units) (2) 26 26
Unique advertiser retention rate (%) (3) 79 78
Turnover per unique advertiser ((pound)) 986 989
US PRINTED DIRECTORIES
Unique advertisers (units) (1) 98,546 105,070
Directory editions published (units) 122 121
Unique advertiser retention rate (%) (3) 68 68
Turnover per unique advertiser ($) 1,634 1,820
OTHER UK PRODUCTS AND SERVICES
Yell.com page impressions for June (in millions) 32.7 42.7
Yell.com searchable advertisers as at June 30 (4) n/a 80,681
- ------------------------------------------------------------------------ ----------------------- --------------------------
(1) Number of unique advertisers in printed directories that were recognised
for revenue purposes and have been billed. Unique advertisers are counted
once only regardless of the number of advertisements they purchase or the
number of directories in which they advertise.
(2) Number of Yellow Pages and Business Pages directory editions that have been
recognised for revenue purposes.
(3) The proportion of unique advertisers that have renewed their advertising
from the preceding publication. In the United Kingdom, this measure
excludes national and key accounts where retention is very high. In 2003,
we further improved our systems and methodology for determining retention
rates in the United Kingdom and the United States. Although we have not
restated the rates disclosed for the prior period, we believe that had we
continued using the previous methodology the retention rate for the first
quarter would have been at a similar level to the rate disclosed for the
prior year.
In the United States, this measure is based on unique directory
advertisers. The 2002 retention rate is for Yellow Book East only while the
2003 retention rate is for Yellow Book as a whole.
(4) Unique customers with a live contract at month end. These figures refer to
searchable advertisers only, i.e. advertisers who can be searched for by
users on Yell.com. It excludes advertisers who purchase products such as
banners and domain names. This information is not available for 2002,
because new systems were being put in place in that period.
9
RECONCILIATION OF GROUP OPERATING PROFIT TO EBITDA BEFORE EXCEPTIONAL IPO COSTS
-------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30
-------------------------------------------------------------------------
2002 2003
(POUND)M (POUND)M CHANGE
- --------------------------------------------------------------------------------------------------------------------
UK OPERATIONS
Operating profit, including
exceptional IPO costs 20.5 31.9
Depreciation and amortisation 17.5 17.3
- ---------------------------------------------------------------------------------------------
UK operations EBITDA 38.0 49.2
Exceptional IPO costs 14.7 5.6
- ---------------------------------------------------------------------------------------------
UK OPERATIONS EBITDA BEFORE
EXCEPTIONAL IPO COSTS 52.7 54.8 4.0%
- ---------------------------------------------------------------------------------------------
UK operations EBITDA margin before
exceptional IPO costs 37.9% 37.8%
- ---------------------------------------------------------------------------------------------
US OPERATIONS
Operating profit (loss), including
exceptional IPO costs 6.2 (29.5)
Depreciation and amortisation 11.4 13.0
- ---------------------------------------------------------------------------------------------
US operations EBITDA 17.6 (16.5)
Exceptional IPO costs 0.3 41.7
Exchange impact (1) - 2.8
- ---------------------------------------------------------------------------------------------
US OPERATIONS EBITDA BEFORE
EXCEPTIONAL IPO COSTS AT CONSTANT
EXCHANGE RATE (1) 17.9 28.0 56.4%
Exchange impact (1) - (2.8)
- ---------------------------------------------------------------------------------------------
US OPERATIONS EBITDA BEFORE
EXCEPTIONAL IPO COSTS 17.9 25.2 40.8%
- ---------------------------------------------------------------------------------------------
US operations EBITDA margin before
exceptional IPO costs 16.3% 21.5%
- ---------------------------------------------------------------------------------------------
GROUP
Operating profit, including
exceptional IPO costs 26.7 2.4
Depreciation and amortisation 28.9 30.3
- ---------------------------------------------------------------------------------------------
Group EBITDA 55.6 32.7
Exceptional IPO costs 15.0 47.3
Exchange impact (1) - 2.8
- ---------------------------------------------------------------------------------------------
GROUP EBITDA BEFORE EXCEPTIONAL IPO
COSTS AT CONSTANT EXCHANGE RATE (1) 70.6 82.8 17.3%
Exchange impact (1) - (2.8)
- ---------------------------------------------------------------------------------------------
GROUP EBITDA BEFORE EXCEPTIONAL IPO
COSTS 70.6 80.0 13.3%
=============================================================================================
GROUP EBITDA MARGIN BEFORE EXCEPTIONAL
IPO COSTS 28.4% 30.5%
- ---------------------------------------------------------------------------------------------
(1) Constant exchange rate states current year results at the same exchange
rate as that used to translate the previous year's results for the
corresponding period. Exchange rate impact is the difference between the
results reported at a constant exchange rate and the actual results
reported using current year exchange rates.
10
NOTES TO EDITORS
YELL GROUP
Yell is an international directories business operating in the classified
advertising market through printed, online and telephone media in the United
Kingdom and the United States. Yell's products in the United Kingdom include the
Yellow Pages and Business Pages directories, Yell.com and Yellow Pages 118 24 7
and in the United States, Yellow Book and Yellowbook.com.
----------------------------------------------------
11
EXHIBIT 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS AT AND
FOR THE THREE MONTHS ENDED 30 JUNE 2003
References to "we", "us", "our", "Yell", and the "Yell Group" are to Yell
Finance B.V., a company incorporated with limited liability under the law of the
Netherlands, and its consolidated subsidiaries. Except as otherwise indicated
these terms also refer to the business of McLeodUSA Media Group, Inc. ("McLeod")
and its subsidiaries acquired on 16 April 2002 and, after 31 December 2002, the
business of National Directory Company ("NDC") (which together are referred to
throughout this document as "Yellow Book West").
The following information should be read in conjunction with the unaudited
financial information for the Yell Group. The attached financial information has
been prepared in accordance with accounting principles generally accepted in the
United Kingdom ("UK GAAP"). UK GAAP differs in certain important respects from
accounting principles generally accepted in the United States ("US GAAP").
This report contains forward-looking statements. These statements appear in a
number of places in this report and include statements regarding our intentions,
beliefs or current expectations concerning, among other things, our results of
operations, financial condition, liquidity, prospects, growth, strategies, new
products (such as colour advertising), the level of new directory launches and
the markets in which we operate.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those in the forward-looking
statements as a result of various factors. You should read the section entitled
"Risk Factors" in our annual report on Form 20-F filed with the US Securities
and Exchange Commission ("SEC") on 1 July 2003 for a discussion of some of these
factors. We undertake no obligation to publicly update or revise any
forward-looking statements, except as may be required by law.
INTRODUCTION
The Yell Group is the leading provider of classified directory advertising and
associated products and services in the United Kingdom and the leading
independent provider of classified directory advertising in the United States.
SUMMARY RESULTS
THREE MONTHS ENDED 30 JUNE
---------------------------------------
2002 2003 CHANGE
---------------------------------------------------------
((POUND) IN MILLIONS) (%)
- ----------------------------------------------------------------------------------------------------------------------------
Group turnover 248.5 262.2 5.5%
Cost of sales (118.1) (117.7) (0.3)%
- ----------------------------------------------------------------------------------------------------------
Gross profit 130.4 144.5 10.8%
Distribution costs (9.0) (9.3) 3.3%
Administrative expenses (including exceptional items) (94.7) (132.8) 40.2%
- ----------------------------------------------------------------------------------------------------------
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS 41.7 49.7 19.2%
Exceptional administrative costs (15.0) (47.3) 215.3%
- ----------------------------------------------------------------------------------------------------------
OPERATING PROFIT 26.7 2.4 (91.0)%
==========================================================================================================
LOSS FOR THE FINANCIAL PERIOD (32.6) (55.8) 71.2%
==========================================================================================================
Gross profit margin (%) 52.5 55.1
EBITDA(1) 55.6 32.7 (41.2)%
EBITDA margin (%) 22.4 12.5
EBITDA before exceptional items (2) 70.6 80.0 13.3%
EBITDA margin (%) before exceptional items 28.4 30.5
Cash inflow from operations before exceptional items, less
capital expenditure 73.2 49.6 (32.2)%
Cash conversion before exceptional items (%) (3) 103.7 62.0
- -----------------
(1) EBITDA comprises total operating profit before depreciation and
amortisation, both being non-cash items. EBITDA is not a measurement of
performance under UK or US GAAP and you should not consider EBITDA as an
alternative to (a) operating profit or net profit/(loss) (as determined in
accordance with generally accepted accounting principles), (b) cash flows
from operating, investing or financing activities (as determined in
accordance with generally accepted accounting principles), or as a measure
of our ability to meet cash needs or (c) any other measures of performance
under generally accepted accounting principles. EBITDA is not a direct
measure of our liquidity, which is shown by the Group's cash flow statement
and needs to be considered in the context of our financial commitments.
EBITDA may not be indicative of our historical operating results, nor is it
meant to be predictive of our potential future results. We believe that
EBITDA is a measure commonly reported and widely used by investors in
comparing performance on a consistent basis without regard to depreciation
and amortisation, which can vary significantly depending upon accounting
methods (particularly when acquisitions have occurred) or non-operating
factors. Accordingly, EBITDA has been disclosed in this financial
information to permit a more complete and comprehensive analysis of our
operating performance relative to other companies and of our ability to
service our debt. Because all companies do not calculate EBITDA
identically, our presentation of EBITDA may not be comparable to similarly
titled measures of other companies. See "Group Operating Profit, EBITDA and
EBITDA Before Exceptional Items".
(2) EBITDA before exceptional items comprises EBITDA as described above and
excludes expenses incurred in connection with the initial public offering
by our parent company, Yell Group plc and subsidiaries, of (pound)47.3
million in the three months ended 30 June 2003 (three months ended 30 June
2002 - (pound)15.0 million expenses of our parent company's withdrawn
initial public offering).
(3) Cash conversion represents cash flow from operations before exceptional
items, less capital expenditure, as a percentage of EBITDA before
exceptional items. We believe cash conversion is a relevant measure used by
companies to assess performance as it gives a relative measure of the
efficiency with which EBITDA is converted into cash. Cash conversion should
not be considered by investors as an alternative to group operating profit
or profit on ordinary activities before taxation as an indicator of
operating performance or as an alternative to cash flow from operating
activities. See "Group Operating Profit, EBITDA and EBITDA Before
Exceptional Items".
2
YELL GROUP OPERATIONAL INFORMATION
THREE MONTHS ENDED 30 JUNE
------------------------------------------
2002 2003
------------------------------------------
UK PRINTED DIRECTORIES
Unique advertisers (units) (1) 130,637 136,400
Directory editions published (units) (2) 26 26
Unique advertiser retention rate (%) (3) 79 78
Turnover per unique advertiser ((pound)) 986 989
US PRINTED DIRECTORIES
Unique advertisers (units) (1) 98,546 105,070
Directory editions published (units) 122 121
Unique advertiser retention rate (%) (3) 68 68
Turnover per unique advertiser ($) 1,634 1,820
OTHER UK PRODUCTS AND SERVICES
Yell.com page impressions for June (in millions) 32.7 42.7
Yell.com searchable advertisers as at 30 June (4) n/a 80,681
- -----------------
(1) Number of unique advertisers in printed directories that were recognised
for revenue purposes and have been billed. Unique advertisers are counted
once only regardless of the number of advertisements they purchase or the
number of directories in which they advertise.
(2) Number of Yellow Pages and Business Pages directory editions that have been
recognised for revenue purposes.
(3) The proportion of unique advertisers that have renewed their advertising
from the preceding publication. In the United Kingdom, this measure
excludes national and key accounts where retention is very high. In 2003,
we further improved our systems and methodology for determining retention
rates in the United Kingdom and the United States. Although we have not
restated the rates disclosed for the prior period, we believe that had we
continued using the previous methodology the retention rate for the three
months ended 30 June 2003 would have been at a similar level to the rate
disclosed for the same period in the prior financial year.
In the United States, this measure is based on unique directory
advertisers. The 2002 retention rate is for Yellow Book East only while the
2003 retention rate is for Yellow Book as a whole.
(4) Unique customers with a live contract at month end. These figures refer to
searchable advertisers only, i.e. advertisers who can be searched for by
users on Yell.com. It excludes advertisers who purchase products such as
banners and domain names. This information is not available for 2002,
because new systems were being put in place in that period.
3
TURNOVER
THREE MONTHS ENDED 30 JUNE
-----------------------------------------
2002 (1) 2003 CHANGE
------------------------ ---------------- ---------------
((POUND) IN MILLIONS)
- ----------------------------------------------------------------- ----------------------------------------- ---------------
UK printed directories 128.8 134.9 4.7%
Other UK products and services 10.1 10.0 (1.0)%
- ----------------------------------------------------------------- ------------------------ -----------------
TOTAL UK TURNOVER 138.9 144.9 4.3%
- ----------------------------------------------------------------- ------------------------ -----------------
US printed directories:
US printed directories at constant exchange rate (2) 109.6 130.1 18.7%
Exchange impact (2) - (12.8) -
- ----------------------------------------------------------------- ------------------------ -----------------
TOTAL US TURNOVER 109.6 117.3 7.0%
- ----------------------------------------------------------------- ------------------------ -----------------
GROUP TURNOVER 248.5 262.2 5.5%
================================================================= ======================== =================
- ---------------------------
(1) Prior year results include McLeod from 16 April 2002, when it was acquired,
and excludes NDC (acquired on 31 December 2002).
(2) Constant exchange rate states current year results at the same exchange
rate as that used to translate the previous year's results for the
corresponding period. Exchange impact is the difference between the results
reported at a constant exchange rate and the actual results reported using
current year exchange rates.
Total Group turnover during the three months ended 30 June 2003 increased by
(pound)13.7 million, or 5.5%, compared to the same period last year (2),
reflecting increased turnover during the period, particularly from US printed
directories which grew by 7.0%.
We recognise turnover from advertising sales for each printed directory on
completion of delivery of that directory.
UK TURNOVER
Total UK turnover grew by 4.3% from last year. Turnover from UK printed
directories increased by (pound)6.1 million, or 4.7%, despite the price cap2 of
RPI minus 6% applicable to Yellow Pages directories, which was in effect for the
period. Turnover from our online directory service increased by (pound)0.8
million, or 16.7%, from (pound)4.8 million to (pound)5.6 million. These
increases were offset by a decline in turnover from our other products and
services; our telephone-based service was repositioned as Yellow Pages 118 24 7
(formerly Talking Pages), following deregulation of the UK directory enquiries
market, and a new pricing structure was introduced in March 2003. We also sold
our data-service business (Yell Data).
- ---------------------------
1 Throughout this report unless otherwise indicated, references to "for the
three months" or the "three month period" are to the three months ended 30
June 2003 and references to "last year", the "prior year" or the "prior
period" are to the corresponding period in the previous financial year.
2 Effective from January 2002 and pursuant to undertakings given to the UK
Secretary of State for Trade and Industry in July 1996, we are required to
cap the rates charged for advertising sold after that date in our UK
printed consumer classified directories at the Retail Price Index ("RPI")
minus 6% for an expected period of four years from January 2002. During the
three months ended 30 June 2002 and 2003, the average price of advertising
in our Yellow Pages decreased by 4.4%. We are not subject to any regulatory
price constraints in the United States. The relevant price cap applied to
approximately 49.4% and 49.0% of our Group turnover in the three months
ended 30 June 2002 and 2003, respectively.
4
Our growth was the result of:
o a 4.4% increase in the number of unique advertisers from 130,637 to
136,400, as a result of the continued success of our first-year advertiser
discount programmes and our ability to retain 78% of existing customers. We
attracted 27,933 new advertisers in the first three months as compared to
27,001 last year; and
o a slight increase in turnover per unique advertiser in our UK printed
directories to(pound)989 from(pound)986, after the impact of the 4.4% price
reduction.
US TURNOVER
US turnover increased by (pound)7.7 million, or 7.0%, from (pound)109.6 million
for the three months ended 30 June 2002 to (pound)117.3 million for the three
months ended 30 June 2003. The Group had 105,070 unique advertisers in the
United States for the three months ended 30 June 2003 compared to 98,546 in the
prior year. Average turnover per unique advertiser grew 11.4% from $1,634 to
$1,820.
The results were negatively affected by (pound)12.8 million from a weakening US
dollar. On a constant US dollar basis, US turnover grew by (pound)20.5 million,
or 18.7%. The effective exchange rates were approximately $1.63 to (pound)1.00
in the quarter to 30 June 2003 and $1.47 to (pound)1.00 in the prior year.
Same-market growth of 7.7% has grown from 5.3% last year in spite of continuing
difficult economic conditions in Manhattan, where we published the largest US
directory in the quarter. Excluding the Manhattan directory, same-market growth
would have been just over 10%.
The former McLeod directories are now performing broadly in line with Yellow
Book East same-market growth, excluding the Manhattan directory. We believe that
this growth reflects the benefits of integration of Yellow Book West into the
Yell Group and the adoption of the Yellow Book sales approach. The first quarter
included only one metro-market relaunch directory in Yellow Book West. The
benefits from the four remaining relaunches will be realised in future quarters.
Remaining growth was due to one new directory launch and the inclusion of a full
quarter of results of acquisitions of McLeod and NDC, offset primarily by a few
directories which were moved into future periods for inclusion in rescopes and
to balance production schedules as a result of the integration of Yellow Book
West.
5
COST OF SALES
THREE MONTHS ENDED 30 JUNE
-------------------------------------------
2002 2003 CHANGE
------------------------ ------------------ --------------------
((POUND) IN MILLIONS)
- -------------------------------------------------------------- ------------------------------------------- --------------------
UK printed directories 47.2 51.2 8.5%
Other UK products and services 3.4 2.9 (14.7)%
- -------------------------------------------------------------- ----------------------- -------------------
TOTAL UK COST OF SALES 50.6 54.1 6.9%
- -------------------------------------------------------------- ----------------------- -------------------
US printed directories:
US printed directories at constant exchange rate (1) 67.5 70.5 4.4%
Exchange impact (1) - (6.9) -
- -------------------------------------------------------------- ----------------------- -------------------
TOTAL US COST OF SALES 67.5 63.6 (5.8)%
- -------------------------------------------------------------- ----------------------- -------------------
TOTAL COST OF SALES 118.1 117.7 (0.3)%
============================================================== ======================= ===================
- -----------------
(1) Constant exchange rate states current year results at the same exchange
rate as that used to translate the previous year's results for the
corresponding period. Exchange impact is the difference between the results
reported at a constant exchange rate and the actual results reported using
current year exchange rates.
We recognise the cost of sales for each directory on completion of delivery of
that directory.
Our cost of sales consists principally of costs associated with the publication
of directories, including advertising sales, paper, printing and pre-press
production, as well as bad debt expense. The principal components of advertising
sales costs, which represent a significant portion of our cost of sales, are
employee costs of the sales force, including salaries, benefits and commissions,
and associated direct costs.
The (pound)3.5 million, or 6.9%, increase in cost of sales for the UK business,
from (pound)50.6 million to (pound)54.1 million in the three months ended 30
June 2003, reflected higher advertisement volumes. Cost of sales as a percentage
of turnover was 37.3% as compared to 36.4% for the corresponding period in the
prior financial year.
The (pound)3.9 million, or 5.8%, decrease in cost of sales for US printed
directories reflected a weakening US dollar and cost savings experienced as a
result of the integration of our Yellow Book East and Yellow Book West
operations. On a constant US dollar basis, cost of sales increased by 4.4%. Cost
of sales for US printed directories as a percentage of related turnover was
54.2% as compared to 61.6% last year. Paper, printing and binding, and pre-press
costs as a percentage of turnover for the three months ended 30 June 2003 of
21.7% decreased from 25.2% last year, representing benefits arising from the
integration of the McLeod acquisition and cost savings from volume price
reductions.
Our consolidated bad debt expense was (pound)13.8 million, or 5.3% of Group
turnover in the three months ended 30 June 2003, as compared to (pound)17.4
million, or 7.0%, last year. The charge for UK bad debts was 4.1% of UK printed
directories and other products and services turnover compared to 4.3% last year.
The US bad debt expense was 6.7% of US printed directories turnover in the three
months ended 30 June 2003 as compared to 8.9% for the same period in the prior
financial year, reflecting the maturing of our US directory profile.
Historically, the US bad debt expense as a percentage of turnover has been
higher than in the United Kingdom due to different market dynamics.
6
GROSS PROFIT AND GROSS PROFIT MARGIN
THREE MONTHS ENDED 30 JUNE
----------------------------------------------
2002 2003 CHANGE
-------------------------- ------------------- -------------------
((POUND) IN MILLIONS)
- -------------------------------------------------------------- ---------------------------------------------- -------------------
UK printed directories 81.6 83.7 2.6%
Other UK products and services 6.7 7.1 6.0%
- -------------------------------------------------------------- -------------------------- -------------------
TOTAL UK GROSS PROFIT 88.3 90.8 2.8%
- -------------------------------------------------------------- -------------------------- -------------------
US printed directories:
US printed directories at constant exchange rate (1) 42.1 59.6 41.6%
Exchange impact (1) - (5.9) -
- -------------------------------------------------------------- -------------------------- -------------------
TOTAL US GROSS PROFIT 42.1 53.7 27.6%
- -------------------------------------------------------------- -------------------------- -------------------
GROSS PROFIT 130.4 144.5 10.8%
============================================================== ========================== ===================
GROSS PROFIT MARGIN (%)
UK operations 63.6 62.7
US operations 38.4 45.8
GROUP TOTAL (%) 52.5 55.1
============================================================== ========================== ===================
- --------------------------
(1) Constant exchange rate states current year results at the same exchange
rate as that used to translate the previous year's results for the
corresponding period. Exchange impact is the difference between the results
reported at a constant exchange rate and the actual results reported using
current year exchange rates.
The increase in gross profit as a percentage of Group turnover from 52.5% last
year to 55.1% in the current period principally reflected the benefits of
integrating acquisitions by our US operations and the maturing of our US
directories profile, as discussed above.
During the three months ended 30 June 2002 and 2003, over 55% of our turnover
came from our UK operations. Our printed directories business in the United
Kingdom, which we view as more developed than that in the United States, and
which covers substantially all of the United Kingdom, has historically had
higher gross profit margins than those in the United States.
In the United States, the different market dynamics and the younger portfolio
result in lower gross profit margins. In the three months ended 30 June 2003,
for example, our gross profit margin for our UK operations was 62.7%, compared
to 45.8% for our US operations. Our overall gross profit margin is therefore
affected and will continue to be affected by lower gross profit margins in the
United States to the extent our US operations continue to form an increasing
portion of the geographic mix of our business.
7
DISTRIBUTION COSTS AND ADMINISTRATIVE EXPENSES
Our distribution costs consist mainly of amounts payable to third-party delivery
companies with which we contract for the delivery of our printed directories.
These costs vary principally due to the number of directories delivered in a
financial period. Our distribution costs related to a directory are recognised
when the directory is delivered.
Distribution costs increased by (pound)0.3 million, or 3.3%, from (pound)9.0
million in the three months ended 30 June 2002 (3.6% of Group turnover) compared
to (pound)9.3 million (3.5% of Group turnover) in the three months ended 30 June
2003.
Our administrative expenses consist principally of amortisation and
depreciation, advertising, promotion and marketing expenses, administrative
staff expenses, information technology costs and staff training. Advertising,
promotion and marketing costs represent our most significant discretionary
expenses.
Administrative expenses, including exceptional items, increased by (pound)38.1
million, or 40.2%, from (pound)94.7 million in the three months ended 30 June
2002 to (pound)132.8 million in the three months ended 30 June 2003. The
increase was largely due to:
o the expensing of (pound)45.7 million for employee incentive plans, which
were contingent upon our parent company's initial public offering in July
2003, and (pound)1.6 million for other one-off costs. We expect further
administrative expenses related to the initial public offering, primarily
relating to fees payable to advisers, in the second quarter; and
o the effects of including a full quarter of Yellow Book West administrative
costs in the current period and foreign exchange movements.
These increases were partially offset by the absence of (pound)15.0 million in
costs incurred for the withdrawn initial public offering of our parent company
in July 2002.
8
GROUP OPERATING PROFIT, EBITDA AND EBITDA BEFORE EXCEPTIONAL ITEMS
THREE MONTHS ENDED 30 JUNE
------------------------------------------
2002 2003 CHANGE
----------------------------------------------------------------
((POUND) IN MILLIONS)
- ------------------------------------------------------------------------------------------------------------------------------
UK OPERATIONS
Operating profit, including exceptional items 20.5 31.9
Depreciation and amortisation 17.5 17.3
- --------------------------------------------------------------------------------------------------------
UK OPERATIONS EBITDA 38.0 49.2
Exceptional items 14.7 5.6
- --------------------------------------------------------------------------------------------------------
UK OPERATIONS EBITDA BEFORE EXCEPTIONAL ITEMS 52.7 54.8 4.0%
- --------------------------------------------------------------------------------------------------------
US OPERATIONS
Operating profit (loss), including exceptional items 6.2 (29.5)
Depreciation and amortisation 11.4 13.0
- --------------------------------------------------------------------------------------------------------
US OPERATIONS EBITDA 17.6 (16.5)
Exceptional items 0.3 41.7
- --------------------------------------------------------------------------------------------------------
US OPERATIONS EBITDA BEFORE EXCEPTIONAL ITEMS 17.9 25.2 40.8%
- --------------------------------------------------------------------------------------------------------
US OPERATIONS EBITDA BEFORE EXCEPTIONAL ITEMS
AT CONSTANT EXCHANGE RATE (1) 17.9 28.0 56.4%
- --------------------------------------------------------------------------------------------------------
GROUP
Operating profit, including exceptional items 26.7 2.4
Depreciation and amortisation 28.9 30.3
- --------------------------------------------------------------------------------------------------------
GROUP EBITDA 55.6 32.7 (41.2)%
========================================================================================================
GROUP
Operating profit before exceptional items 41.7 49.7
Depreciation and amortisation 28.9 30.3
- --------------------------------------------------------------------------------------------------------
GROUP EBITDA BEFORE EXCEPTIONAL ITEMS 70.6 80.0 13.3%
========================================================================================================
GROUP EBITDA BEFORE EXCEPTIONAL ITEMS
AT CONSTANT EXCHANGE RATE (1) 70.6 82.8 17.3%
========================================================================================================
EBITDA MARGIN (%)
UK operations 27.4 34.0
US operations 16.1 (14.1)
EBITDA MARGIN BEFORE EXCEPTIONAL ITEMS (%)
UK operations 37.9 37.8
US operations 16.3 21.5
========================================================================================================
- --------------------------
(1) Constant exchange rate states current year results at the same exchange
rate as that used to translate the previous year's results for the
corresponding period. Exchange impact is the difference between the results
reported at a constant exchange rate and the actual results reported using
current year exchange rates.
EBITDA from UK operations before exceptional items increased by 4.0% to
(pound)54.8 million from (pound)52.7 million. Yell.com reported EBITDA of
(pound)1.1 million for the three months ended 30 June 2003 (operating profit of
(pound)0.6 million adding back depreciation of (pound)0.5 million), compared to
a loss of (pound)0.4 million in the prior year (operating loss of (pound)0.9
million adding back depreciation of (pound)0.5 million). Exceptional items of
(pound)5.6 million of costs in the quarter ended 30 June 2003 were incurred in
connection with the initial public offering of our parent company in July 2003
and other non-recurring transaction charges, and (pound)14.7 million was charged
in the previous financial year for the withdrawn initial public offering in July
2002.
9
EBITDA before exceptional items from US operations increased by (pound)7.3
million, or 40.8%. This increase reflects the inclusion of acquisitions for a
full quarter during the three months ended 30 June 2003. We also increased the
profitability of our directories by leveraging off our existing operations and
administrative cost base to yield additional turnover from our directories
without a corresponding increase in costs.
Excluding the exceptional items in 2003 and 2002, Group EBITDA increased by
(pound)9.4 million, or 13.3%. Excluding the exceptional items and at constant US
dollar exchange rates, Group EBITDA would have increased by (pound)12.2 million,
or 17.3%.
NET INTEREST PAYABLE
Net interest expense was (pound)82.9 million, comprising cash interest, non-cash
interest and exceptional items in the three months ended 30 June 2003, compared
to (pound)57.6 million last year. The exceptional items of (pound)30.0 million
represent the accelerated amortisation of deferred financing costs in connection
with the repayment of the senior credit facilities on 15 July 2003 and the early
redemption of 35% of our senior notes on 18 August 2003. Net interest expense
comprised (pound)29.2 million of net interest paid or to be paid within a
six-month period, (pound)22.1 million of cash interest rolled-up into our
long-term debt and (pound)1.6 million of amortised financing costs.
TAX ON PROFIT (LOSS) ON ORDINARY ACTIVITIES
Taxation before exceptional items of (pound)3.1 million for the three months
ended 30 June 2003 and (pound)4.0 million last year was charged despite the loss
on ordinary activities because certain goodwill amortisation is not allowable
for determining tax. Tax credits in the amount of (pound)27.8 million for the
three months ended 30 June 2003 and (pound)2.3 million last year were recognised
as a benefit offsetting one-off items. Our future taxation charge will depend on
our taxable income in the United Kingdom and the United States and our ability
to continue using our net operating losses to offset our future taxable income
in the United States.
NET LOSS
The net loss was (pound)55.8 million for the three months ended 30 June 2003
compared to a net loss of (pound)32.6 million for the same period in the prior
year.
LIQUIDITY AND CAPITAL RESOURCES
Apart from significant acquisitions, which we have funded through a combination
of borrowings, cash from contributions from the investment funds which
previously owned our parent company and cash flows from operations, we have
funded our existing business largely from cash flows generated from our
operations. We believe that we have sufficient working capital to meet our
operating and capital expenditure requirements. In addition, we have access to a
(pound)200 million revolving credit facility as part of the new senior credit
facilities, which expires on 7 July 2008, of which none was drawn down at 30
June 2003.
10
CASH FLOWS
THREE MONTHS ENDED 30 JUNE
-------------------------------------------------
2002 2003
-------------------------------------------------
((POUND) IN MILLIONS)
- -------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 78.8 55.1
Net cash outflow for returns on investments and servicing of
finance (31.7) (18.8)
Net cash outflow for taxation - (1.0)
Net cash outflow for capital expenditure and financial
investment (429.3) (7.3)
- -------------------------------------------------------------------------------------------------------------
NET CASH (OUTFLOW) INFLOW BEFORE FINANCING (382.2) 28.0
Net cash inflow from financing 404.9 -
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 22.7 28.0
=============================================================================================================
Net cash inflow from operating activities for the three months ended 30 June
2003 was (pound)55.1 million, compared with an inflow of (pound)78.8 million for
the three months ended 30 June 2002. The decrease in cash flows reflected the
timing of charges from year end which were paid during the first three months of
the 2004 financial year. Net cash inflow from operating activities for the three
months ended 30 June 2003 included (pound)0.4 million of expenses related to the
global offer. Net cash inflow from operating activities for the three months
ended 30 June 2002 included (pound)3.9 million of expenses paid for our parent
company's withdrawn initial public offering.
Net cash outflow from returns on investments and servicing of finance
principally comprises interest paid.
Net cash outflow for capital expenditure and financial investment comprises
capital expenditure on fixed assets and purchases of subsidiary undertakings,
net of cash acquired. Capital expenditure in the three months ended 30 June 2003
was (pound)5.9 million compared to (pound)5.6 million last year.
On 16 April 2002, we purchased McLeod for $600.0 million ((pound)417.0 million)
plus expenses of $10.0 million ((pound)6.9 million). We financed the McLeod
acquisition through $250.0 million ((pound)173.7 million) of senior bank
financing and a $250.0 million ((pound)173.7 million) bridge facility together
with $88.3 million ((pound)61.3 million) of additional funds in the form of
equity and subordinated non-cash pay loans from the funds that owned our parent
company before the global offer described below, and $37.3 million ((pound)25.9
million) of unrestricted cash from our available cash balances. As a result, our
overall borrowings before the offset of finance costs increased by approximately
(pound)408 million.
CAPITAL RESOURCES
At 30 June 2003, we had cash of (pound)57.7 million.
We expect that any significant acquisitions or other significant expenditures,
including those related to the development of our online services, would be
financed in the future through any one or more of operating cash flows, credit
facilities and the issue of new debt and equity securities.
11
We had net debt of (pound)2,368.1 million at 30 June 2003. The table below sets
out the details of our debt at 30 June 2003.
((POUND) IN MILLIONS)
Long-term loans and other borrowings
Term Loan A 549.0
Term Loan B 175.0
Term Loan C 234.7
Term Loan D 151.3
Senior Sterling Notes due 2011 250.0
Senior Dollar Notes due 2011 121.1
Senior Discount Dollar Notes due 2011 116.0
Subordinated parent company loan 842.6
Other 1.2
----------------------
Total debt 2,440.9
Unamortised financing costs (15.1)
Cash at bank (57.7)
----------------------
NET DEBT AT END OF THE PERIOD 2,368.1
======================
OUR PARENT COMPANY'S GLOBAL OFFER AND REFINANCING
On 15 July 2003, our parent company, Yell Group plc, completed raising
(pound)433 million (gross proceeds) through a global offer of shares to
institutional investors, also referred to as an initial public offering.
A portion of the net proceeds were used to repay approximately (pound)54 million
of debt under the senior credit facilities and to redeem up to 35%
(approximately (pound)173 million) of the senior notes pursuant to the optional
redemption features under the indentures. Additionally, we replaced our
remaining senior credit facilities with new senior credit facilities of
(pound)664 million and $596 million and a revolving credit facility of
(pound)200 million. As part of the reorganisation, the subordinate parent
company loan became non-interest bearing to reflect the fact that the equivalent
amounts borrowed by our parent company were settled at that time.
As a result of the capital raising, we incurred a number of exceptional or
one-off costs, including cash and non-cash interest charges relating to premium
paid in connection with the redemption of the senior notes and to the write-off
of deferred finance costs; charges relating to option grants under existing
share ownership plans; and other transaction fees and costs arising out of the
offering. In addition, participants in a plan implemented for certain key
employees of Yellow Book and its subsidiaries are entitled to a payment under
the Yellow Book Phantom DDB Plan, under which the participants as a group are
treated economically as if they had invested approximately $45 million in the
Yell Group in the same manner as the funds advanced by the funds that owned our
parent company before the global offer. We accrued a non-cash compensation
charge of approximately $63 million (approximately (pound)39 million) in
connection with this. In satisfaction of those obligations, the plan
participants exchanged their interests in the plan for equity in our parent
company.
12
As mentioned above, additional costs of our parent company's global offering,
substantially fees payable to advisers, will be incurred during the second
quarter. Some of these remaining costs will be charged against our share premium
and some will be charged against profit as further exceptional items.
We are required to satisfy interest and principal payments on our borrowings as
they become due. To the extent we are not able to fund any principal payment at
maturity or any interest payment when due from cash flow from operations, we
would be required to refinance this indebtedness pursuant to credit facilities
and/or the issue of new debt and equity securities into the capital markets. No
one has guaranteed our obligations under the senior notes or has any obligation
to provide additional equity financing to us.
The terms of the previous senior credit facilities required us to maintain
specified consolidated financial ratios for senior debt to Earnings Before
Interest, Tax, Depreciation and Amortisation ("EBITDA", as defined in the senior
credit facilities), cash flow to total debt service, EBITDA to net cash interest
payable and total net debt to EBITDA, and to observe capital expenditure limits
for each financial year. In addition, the terms of our previous senior credit
facilities required us to make early repayments equal to 50% of excess cash
flows as defined in the terms. Under these terms we were obliged to make an
early repayment of (pound)34.4 million in the second quarter of the 2003
financial year. The new senior credit facilities require us to maintain
specified consolidated financial ratios for the net total debt to EBITDA, EBITDA
to net cash interest payable, and, until 31 March 2005, net senior debt to
EBITDA.
OTHER MATTERS
Off Balance-sheet Arrangements
We do not have any off-balance sheet arrangements other than employee incentive
arrangements that were triggered upon a change in ownership and the hedges
discussed below.
Market-related Risks
Interest is payable under our senior credit facilities at a variable rate. We
could, therefore, be adversely affected if interest rates were to rise
significantly. Under our previous senior credit facilities, we were required to
hedge at least 50% of the variable-rate indebtedness under the senior credit
facilities for two years. We have hedged at 30 June 2003 nearly 90% of the
indebtedness under the senior credit facilities for six months and 50% for the
following 18 months using interest rate swaps, with a review of this strategy on
a quarterly basis. At 30 June 2003, we had (pound)20.9 million net unrecognised
losses on these instruments that will be recognised when the interest is paid.
All of these instruments are entered into for hedging purposes and, under UK
GAAP, gains and losses on these instruments are deferred and only recognised in
income when the underlying transaction is recorded. Such instruments have not
been designated and do not qualify for hedge accounting under Statement of
Financial Accounting Standards No 133 "Accounting for Derivative Instruments and
Hedging Activities" for US GAAP purposes.
13
All significant cash inflows and outflows associated with our operations in the
United Kingdom are denominated in pounds sterling, and all significant cash
inflows and outflows associated with our operations in the United States are
denominated in US dollars. However, our financial information is presented in
pounds sterling, and changes in the exchange rate between the US dollar and
pounds sterling will affect the translation of the results of our operations
into pounds sterling. We do not currently intend to hedge any foreign exchange
rate risk relating to US dollar-denominated notes, although we will continue to
review this practice. The dilution of our earnings reported in pounds sterling
as a result of the weakening US dollar is partially offset by natural hedging
within the Group as a result of having a significant amount of debt denominated
in US dollars. The Group does not currently intend to hedge any foreign exchange
rate risk relating to US dollar-denominated notes, although it will continue to
review this practice. In addition, the Yell Group entered into a forward
contract to purchase (pound)43.3 million at the rate of $1.595 per (pound)1
sterling as a hedge against future cash flows within the Group.
At 30 June 2003, we had (pound)565.9 million of borrowings denominated in US
dollars net of deferred financing fees, and (pound)1,219.4 million of borrowings
that accrue interest at variable rates, before taking into account hedging
arrangements. As at 30 June 2003, taking into account the hedging arrangements,
if the annualised variable interest rates had been 1.0% higher or lower with no
change in exchange rates, our interest charge would vary by approximately
(pound)2.3 million higher or lower, respectively, taking into account our
hedging arrangements, or (pound)12.2 million higher or lower, respectively,
without taking into account hedging arrangements. Further, taking into account
our US dollar-denominated liabilities, if the average US dollar/pound sterling
exchange rate during the quarter would have been $1.78 to (pound)1.00, for
example, instead of $1.63 to (pound)1.00, the approximate rate effective for the
three months ended 30 June 2003, then our quarterly interest charge would have
been approximately (pound)4.6 million lower.
International Financial Reporting Standards
In June 2002, the Council of Ministers of the European Union approved a
regulation (the "Regulation") requiring all companies that are governed by the
law of a member state of the European Union and whose securities are admitted to
trading on a regulated market of any member state to prepare their consolidated
financial statements in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union. The Regulation is to be
effective for each financial year starting on or after 1 January 2005.
The International Accounting Standards Board issued IFRS1, a standard on
transition to IFRS, in June 2003. It is expected that there will be significant
continuing developments in IFRS between now and 2005 and consequently there is
uncertainty about exactly what IFRS will require in 2005. This uncertainty will
be reduced as the International Accounting Standards Board finalises and
publishes its standards on the first time adoption of IFRS and other key areas
such as business combinations and share-based payments.
14
In the meantime, the UK Accounting Standards Board is adopting a phased
transition to the conversion of existing UK GAAP and plans to issue around 40
new standards or revisions to existing standards over the next two years, some
of which have already been issued in the form of Financial Reporting Exposure
Drafts ("FREDs"). It is also possible that by the implementation date set by the
European Union, UK GAAP will not be fully aligned with IFRS.
The Group will adopt any standards arising from FREDs when they become effective
and part of UK GAAP. The transition of UK GAAP to IFRS and/or the adoption of
IFRS could possibly have a material impact on the Group's financial position and
reported results, although it is not possible for the Directors to quantify the
impact at this time.
Recent US GAAP Accounting Pronouncements
In April 2003, the FASB issued Statement of Financial Accounting Standards No
149 "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" ("SFAS 149"). This standard amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under FASB Statement No 133, "Accounting
for Derivative Instruments and Hedging Activities". This standard is effective
prospectively for contracts entered into or modified after 30 June 2003 and
prospectively for hedging relationships designated after 30 June 2003. We are in
the process of assessing the impact of adopting this standard.
In May 2003, the FASB issued Statement of Financial Accounting Standards No 150
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity" ("SFAS 150"). This standard improves the accounting for
certain financial instruments that, under previous guidance, issuers could
account for as equity and requires that these instruments be classified as
liabilities in statements of financial position. This standard is effective at
the beginning of the first interim period beginning after 15 June 2003. This
standard shall be implemented by reporting the cumulative effect of a change in
accounting principle for financial instruments created before the issuance date
of the standard and still existing at the beginning of the interim period of
adoption. We are in the process of assessing the impact of adopting this
standard.
Critical Accounting Estimates
In general, our accounting policies are consistent with those generally adopted
by others operating within the same industry in the United Kingdom. Our
accounting policies are set out in our audited financial statements contained
within the Form 20-F filed with the SEC on 1 July 2003. A discussion of the most
significant policies that require our management to make subjective and complex
judgements or to consider matters that are inherently uncertain are also
contained in that document.
15
CONSOLIDATED RESULTS OF OUR PARENT COMPANY
We have included certain consolidated financial information of our parent
company, Yell Group plc and its subsidiaries, as an appendix to the consolidated
financial information of Yell Finance B.V., in order to highlight differences
between what our parent company would report using UK presentational conventions
and what we would report using US reporting conventions, and to satisfy the
requirements of our parent company to produce a UK GAAP to US GAAP
reconciliation.
16
EXHIBIT 99.3
YELL FINANCE B.V. AND SUBSIDIARIES
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
THREE MONTHS ENDED 30 JUNE
---------------------------------------
(UNAUDITED) NOTES 2002 2003
------------------ -------------------
((POUND) IN MILLIONS)
TURNOVER 2 248.5 262.2
Cost of sales (118.1) (117.7)
------------------- ----------------
GROSS PROFIT 130.4 144.5
Distribution costs (9.0) (9.3)
ADMINISTRATIVE EXPENSES
Ordinary items (79.7) (85.5)
Exceptional items 4 (15.0) (47.3)
------------------- ----------------
(94.7) (132.8)
------------------- ----------------
OPERATING PROFIT 3 26.7 2.4
NET INTEREST PAYABLE
Ordinary items (57.6) (52.9)
Exceptional items - (30.0)
------------------- ----------------
(57.6) (82.9)
------------------- ----------------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (30.9) (80.5)
TAX ON LOSS ON ORDINARY ACTIVITIES
Before exceptional items (4.0) (3.1)
On exceptional items 2.3 27.8
------------------- ----------------
(1.7) 24.7
------------------- ----------------
LOSS FOR THE FINANCIAL PERIOD 9 (32.6) (55.8)
=================== ================
STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
THREE MONTHS ENDED 30 JUNE
---------------------------------------
(UNAUDITED) NOTES 2002 2003
------------------ ----------------
((POUND) IN MILLIONS)
Loss for the financial period (32.6) (55.8)
Currency movements 9 (25.2) (18.0)
------------------- ----------------
TOTAL RECOGNISED GAINS AND LOSSES FOR THE (57.8) (73.8)
FINANCIAL PERIOD =================== ================
The accompanying unaudited condensed notes are an integral part of these
financial statements.
F-1
YELL FINANCE B.V. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
THREE MONTHS ENDED 30 JUNE
-------------------------------------------
(UNAUDITED) 2002 2003
--------------------- -------------------
((POUND) IN MILLIONS)
NET CASH INFLOW FROM OPERATING ACTIVITIES 78.8 55.1
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest paid (21.3) (18.8)
Finance fees paid (10.4) -
--------------------- -------------------
NET CASH OUTFLOW FOR RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (31.7) (18.8)
--------------------- -------------------
TAXATION - (1.0)
--------------------- -------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (5.6) (5.9)
--------------------- -------------------
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
(5.6) (5.9)
--------------------- -------------------
ACQUISITIONS
Purchase of subsidiary undertakings, net of cash
acquired (423.7) (1.4)
--------------------- -------------------
NET CASH OUTFLOW FOR ACQUISITIONS (423.7) (1.4)
--------------------- -------------------
NET CASH (OUTFLOW) INFLOW BEFORE FINANCING (382.2) 28.0
FINANCING
Issue of ordinary share capital and capital
contributions received 0.1 -
Expenses of withdrawn initial public offering (3.9) -
New loans issued 408.7 -
--------------------- -------------------
NET CASH INFLOW FROM FINANCING 404.9 -
--------------------- -------------------
INCREASE IN NET CASH IN THE PERIOD 22.7 28.0
===================== ===================
Total operating profit 26.7 2.4
Depreciation 5.3 5.7
Goodwill amortisation 23.6 24.6
Increase in stocks (3.9) (12.0)
Decrease in debtors 7.6 29.7
Increase in creditors 19.5 4.7
--------------------- -------------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 78.8 55.1
===================== ===================
The accompanying unaudited condensed notes are an integral part of these
financial statements.
F-2
YELL FINANCE B.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT AT
31 MARCH 30 JUNE
NOTES 2003 2003
(AUDITED) (UNAUDITED)
---------------- ----------------
((POUND) IN MILLIONS)
FIXED ASSETS
Intangible assets 1,824.1 1,767.1
Tangible assets 47.1 42.4
Investment 1.9 1.6
---------------- -----------------
TOTAL FIXED ASSETS 1,873.1 1,811.1
---------------- -----------------
CURRENT ASSETS
---------------- -----------------
Stocks 145.8 152.7
Debtors 6 461.4 445.6
Cash at bank and in hand 30.0 57.7
---------------- -----------------
TOTAL CURRENT ASSETS 637.2 656.0
---------------- -----------------
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Loans and other borrowings 5,8 (112.8) (2,117.0)
Other creditors 7 (235.9) (238.0)
---------------- -----------------
TOTAL CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (348.7) (2,355.0)
---------------- -----------------
NET CURRENT ASSETS (LIABILITIES) 288.5 (1,699.0)
---------------- -----------------
TOTAL ASSETS LESS CURRENT LIABILITIES 2,161.6 112.1
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Loans and other borrowings 5,8 (2,286.0) (308.8)
---------------- -----------------
NET LIABILITIES (124.4) (196.7)
================ =================
CAPITAL AND RESERVES
Called up share capital 0.1 0.1
Share premium account 1.0 1.0
Profit and loss account (deficit) (125.5) (197.8)
---------------- -----------------
EQUITY SHAREHOLDERS' DEFICIT 9 (124.4) (196.7)
================ =================
The accompanying unaudited condensed notes are an integral part of these
financial statements.
F-3
YELL FINANCE B.V. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION, COMBINATION AND CONSOLIDATION
The principal activity of Yell Finance B.V. and its subsidiaries is publishing
classified advertising directories in the United Kingdom and the United States.
The unaudited interim financial information has been prepared in accordance with
generally accepted accounting principles in the UK ("UK GAAP") and on the basis
of the accounting policies set out in the audited combined and consolidated
financial statements of Yell Finance B.V. for the year ended 31 March 2003
contained in the Form 20-F filed with the US Securities and Exchange Commission
on 1 July 2003.
The foregoing information does not constitute statutory financial statements
within the meaning of s240 of the Companies Act 1985.
In the opinion of management, the financial information included herein includes
all adjustments necessary for a fair presentation of the consolidated results,
financial position and cash flows for each period presented. The consolidated
results for interim periods are not necessarily indicative of results for the
full year. This financial information should be read in conjunction with Yell
Finance B.V.'s Form 20-F filed with the US Securities and Exchange Commission on
1 July 2003 which includes the audited combined and consolidated financial
statements of Yell Finance B.V. and its subsidiaries for the year ended 31 March
2003.
The preparation of the consolidated financial information requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial information and the reported amounts of income and expenditure
during the reporting period. Actual results could differ from those estimates.
Estimates are used principally when accounting for income, provision for
doubtful debts, depreciation, employee pension and management incentive schemes
and taxes.
F-4
YELL FINANCE B.V. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. TURNOVER THREE MONTHS ENDED 30 JUNE
--------------------------------------
2002 2003
------------------ ------------------
((POUND) IN MILLIONS)
UK printed directories 128.8 134.9
Other products and services 10.1 10.0
------------------ --------------------
TOTAL UK TURNOVER 138.9 144.9
TOTAL US TURNOVER 109.6 117.3
------------------ --------------------
GROUP TURNOVER 248.5 262.2
================== ====================
3. OPERATING PROFIT THREE MONTHS ENDED 30 JUNE
--------------------------------------
2002 2003
------------------ ------------------
((POUND) IN MILLIONS)
UK printed directories 21.6 31.7
Other products and services (1.1) 0.2
------------------ -------------------
TOTAL UK OPERATING PROFIT 20.5 31.9
TOTAL US OPERATING PROFIT (LOSS) 6.2 (29.5)
------------------ -------------------
OPERATING PROFIT 26.7 2.4
================== ===================
4. EXCEPTIONAL ITEMS
An analysis of our results for the three months ended June 2002 and 2003
separating out exceptional items is as follows:
THREE MONTHS ENDED 30 JUNE
---------------------------------------------------------------------------------------------
2002 2003
---------------------------------------------- ----------------------------------------------
ORDINARY EXCEPTIONAL TOTAL ORDINARY EXCEPTIONAL TOTAL
ITEMS ITEMS ITEMS ITEMS
---------------- ----------------- ----------- --------------- ----------------- ------------
((POUND) IN MILLIONS)
GROSS PROFIT 130.4 - 130.4 144.5 - 144.5
Distribution costs (9.0) - (9.0) (9.3) - (9.3)
Administrative expenses (79.7) (15.0) (94.7) (85.5) (47.3) (132.8)
---------------- ----------------- ----------- --------------- ----------------- ------------
OPERATING PROFIT (LOSS) 41.7 (15.0) 26.7 49.7 (47.3) 2.4
Net interest payable (57.6) - (57.6) (52.9) (30.0) (82.9)
---------------- ----------------- ----------- --------------- ----------------- ------------
LOSS BEFORE TAXATION (15.9) (15.0) (30.9) (3.2) (77.3) (80.5)
Taxation (4.0) 2.3 (1.7) (3.1) 27.8 24.7
---------------- ----------------- ----------- --------------- ----------------- ------------
LOSS FOR THE PERIOD (19.9) (12.7) (32.6) (6.3) (49.5) (55.8)
================ ================= =========== =============== ================= ============
Exceptional administrative expenses in 2003 relate to costs incurred in
connection with the initial public offering of our parent company. Of the
(pound)47.3 million exceptional administrative expenses, (pound)5.6 million
relates to our UK business and (pound)41.7 million to our US business.
Exceptional administrative expenses of (pound)15.0 million in 2002 relate to
costs incurred in connection with the withdrawn initial public offering of our
parent company. (pound)14.7 million was charged to our UK business and
(pound)0.3 million was charged to our US business. The exceptional interest
payable in 2003 is the accelerated amortisation of deferred financing fees on
our debt due to be repaid in the second quarter. The exceptional tax credits in
2003 and 2002 represent the effective tax on the exceptional items before tax.
We do not allocate interest or taxation charges by product or geographic
segment.
F-5
YELL FINANCE B.V. AND SUBSIDIARIES
NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
5. NET DEBT
ANALYSIS OF NET DEBT
AT AT
31 MARCH 30 JUNE
2003 2003
------------------ ------------------
((POUND) IN MILLIONS)
Long-term loans and other borrowings
falling due after more than one year 2,286.0 308.8
Short-term borrowings and long-term loans and
other borrowings falling due within one year 112.8 2,117.0
---------------------------------------------------------- ------------------ ------------------
Total debt 2,398.8 2,425.8
Cash at bank and in hand (30.0) (57.7)
------------------ ------------------
NET DEBT AT END OF PERIOD 2,368.8 2,368.1
================== ==================
RECONCILIATION OF MOVEMENT IN NET DEBT DEBT DUE
WITHIN
TOTAL ONE YEAR
CASH EXCLUDING- DEBT DUE
LESS BANK BANK AFTER
OVERDRAFT OVERDRAFT ONE YEAR NET DEBT
--------------------------------------------------------------------
((POUND) IN MILLIONS)
AT 31 MARCH 2003 30.0 (112.8) (2,286.0) (2,368.8)
Cash inflow from operating activities less
interest and taxation paid and capital
expenditures 29.4 - - 29.4
Cash outflow on acquisitions (1.4) - - (1.4)
Reclassification of long and short term debt - (2,031.4) 2,031.4 -
Interest and amortised fees 8.4 (60.6) (52.2)
Currency movements (0.3) 18.8 6.4 24.9
--------------- --------------- ---------------- ---------------
AT 30 JUNE 2003 57.7 (2,117.0) (308.8) (2,368.1)
=============== =============== ================ ===============
F-6
YELL FINANCE B.V. AND SUBSIDIARIES
NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
5. NET DEBT (CONTINUED)
On 15 July 2003, our parent company, Yell Group plc, completed raising
(pound)433 million (gross proceeds) through a global offer of shares to
institutional investors.
A portion of the net proceeds were used to repay approximately (pound)54 million
of debt under the senior credit facilities and to redeem up to 35%
(approximately (pound)173 million) of the senior notes pursuant to the optional
redemption features under the indentures. Additionally, we replaced our
remaining senior credit facilities with new senior credit facilities of
(pound)664 million and $596 million and a revolving credit facility of
(pound)200 million.
6. DEBTORS
AT AT
31 MARCH 30 JUNE
2003 2003
----------------- --------------------
(POUND) IN MILLIONS)
Trade debtors 412.3 354.4
Other debtors 8.2 9.6
Accrued income 7.6 24.4
Prepayments 10.2 13.1
Deferred tax asset 23.1 44.1
----------------- ------------------------
TOTAL DEBTORS 461.4 445.6
================= ========================
All amounts above fall due within one year except for the deferred tax asset,
which may fall due after more than one year. The increase in the deferred tax
asset from 31 March 2003 is a reflection of the tax credits on exceptional items
and is expected to be utilised against taxable profits arising in the current
financial year.
7. OTHER CREDITORS
AT AT
31 MARCH 30 JUNE
2003 2003
------------------- -------------------
((POUND) IN MILLIONS)
Trade creditors 34.9 20.1
Corporation tax 6.2 2.4
Other taxation and social security 24.7 16.2
Other creditors 5.7 -
Accrued expenses 90.4 135.7
Deferred income 74.0 63.6
------------------- -------------------
TOTAL CREDITORS FALLING DUE WITHIN ONE YEAR 235.9 238.0
=================== ===================
F-7
YELL FINANCE B.V. AND SUBSIDIARIES
NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
8. LOANS AND OTHER BORROWINGS
AT AT
31 MARCH 30 JUNE
2003 2003
---------------- ---------------
((POUND) IN MILLIONS)
AMOUNTS FALLING DUE WITHIN ONE YEAR
Senior credit facilities 111.8 1,110.0
Senior notes:
Senior sterling notes - 87.5
Senior dollar notes - 42.4
Senior discount dollar notes - 40.8
Subordinated parent company loan - 842.6
Net obligations under finance leases 1.0 1.2
---------------- ---------------
TOTAL AMOUNTS FALLING DUE WITHIN ONE YEAR 112.8 2,124.5
Unamortised finance fees - (7.5)
---------------- ---------------
NET AMOUNTS FALLING DUE WITHIN ONE YEAR 112.8 2,117.0
---------------- ---------------
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Senior credit facilities 1,013.7 -
Senior notes:
Senior sterling notes 250.0 162.5
Senior dollar notes 126.7 78.7
Senior discount dollar notes 118.2 75.2
Subordinated parent company loan 816.7 -
---------------- ---------------
TOTAL AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 2,325.3 316.4
Unamortised finance fees (39.3) (7.6)
---------------- ---------------
NET AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 2,286.0 308.8
---------------- ---------------
NET LOANS AND OTHER BORROWINGS 2,398.8 2,425.8
================ ===============
Also see note 5 for details of the repayment of our senior debt.
9. CHANGES IN EQUITY SHAREHOLDERS' FUNDS (DEFICIT)
SHARE SHARE PROFIT AND
CAPITAL PREMIUM LOSS ACCOUNT TOTAL
-----------------------------------------------------------------
((POUND) IN MILLIONS)
BALANCE AT 31 MARCH 2003 0.1 1.0 (125.5) (124.4)
Loss for the period - - (55.8) (55.8)
Equity offset in respect of employee share options - - 1.5 1.5
Currency movements (a) - - (18.0) (18.0)
-------------- --------------- ---------------- ---------------
BALANCE AT 30 JUNE 2003 0.1 1.0 (197.8) (196.7)
============== =============== ================ ===============
(a) The cumulative foreign currency translation adjustment was a(pound)55.7
million loss at 30 June 2003 (31 March 2003 -(pound)37.7 million loss).
F-8
YELL FINANCE B.V. AND SUBSIDIARIES
NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
10. RELATED PARTY TRANSACTIONS
Transaction fees charged to the Yell Group from Apax Partners Managing Entities
and affiliates of Hicks, Muse, Tate and Furst Incorporated were (pound)3 million
each ($4.5 million) for the three months ended 30 June 2003. Monitoring fees
were (pound)0.7 million for the same period.
F-9
EXHIBIT 99.4
YELL GROUP PLC AND SUBSIDIARIES
APPENDIX
CONSOLIDATED FINANCIAL INFORMATION OF YELL GROUP PLC AND ITS SUBSIDIARIES
We have included certain unaudited consolidated financial information of Yell
Group plc and its subsidiaries ("Yell Group plc") as an appendix to the
unaudited condensed consolidated financial information of Yell Finance B.V. and
its subsidiaries ("Yell Finance B.V."), in order to highlight what Yell Group
plc would report under UK GAAP using UK presentational conventions and to
satisfy the requirements of Yell Group plc to produce a UK GAAP to US GAAP
reconciliation.
The unaudited financial information for Yell Group plc includes:
o profit and loss accounts for the three month periods ended 30 June 2002 and
2003 in line with presentational conventions in the United Kingdom;
o cash flow statement for the three month periods ended 30 June 2002 and
2003;
o balance sheets at 31 March 2003 and 30 June 2003;
o analysis of net debt at 31 March 2003 and 30 June 2003 and movement in net
debt for the three month period ended 30 June 2003;
o changes in equity shareholders' deficit for the three months ended 30 June
2003;
o a reconciliation of results between US GAAP and UK GAAP for the three month
periods ended 30 June 2002 and 2003 and of equity shareholders' deficit for
31 March 2003 and 30 June 2003.
The following unaudited financial information has been prepared in accordance
with generally accepted accounting principles in the United Kingdom ("UK GAAP")
and on the basis of the accounting policies set out in the audited combined and
consolidated financial statements of Yell Finance B.V. for the year ended 31
March 2003 contained in the Form 20-F filed with the SEC on 1 July 2003.
The following information does not constitute statutory financial statements
within the meaning of s240 of the Companies Act 1985.
YELL GROUP PLC AND SUBSIDIARIES
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
THREE MONTHS ENDED 30 JUNE
-----------------------------------------
(UNAUDITED) 2002 2003
------------------- -------------------
((POUND) IN MILLIONS)
GROUP TURNOVER 248.5 262.2
Cost of sales (118.1) (117.7)
------------------- -------------------
GROSS PROFIT 130.4 144.5
Distribution costs (9.0) (9.3)
ADMINISTRATIVE EXPENSES
Ordinary items (79.7) (85.5)
Exceptional items (15.0) (47.3)
------------------- -------------------
(94.7) (132.8)
------------------- -------------------
OPERATING PROFIT 26.7 2.4
NET INTEREST PAYABLE
Ordinary items (57.6) (52.9)
Exceptional items - (30.0)
------------------- -------------------
(57.6) (82.9)
------------------- -------------------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (30.9) (80.5)
TAX ON LOSS ON ORDINARY ACTIVITIES
Before exceptional items (4.0) (3.1)
On exceptional items 2.3 27.8
------------------- -------------------
(1.7) 24.7
------------------- -------------------
LOSS FOR THE FINANCIAL PERIOD (32.6) (55.8)
=================== ===================
STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
THREE MONTHS ENDED 30 JUNE
-----------------------------------------
(UNAUDITED) 2002 2003
------------------ ------------------
((POUND) IN MILLIONS)
Loss for the financial period (32.6) (55.8)
Currency movements (25.2) (18.0)
------------------- ------------------
TOTAL RECOGNISED GAINS AND LOSSES FOR THE (73.8)
FINANCIAL PERIOD (57.8)
=================== ==================
See notes to the financial information for additional details.
YELL GROUP PLC AND SUBSIDIARIES
COMBINED AND CONSOLIDATED CASH FLOW STATEMENTS
THREE MONTHS
ENDED 30 JUNE
(UNAUDITED) 2002 2003
--------------- ---------------
((POUND) IN MILLIONS)
NET CASH INFLOW FROM OPERATING ACTIVITIES 78.8 55.1
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest paid (21.3) (18.8)
Finance fees paid (10.4) -
--------------- ---------------
NET CASH OUTFLOW FOR RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (31.7) (18.8)
--------------- ---------------
TAXATION - (1.0)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (5.6) (5.9)
--------------- ---------------
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (5.6) (5.9)
--------------- ---------------
ACQUISITIONS
Purchase of subsidiary undertakings, net of cash
acquired (423.7) (1.4)
--------------- ---------------
NET CASH OUTFLOW FOR ACQUISITIONS (423.7) (1.4)
--------------- ---------------
NET CASH (OUTFLOW) INFLOW BEFORE FINANCING (382.2) 28.0
FINANCING
Issue of ordinary share capital and capital 0.1 -
contributions received
Expenses of withdrawn initial public offering (3.9) -
New loans issued 408.7 -
--------------- ---------------
NET CASH INFLOW FROM FINANCING 404.9 -
--------------- ---------------
INCREASE IN NET CASH IN THE PERIOD 22.7 28.0
=============== ===============
Total operating profit 26.7 2.4
Depreciation 5.3 5.7
Goodwill amortisation 23.6 24.6
Increase in stocks (3.9) (12.0)
Decrease in debtors 7.6 29.7
Increase in creditors 19.5 4.7
--------------- ---------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 78.8 55.1
=============== ===============
See notes to the financial information for additional details.
YELL GROUP PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT AT
31 MARCH 30 JUNE
2003 2003
(AUDITED) (UNAUDITED)
---------------- -------------------
((POUND) IN MILLIONS)
FIXED ASSETS
Intangible assets 1,824.1 1,767.1
Tangible assets 47.1 42.4
Investment 1.9 1.6
---------------- -------------------
TOTAL FIXED ASSETS 1,873.1 1,811.1
---------------- -------------------
CURRENT ASSETS
---------------- -------------------
Stocks 145.8 152.7
Debtors 461.4 445.6
Cash at bank and in hand 30.1 57.8
---------------- -------------------
TOTAL CURRENT ASSETS 637.3 656.1
---------------- -------------------
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Loans and other borrowings (112.8) (2,117.0)
Other creditors (235.9) (238.0)
---------------- -------------------
TOTAL CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
(348.7) (2,355.0)
---------------- -------------------
NET CURRENT ASSETS (LIABILITIES) 288.6 (1,698.9)
---------------- -------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 2,161.7 112.2
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Loans and other borrowings (2,286.0) (308.8)
---------------- -------------------
NET LIABILITIES (124.3) (196.6)
================ ===================
EQUITY SHAREHOLDERS' DEFICIT (124.3) (196.6)
================ ===================
See notes to the financial information for additional details.
YELL GROUP PLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL INFORMATION
NET DEBT
ANALYSIS OF NET DEBT
AT AT
31 MARCH 30 JUNE
2003 2003
------------------------- ----------------------
((POUND) IN MILLIONS)
Long-term loans and other borrowings
falling due after more than one year 2,286.0 308.8
Short-term borrowings and long-term loans and
other borrowings falling due within one year 112.8 2,117.0
---------------------------------------------------------- ------------------------- ----------------------
Total debt 2,398.8 2,425.8
Cash at bank and in hand (30.1) (57.8)
-------------------------
----------------------
NET DEBT AT END OF PERIOD 2,368.7 2,368.0
========================= ======================
RECONCILIATION OF MOVEMENT IN NET DEBT DEBT DUE
WITHIN ONE
TOTAL YEAR
CASH EXCLUDING DEBT DUE
LESS BANK BANK AFTER
OVERDRAFT OVERDRAFT ONE YEAR NET DEBT
--------------------------------------------------------------------
((POUND) IN MILLIONS)
AT 31 MARCH 2003 30.1 (112.8) (2,286.0) (2,368.7)
Cash inflow from operating activities less
interest and taxation paid and capital
expenditures 29.4 - - 29.4
Cash outflow on acquisitions (1.4) - - (1.4)
Reclassification of long and short term debt - (2,031.4) 2,031.4 -
Interest and amortised fees - 8.4 (60.6) (52.2)
Currency movements (0.3) 18.8 6.4 24.9
---------------- --------------- --------------- ---------------
AT 30 JUNE 2003 57.8 (2,117.0) (308.8) (2,368.0)
================ =============== =============== ===============
YELL GROUP PLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
CHANGES IN EQUITY SHAREHOLDERS' DEFICIT
SHARE SHARE OTHER PROFIT AND
CAPITAL PREMIUM RESERVES LOSS ACCOUNT TOTAL
---------------------------------------------------------------------------------
((POUND) IN MILLIONS)
BALANCE AT 31 MARCH 2003 0.1 1.0 0.1 (125.5) (124.3)
Loss for the period - - - (55.8) (55.8)
Equity offset in respect of
employee share options - - - 1.5 1.5
Currency movements - - - (18.0) (18.0)
--------------- --------------- --------------- ----------------- ---------------
BALANCE AT 30 JUNE 2003 0.1 1.0 0.1 (197.8) (196.6)
=============== =============== =============== ================= ===============
(a) The cumulative foreign currency translation adjustment was a (pound)55.7
million loss at 30 June 2003 (31 March 2003 - (pound)37.7 million loss).
On 13 June 2003, the authorised share capital of the Company was increased by
(pound)864.5 million by the creation of 1,140,499 C ordinary shares of
(pound)758 each. Also on 13 June 2003, 1,140,499 C ordinary shares were issued
fully paid. The investment in subsidiaries was revalued and increased by
(pound)864.5 million. These adjustments are eliminated on consolidation of the
Group figures.
On 9 July 2003 the issued share capital of the Company was reduced by the
cancellation of 1,140,499 C ordinary shares of (pound)758 each and the
distributable reserves were credited with an amount of (pound)864.5 million.
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Our consolidated financial information is prepared in accordance with accounting
principles generally accepted in the United Kingdom ("UK GAAP"), which differ in
certain respects from those applicable in the United States ("US GAAP").
Differences result primarily from the different treatment of directories in
progress, goodwill and other intangibles, derivative financial instruments,
pensions, closure provisions and deferred taxes. Under US GAAP, a portion of the
purchase price is allocated, when accounting for acquisitions, to the deferred
costs of directories that publish in the months immediately following the
acquisition. Under UK GAAP, the deferred costs, which represent the value of
selling efforts not yet realised, are valued at the lower of historical cost and
net realisable value. The purchase price allocation under US GAAP increases the
value of the selling effort to its fair value and, accordingly, profits in the
period immediately following an acquisition would be significantly lower under
US GAAP than under UK GAAP. Further, under US GAAP, a portion of the purchase
price would be allocated to other intangible assets such as acquired customer
relationships and brand names, which are amortised over a different life than
the goodwill recorded under UK GAAP and establishing associated deferred taxes.
Adjustments relating to employee incentive plans and amortisation of deferred
financing costs arise as a result of the definition of an adjusting post balance
sheet event under UK and US GAAP. Under UK GAAP, these costs are recognised in
the quarter as a result of our global offer, which we completed on 15 July 2003.
Under US GAAP these costs will be recognised in the second quarter.
YELL GROUP PLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The following information summarises estimated adjustments, gross of their tax
effect, which reconcile net loss and shareholders' deficit from that reported
under UK GAAP to that which would have been recorded had US GAAP been applied.
NET LOSS
THREE MONTHS ENDED 30 JUNE
---------------------------------------
2002 2003
------------------- ------------------
((POUND) IN MILLIONS)
Loss for the financial period under UK GAAP (32.6) (55.8)
Adjustment for:
Directories in progress
-Deferred costs (13.1) (11.1)
-Acquisition accounting(a) (24.1) -
Pensions (0.7) (2.3)
Goodwill 23.6 24.6
Other intangible assets (29.4) (22.6)
Derivative financial instruments (4.6) 4.0
Closure provisions - (1.0)
Employee incentive plans - 45.7
Amortisation of deferred financing costs - 30.0
Deferred taxation 18.8 (22.1)
------------------ ------------------
NET LOSS AS ADJUSTED FOR US GAAP (62.1) (10.6)
================== ==================
(a) Represents certain adjustments that arose as a result of acquisitions.
SHAREHOLDERS' DEFICIT
AT AT
31 MARCH 30 JUNE
2003 2003
------------------- ---------------
((POUND) IN MILLIONS)
Shareholders' deficit under UK GAAP (124.3) (196.6)
Adjustment for:
Directories in progress (92.6) (105.5)
Pensions 7.7 5.4
Additional minimum pension liability (35.8) (35.8)
Goodwill (646.7) (615.2)
Other intangible assets 842.0 809.3
Derivative financial instruments (24.9) (20.9)
Closure provisions 2.9 1.9
Employee incentive plans - 45.7
Amortisation of deferred financing costs - 30.0
Deferred taxation (223.9) (246.1)
------------------- ---------------
SHAREHOLDERS' DEFICIT AS ADJUSTED FOR US GAAP (295.6 (327.8)
=================== ===============
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 28, 2003
YELL FINANCE B.V.
(Registrant)
By: /s/ John Davis
------------------------------
Name: John Davis
Title: Chief Financial Officer