EXHIBIT 99.1
[ ] YELL
9 NOVEMBER 2004
NEWS RELEASE NEWS RELEASE NEWS RELEASE NEWS RELEASE NEWS RELEASE
YELL GROUP PLC FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
STRONG GROWTH CONTINUES. ON TRACK TO MEET FULL YEAR EXPECTATIONS.
DIVIDEND UP 40%
o Group turnover up 6.3% to (pound)604.6 million; 12.3% at a constant
exchange rate
o Group adjusted EBITDA up 9.8% to (pound)206.0 million; 14.6% at a constant
exchange rate
o Group adjusted profit after tax (pound)60.7 million, excluding exceptional
legal costs ((pound)22.1 million last year, excluding exceptional IPO
costs)
o Group operating cash flow less capital expenditure up 11.0% to (pound)170.6
million; up 14.6% at a constant exchange rate
o Diluted earnings per share before amortisation and exceptional costs up
18.3% to 15.5 pence (13.1 pence last year on a pro forma basis)
o Interim dividend up 40% to 4.2 pence per share
Note: Earnings, profit after tax and cash flow figures stated before exceptional
legal costs in our US operation of (pound)12.8 million ((pound)8.0 million net
of tax credit) in 2004, and exceptional IPO costs of (pound)148.5 million
((pound)111.3 million net of tax credit) in 2003. Including these costs the
Group made a profit after tax of (pound)52.7 million (a loss of (pound)89.2
million last year).
JOHN CONDRON, CHIEF EXECUTIVE OFFICER, SAID:
"Yell has delivered another set of strong results, which confirm that the group
is well on track to meet full year expectations. In the UK, our printed
directories continue to perform as expected, and Yell.com continues its rapid
growth and increasing profitability. In the US, our excellent performance is the
result of strong organic growth, combined with the benefits of the acquisitions
we have made. We are declaring a 40% per share increase in our interim dividend
with the intention of recommending the same level of increase for the full
year."
JOHN DAVIS, CHIEF FINANCIAL OFFICER, SAID:
"Yell's success in growing its revenues and profits and in maintaining high cash
generation now enables us to raise substantially our dividend this year.
Thereafter we intend to maintain our policy of dividend growth at least in line
with earnings. This does not constrain our ability to pursue our consistent
growth strategy. By taking this step, we also ensure that we continue to operate
with an efficient capital structure."
Yell Group plc. Registered Office: Queens Walk, Oxford Road, Reading,
Berkshire RG1 7PT. Registered in England No. 4180320.
ENQUIRIES
YELL - INVESTORS
Jill Sherratt
Tel +44 (0)118 950 6984
Mobile +44 (0)7764 879808
YELL - MEDIA
Jon Salmon
Tel +44 (0)118 950 6656
Mobile +44 (0)7801 977340
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, turnover, financial condition, liquidity, prospects,
growth, strategies, new products, 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 Yell Finance B.V.'s 31 March 2004 annual
report on Form 20-F filed with the US Securities and Exchange Commission (the
"SEC") on 8 June 2004, for a discussion of some of these factors. We undertake
no obligation publicly to 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/announcements
-------------------------------
Yell Group plc will publish an interim report to shareholders on 11
November 2004
Our subsidiary, Yell Finance B.V., will furnish its results for the
six months ended 30 September 2004 to the SEC on Form 6-K on 9 November
2004.
This filing can also be accessed on the Yell Group website.
2
YELL GROUP PLC SUMMARY FINANCIAL RESULTS
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
30 SEPTEMBER
2003 2004
- ---------------------------------------------------------------------------------------------------------
CHANGE AT
CONSTANT
EXCHANGE RATE
(POUND)M (POUND)M CHANGE (6)
- ---------------------------------------------------------------------------------------------------------
Turnover (1) 568.6 604.6 6.3% 12.3%
Adjusted EBITDA (1) (2) 187.6 206.0 9.8% 14.6%
Operating cash flow (1) (3) 153.7 170.6 11.0% 14.6%
Adjusted diluted earnings per share
(pence) (4) 13.1p 15.5p 18.3%
Cash conversion (1) (5) 81.9% 82.8%
Adjusted profit after tax (2) 22.1 60.7
Exceptional items after tax (111.3) (8.0)
(Loss) profit on ordinary activities
after tax (89.2) 52.7
- ---------------------------------------------------------------------------------------------------------
(1) Turnover, adjusted EBITDA, operating cash flow and cash conversion are the
key financial measures that we use to assess the growth in the business and
operational efficiencies.
(2) Adjusted items in the period ended 30 September 2003 are stated before
exceptional costs arising on IPO. Adjusted items in the period ended 30
September 2004 are stated before exceptional legal costs.
(3) Cash inflow from operations before payments of exceptional items, less
capital expenditure.
(4) Diluted earnings per share before amortisation and exceptional items.
(5) Operating cash flow as a percentage of adjusted EBITDA.
(6) Change at constant exchange rate states the change in current period
results compared to the same period in the previous year as if the current
period results were translated at the same exchange rate as that used to
translate the results for the same period in the previous year.
REVIEW OF OPERATING PERFORMANCE
TURNOVER
Group turnover increased 6.3% to (pound)604.6 million; or 12.3% at a constant
exchange rate, from (pound)568.6 million last year.
UK operations
UK turnover increased 3.3% to (pound)325.0 million; or 3.9% excluding last
year's discontinued products (the sale of Yell Data, our data-service business,
and the ending of our contract with BT to sell advertising in its phone books).
Turnover from printed directories grew 1.9% to (pound)300.9 million. The effect
of RPI -6% was to reduce our prices by an average of 3.5%. Yell.com grew
turnover 42.6% to (pound)16.4 million.
The total number of unique print advertisers increased 1.2% to 254,000.
As anticipated, the UK retention rate has declined from 78% to 75% (or 74%
excluding national and key accounts). Our success in attracting more than
100,000 new advertisers in each of the last four years has inevitably diluted
overall retention. New advertisers are now proving more difficult to retain in a
competitive market than those advertisers for whom the value of advertising in
Yellow Pages is proven. Our strategy to increase the advertiser base has
contributed to sustained growth in advertiser numbers and revenue.
3
Average turnover from unique advertisers improved slightly to (pound)1,183 from
(pound)1,178 last year.
As part of our strategy to grow our advertiser base, we rescoped five
directories into ten during the first half of the year, reflecting changes in
shopping and trading patterns. These included three of the five we are rescoping
in London, which is traditionally a more competitive market than the rest of the
UK. Typically, rescoped directories achieve little or no growth in their first
year, but create potential for future growth.
Yell.com continued to grow rapidly, growing searchable advertisers by 39.1% to
121,000, contributing to turnover growth of 42.6%.
Overall, UK turnover remains on course to meet full year expectations.
US operations
US turnover grew 10.1% to (pound)279.6 million. At a constant exchange rate, the
increase was 23.4%, reflecting the continued success of our US growth strategy.
The average exchange rate was approximately $1.81: (pound)1.00 against $1.62:
(pound)1.00 in the same period last year.
Unique advertisers increased 13.3% to 238,000 with average turnover per unique
advertiser up 8.8% to $2,133 and retention up from 70% to 72%.
Organic turnover growth was 16.0%, to which same-market growth contributed 12.3%
and six new launches contributed 3.7%. Acquisitions, including primarily Feist
which we acquired in March this year, contributed 10.2% to turnover growth,
reflecting a heavy first half publishing schedule for Feist. Growth was
marginally slowed by changes in operating practices including the intentional
running down of the CCD partnership and production rescheduling.
US turnover growth for the year should be in line with expectations. However
third quarter growth is expected to slow slightly as a result of the effects of
fewer launches and production rescheduling following acquisitions.
ADJUSTED EBITDA
Group adjusted EBITDA increased 9.8% to (pound)206.0 million; or 14.6% at a
constant exchange rate. The group adjusted EBITDA margin increased 1.1
percentage points to 34.1%, driven by the strong US performance.
UK adjusted EBITDA rose 2.6% to (pound)132.2 million, reflecting the continued
progress of Yell.com, which significantly increased its adjusted EBITDA to
(pound)5.1 million from (pound)2.1 million last year. Consequently the overall
UK adjusted EBITDA margin was broadly in line with the previous year.
US adjusted EBITDA rose 25.7% to (pound)73.8 million, or 40.9% at a constant
exchange rate. The US adjusted EBITDA margin increased from 23.1% to 26.4%,
driven by the strong revenue growth and operational leverage.
4
OPERATING CASH FLOW AND NET DEBT
The Group converted 82.8% of adjusted EBITDA to cash, as compared to 81.9% last
year. Group operating cash flow increased 11.0% to (pound)170.6 million; or
14.6% at a constant exchange rate.
Net debt at (pound)1,169 million, down (pound)54 million from 31 March 2004,
represents a multiple of 3.1 times adjusted EBITDA for the last 12 months.
NET RESULTS
ADJUSTED AFTER TAX RESULTS
Profit after tax before exceptional items for the six months to 30 September
2004 was (pound)60.7 million, compared with an adjusted profit after tax of
(pound)22.1 million for the same period last year. This reflects strong adjusted
EBITDA growth, as well as lower interest charges arising from the new capital
structure put in place at the time of the IPO on 15 July 2003. The tax charge
before exceptional items was (pound)37.7 million, which represents 25.5% of
profit before tax adjusted for goodwill amortisation and exceptional costs.
EXCEPTIONAL COSTS AND AFTER TAX RESULTS
Exceptional costs after tax of (pound)8.0 million are the estimated total costs
after tax relating to the nine-month long litigation brought against Yellow
Book, our US operation, which was settled on 7 October 2004. Including these
costs, the profit after tax for the six months ended 30 September 2004 was
(pound)52.7 million. As previously reported, there were substantial exceptional
costs during the first half of last year which arose on our IPO and amounted to
(pound)148.5 million before tax, and (pound)111.3 million after a tax credit of
(pound)37.2 million. Including these costs the loss after tax for the six months
ended 30 September 2003 was (pound)89.2 million.
EARNINGS AND DIVIDEND PER SHARE
Diluted earnings per share were 15.5 pence before amortisation and exceptional
costs; an increase of 18.3%. Basic earnings per share before amortisation and
exceptional costs were 15.8 pence. This compares with pro forma (before
amortisation and as if the IPO had occurred before the start of last year) basic
earnings per share of 13.3 pence last year.
The Board has declared an increase of 40% in the interim dividend to 4.2 pence
per share, and this is expected to account for one third of the full year
dividend.
The ex-dividend date will be 17 November 2004 and the interim dividend will be
paid on 17 December 2004 to shareholders registered on 19 November 2004.
5
KEY OPERATIONAL INFORMATION
-------------------------------------
SIX MONTHS ENDED 30 SEPTEMBER
-------------------------------------
2003 2004 CHANGE
- -------------------------------------------------------------------------------------------------------------------
UK PRINTED DIRECTORIES
Unique advertisers (thousands) (1) 251 254 1.2%
Directory editions published 50 55
Unique advertiser retention rate (%) (2) 78 75
Turnover per unique advertiser ((pound)) 1,178 1,183 0.4%
US PRINTED DIRECTORIES
Unique advertisers (thousands) (1) (3) 210 238 13.3%
Directory editions published 250 259
Unique advertiser retention rate (%) (3) 70 72
Turnover per unique advertiser ($) 1,960 2,133 8.8%
OTHER UK PRODUCTS AND SERVICES
Yell.com page impressions for September (millions) 51 70 37.3%
Yell.com searchable advertisers at 30 September (thousands)(4) 87 121 39.1%
- -------------------------------------------------------------------------------------------------------------------
(1) Number of unique advertisers in printed directories that were recognised
for turnover 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) The proportion of unique advertisers that have renewed their advertising
from the preceding publication. As a result of improvements to our systems,
we are now able to include national and key accounts in our measurement of
retention. If we had continued to exclude these accounts, the retention
rate for 2004 would have been 74%. We have not adjusted previously reported
2003 figures. These improvements to our systems have not affected the
reporting of our financial results.
(3) As a result of the progress in the United States towards integrating our
customer databases, we have been able to make improvements in the ways in
which we capture, record and analyse customer information. This has led to
a significant overall elimination of duplicate records of unique
advertisers. We have not adjusted the previously reported 2003 figure for
any duplicated records in 2003. There remains some overlap in reporting
unique advertisers between Yellow Book and the former McLeod that we expect
to be removed. These improvements to our systems have not affected the
reporting of our financial results. Retention in the US is based on unique
directory advertisers.
(4) Unique customers with a live contract at month end. These figures refer to
searchable advertisers only, i.e. advertisers for whom users can search on
Yell.com. They exclude advertisers who purchase products such as banners
and domain names.
6
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
SIX MONTHS ENDED
30 SEPTEMBER
--------------------------------
NOTES 2003 2004
-------------- --------------
(POUND)M (POUND)M
TURNOVER 2 568.6 604.6
Cost of sales (251.1) (271.6)
-------------- --------------
GROSS PROFIT 317.5 333.0
-------------- --------------
Distribution costs (17.2) (17.7)
Administrative expenses
Ongoing activities (173.3) (170.4)
Exceptional items 4 (90.1) (12.8)
-------------- --------------
(263.4) (183.2)
-------------- --------------
OPERATING PROFIT 3 36.9 132.1
Net interest payable
Ongoing activities (88.2) (46.5)
Exceptional items 4 (58.4) -
-------------- --------------
(146.6) (46.5)
-------------- --------------
(LOSS) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (109.7) 85.6
TAXATION
On ongoing activities 5 (16.7) (37.7)
On exceptional items 4,5 37.2 4.8
-------------- --------------
20.5 (32.9)
-------------- --------------
(LOSS) PROFIT FOR THE FINANCIAL PERIOD (89.2) 52.7
Interim dividend 6 (20.8) (29.5)
-------------- --------------
RETAINED (LOSS) PROFIT FOR THE FINANCIAL PERIOD (110.0) 23.2
============== ==============
(IN PENCE) (IN PENCE)
Basic (loss) earnings per share 7 (20.0) 7.5
Diluted (loss) earnings per share 7 (20.0) 7.4
EARNINGS PER SHARE BEFORE EXCEPTIONAL ITEMS
AND GOODWILL AMORTISATION (A)
Basic 7 13.3 15.8
Diluted 7 13.1 15.5
(a) Earnings per share before exceptional items and goodwill amortisation for
the six months ended 30 September 2003 are calculated on a pro forma basis
as though our IPO and debt refinancing had occurred before 1 April 2003.
With the exception of the profit for the financial period detailed above and the
currency movements detailed in note 10, there have been no other recognised
gains or losses.
See notes to the financial information for additional details.
7
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 SEPTEMBER
------------------------------------
NOTES 2003 2004
---------------- ----------------
(POUND)M (POUND)M
NET CASH INFLOW FROM OPERATING ACTIVITIES 133.2 170.3
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (78.9) (38.4)
Redemption Premium Paid (19.7) -
Finance Fees paid (16.1) -
---------------- ----------------
NET CASH OUTFLOW FOR RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (114.7) (38.4)
---------------- ----------------
TAXATION (4.6) (14.8)
---------------- ----------------
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Purchase of tangible fixed assets, net
of sales proceeds (10.6) (8.7)
---------------- ----------------
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT (10.6) (8.7)
---------------- ----------------
ACQUISITIONS
Purchase of subsidiary undertakings, net of
cash acquired (3.1) -
---------------- ----------------
NET CASH OUTFLOW FOR ACQUISITIONS (3.1) -
---------------- ----------------
DIVIDENDS PAID - (41.8)
------------------ -----------------
NET CASH INFLOW BEFORE FINANCING 0.2 66.6
FINANCING
Issue of ordinary share capital 8 433.6 1.2
Expenses paid in connection with share
issue (22.8) -
New loans issued 1,031.0 -
Borrowings repaid 8 (1,378.4) (45.0)
---------------- ----------------
NET CASH INFLOW (OUTFLOW) FROM FINANCING 63.4 (43.8)
---------------- ----------------
INCREASE IN NET CASH IN THE PERIOD 63.6 22.8
================ ================
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW
FROM OPERATING ACTIVITIES
Total operating profit 36.9 132.1
Depreciation 11.4 11.5
Goodwill amortisation 49.2 49.6
Exceptional employee costs settled in shares
49.1 -
Increase in stocks (21.6) (27.1)
Decrease (increase) in debtors 20.8 (2.9)
(Decrease) increase in creditors (12.6) 5.9
Other non cash items - 1.2
---------------- ----------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 133.2 170.3
================ ================
NET CASH INFLOW FROM OPERATING ACTIVITIES 133.2 170.3
Cash payments of accrued exceptional items 31.1 9.0
Purchase of tangible fixed assets, net of sale
proceeds (10.6) (8.7)
---------------- ----------------
NET CASH INFLOW FROM OPERATING ACTIVITIES BEFORE PAYMENTS
OF EXCEPTIONAL ITEMS AND AFTER CAPITAL EXPENDITURE 153.7 170.6
================ ================
See notes to the financial information for additional details.
8
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
AT AT
31 MARCH 30 SEPTEMBER
NOTES 2004 2004
(POUND)M (POUND)M
---------------- ----------------
FIXED ASSETS
Intangible assets 1,725.3 1,686.5
Tangible assets 45.9 41.8
Investment 1.8 2.7
---------------- ----------------
TOTAL FIXED ASSETS 1,773.0 1,731.0
---------------- ----------------
CURRENT ASSETS
---------------- ----------------
Stocks 151.9 180.2
Debtors 460.6 450.8
Cash at bank and in hand 8 18.7 42.0
---------------- ----------------
TOTAL CURRENT ASSETS 631.2 673.0
---------------- ----------------
CREDITORS: AMOUNTS FALLING DUE WITHIN
ONE YEAR
Loans and other borrowings 8,9 (85.8) (85.6)
Other creditors (273.0) (269.5)
---------------- ----------------
TOTAL CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
(358.8) (355.1)
---------------- ----------------
NET CURRENT ASSETS 272.4 317.9
---------------- ----------------
TOTAL ASSETS LESS CURRENT LIABILITIES 2,045.4 2,048.9
CREDITORS: AMOUNTS FALLING DUE AFTER
MORE THAN ONE YEAR
Loans and other borrowings 8,9 (1,155.9) (1,125.5)
---------------- ----------------
NET ASSETS 889.5 923.4
================ ================
CAPITAL AND RESERVES
Called up share capital 10 7.0 7.0
Share premium account 10 1,184.7 1,185.9
Profit and loss account deficit 10 (302.2) (269.5)
---------------- ----------------
EQUITY SHAREHOLDERS' FUNDS 889.5 923.4
================ ================
See notes to the financial information for additional details.
9
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION
1. BASIS OF PREPARATION AND CONSOLIDATION
The principal activity of Yell Group plc and its subsidiaries is publishing
classified advertising directories in the United Kingdom and the United
States.
The unaudited 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 that were set out in the audited
consolidated financial information of Yell Group plc for the year ended 31
March 2004.
The information contained herein does not constitute statutory financial
statements within the meaning of section 240 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 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 period. Actual results could
differ from those estimates. Estimates are used principally when accounting
for doubtful debts, depreciation, employee pension costs and taxes.
10
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
2. TURNOVER
SIX MONTHS
ENDED 30 SEPTEMBER CHANGE
-------------------------------------------
2003 2004 %
------------- ---------------------------
(POUND)M (POUND)M
UK printed directories 295.2 300.9 1.9%
Other products and services 19.4 24.1 24.2%
------------- -------------
TOTAL UK TURNOVER 314.6 325.0 3.3%
------------- -------------
US printed directories:
US printed directories at constant
exchange rate (a) 254.0 313.4 23.4%
Exchange impact (a) - (33.8)
------------- -------------
TOTAL US TURNOVER 254.0 279.6 10.1%
------------- -------------
GROUP TURNOVER 568.6 604.6 6.3%
============= =============
(a) Constant exchange rate states current period results at the same exchange
rate as that used to translate the results for the same period in the
previous year. Exchange impact is the difference between the results
reported at a constant exchange rate and the actual results using current
period exchange rates.
3. OPERATING PROFIT AND EBITDA INFORMATION
ADJUSTED EBITDA BY SEGMENT
SIX MONTHS
ENDED 30 SEPTEMBER CHANGE
-------------------------------------------
2003 2004 %
------------- -----------------------------
(POUND)M (POUND)M
UK printed directories 128.6 124.8 (3.0)%
Other products and services 0.3 7.4
------------- -------------
TOTAL UK OPERATIONS 128.9 132.2 2.6%
------------- -------------
US operations:
US printed directories at constant exchange rate
(a) 58.7 82.7 40.9%
Exchange impact (a) - (8.9)
------------- -------------
TOTAL US OPERATIONS 58.7 73.8 25.7%
------------- -------------
GROUP ADJUSTED EBITDA 187.6 206.0 9.8%
============= =============
(a) Constant exchange rate states current period results at the same exchange
rate as that used to translate the results for the same period in the
previous year. Exchange impact is the difference between the results
reported at a constant exchange rate and the actual results using current
period exchange rates.
11
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
3. OPERATING PROFIT AND EBITDA INFORMATION (CONTINUED)
RECONCILIATION OF GROUP OPERATING PROFIT TO ADJUSTED EBITDA (a)
SIX MONTHS
ENDED 30 SEPTEMBER CHANGE
---------------------------------------------------
2003 2004 %
---------------------------------------------------
(POUND)M (POUND)M
UK operations
OPERATING PROFIT 58.8 97.1
Depreciation and amortisation 34.8 35.1
-------------- --------------
UK OPERATIONS EBITDA 93.6 132.2
Exceptional items 35.3 -
-------------- --------------
UK OPERATIONS ADJUSTED EBITDA 128.9 132.2 2.6%
-------------- --------------
UK OPERATIONS ADJUSTED EBITDA MARGIN 41.0% 40.7%
============== ==============
US operations
OPERATING (LOSS) PROFIT (21.9) 35.0
Depreciation and amortisation 25.8 26.0
-------------- --------------
US OPERATIONS EBITDA 3.9 61.0
Exceptional items 54.8 12.8
Exchange impact (b) - 8.9
-------------- --------------
US OPERATIONS ADJUSTED EBITDA AT
CONSTANT EXCHANGE RATE (b) 58.7 82.7 40.9%
Exchange impact (b) - (8.9)
-------------- --------------
US OPERATIONS ADJUSTED EBITDA 58.7 73.8 25.7%
-------------- --------------
US OPERATIONS ADJUSTED EBITDA MARGIN (c) 23.1% 26.4%
============== ==============
Group
OPERATING PROFIT 36.9 132.1
Depreciation and amortisation 60.6 61.1
-------------- --------------
GROUP EBITDA 97.5 193.2 98.2%
Exceptional items 90.1 12.8
Exchange impact (b) - 8.9
-------------- --------------
GROUP ADJUSTED EBITDA AT CONSTANT EXCHANGE 187.6 214.9 14.6%
RATE (b)
Exchange impact (b) - (8.9)
-------------- --------------
GROUP ADJUSTED EBITDA 187.6 206.0 9.8%
============== ==============
GROUP ADJUSTED EBITDA MARGIN 33.0% 34.1%
============== ==============
(a) Adjusted EBITDA is one of the key financial measures that we use to assess
the success of our business operations in achieving growth in an efficient
manner.
(b) Constant exchange rate states current period results at the same exchange
rate as that used to translate the results for the same period in the
previous year. Exchange impact is the difference between the results
reported at a constant exchange rate and the actual results reported using
current period exchange rates.
(c) US operations EBITDA margin including exceptional items is 21.8% in 2004.
We do not allocate interest or taxation charges by product or geographic
segment.
12
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
4. RESULTS BEFORE AND AFTER EXCEPTIONAL ITEMS
SIX MONTHS ENDED 30 SEPTEMBER
-------------------------------------------------------------------------------------
2003 2004
-------------------------------------------------------------------------------------
ORDINARY EXCEPTIONAL ORDINARY EXCEPTIONAL
ITEMS ITEMS TOTAL ITEMS ITEMS TOTAL
-------------------------------------------------------------------------------------
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
GROSS PROFIT 317.5 - 317.5 333.0 - 333.0
Distribution costs (17.2) - (17.2) (17.7) - (17.7)
Administrative expenses (173.3) (90.1) (263.4) (170.4) (12.8) (183.2)
-------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS) 127.0 (90.1) 36.9 144.9 (12.8) 132.1
Net interest payable (88.2) (58.4) (146.6) (46.5) - (46.5)
-------------------------------------------------------------------------------------
(LOSS) PROFIT BEFORE
TAXATION 38.8 (148.5) (109.7) 98.4 (12.8) 85.6
Taxation (16.7) 37.2 20.5 (37.7) 4.8 (32.9)
-------------------------------------------------------------------------------------
(LOSS) PROFIT FOR THE
PERIOD 22.1 (111.3) (89.2) 60.7 (8.0) 52.7
=====================================================================================
Exceptional costs for the six months to 30 September 2004 are the estimated
total costs relating to litigation brought against our US operations (see note
12). Exceptional administrative costs in the six months ended 30 September 2003
relate to costs incurred in connection with our IPO.
5. TAXATION
The effective tax rate for the period is different from the standard rate
of corporation tax in the United Kingdom (30%) as explained below:
SIX MONTHS ENDED 30 SEPTEMBER
----------------------------------
2003 2004
--------------- ---------------
(POUND)M (POUND)M
Profit on ordinary activities before exceptional items and
taxation multiplied by the standard rate of corporation tax
in the United Kingdom (30%) 11.6 29.5
Effects of:
Non-allowable goodwill amortisation 10.5 11.1
US tax losses (3.7) (2.9)
Other permanent differences (1.7) -
--------------- ---------------
Tax charge on ongoing activities 16.7 37.7
--------------- ---------------
Exceptional items multiplied by the standard rate of
corporation tax in the United Kingdom (30%) (44.6) (3.8)
Effects of:
Higher rate for overseas tax - (1.0)
Items not allowed for tax purposes 7.4 -
--------------- ---------------
Taxation credit on exceptional items (37.2) (4.8)
--------------- ---------------
Total tax (credit) charge (20.5) 32.9
=============== ===============
6. INTERIM DIVIDEND
The interim dividend of 4.2 pence per share (2003 - 3.0 pence per share) is
payable on 17 December 2004 to shareholders registered at the close of
business on 19 November 2004 and will amount to (pound) 29.5 million (2003
- (pound)20.8 million).
13
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
7. EARNINGS (LOSS) PER SHARE
PRO FORMA
INTEREST
ADJUST- EXCEPTIONAL
MENTS NET COSTS NET
ACTUAL OF TAX (A) OF TAX (B) AMORTISATION (C) ADJUSTED
----------------------------------------------------------------------------------
SIX MONTHS ENDED 30 SEPTEMBER 2004
Group profit for the
financial period ((pound)m) 52.7 - 8.0 49.6 110.3
Weighted average number of
issued ordinary shares
(millions) (d) 699.8 - 699.8
--------- ---------
BASIC EARNINGS PER SHARE 7.5 15.8
(PENCE) Effect of share options
(pence) (0.1) (0.3)
--------- ---------
DILUTED EARNINGS PER SHARE 7.4 15.5
========= =========
(PENCE)
SIX MONTHS ENDED 30 SEPTEMBER 2003
Group (loss) profit for the
financial period ((pound)m) (89.2) 21.1 111.3 49.2 92.4
Weighted average number of
issued ordinary shares
(millions) (d) 446.9 247.9 694.8
--------- ---------
BASIC (LOSS) EARNINGS (20.0) 13.3
PER SHARE (PENCE)
Effect of share options
(pence) - (0.2)
--------- ---------
DILUTED (LOSS) EARNINGS
PER SHARE (PENCE) (20.0) 13.1
========= =========
(a) Group losses for the six months ended 30 September 2003 have been adjusted
to exclude interest charges on the long-term debt we repaid as a result of
the IPO. Interest has been added back by referring to the effective
interest rates applied to the borrowings repaid from the proceeds of the
IPO over the period. All interest adjustments have been tax effected at the
UK corporation tax rate of 30%. The weighted average number of shares for
the six months ended 30 September 2003 has been adjusted as though the IPO
happened before 1 April 2003.
(b) Exceptional items are explained in note 4.
(c) Amortisation charges presented are not adjusted for tax. The adjustment
would have been (pound)45.1 million, as opposed to (pound)49.6 million, and
(pound)43.5 million, as opposed to (pound)49.2 million, in 2004 and 2003,
respectively, if the tax effect from tax allowable amortisation in the
United States had been taken into account. Accordingly, the diluted
earnings per share would have been 14.9 pence, as opposed to 15.5 pence, in
the six months ended 30 September 2004 and 12.3 pence, as opposed to 13.1
pence in the six months ended 30 September 2003.
(d) The calculation of the basic and diluted earnings (loss) per ordinary share
has been based on the profit (loss) for the relevant financial period and
on 694.8 million shares for the six months ended 30 September 2003, being
the weighted average share capital prior to the IPO after taking into
account the restructuring of the existing share capital on the IPO. For the
six months ended 30 September 2004, the calculation was based on 699.8
million shares, the weighted average share capital during the period.
14
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
8. NET DEBT
ANALYSIS OF NET DEBT
AT AT
31 MARCH 2004 30 SEPTEMBER 2004
------------------ --------------------
(POUND)M (POUND)M
Long-term loans and other borrowings
falling due after more than one year 1,155.9 1,125.5
Short-term borrowings and long-term
loans and other borrowings falling due within
one year 85.8 85.6
------------------- --------------------
Total debt 1,241.7 1,211.1
Cash at bank and in hand 18.7 42.0
------------------- --------------------
NET DEBT AT END OF PERIOD 1,223.0 1,169.1
=================== ====================
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)M (POUND)M (POUND)M (POUND)M
AT 31 MARCH 2004 18.7 (85.8) (1,155.9) (1,223.0)
Net cash inflow before financing and
dividends paid 108.4 - - 108.4
Dividend paid (41.8) - - (41.8)
Long term debt becoming due within one year - (45.0) 45.0 -
Borrowings repaid (45.0) 45.0 - -
Issue of Ordinary Share Capital 1.2 - - 1.2
Non-cash charges - 0.2 (7.3) (7.1)
Currency movements 0.5 - (7.3) (6.8)
------------- ------------- ------------- -------------
AT 30 SEPTEMBER 2004 42.0 (85.6) (1,125.5) (1,169.1)
============= ============= ============= =============
15
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
9. LOANS AND OTHER BORROWINGS
AT AT
31 MARCH 30 SEPTEMBER
2004 (A) 2004 (A)
---------------- ------------------
(POUND)M (POUND)M
AMOUNTS FALLING DUE WITHIN ONE YEAR
Senior credit facilities (b) 80.0 85.0
Revolver loan (b) 5.0 -
Net obligations under finance leases 0.8 0.6
---------------- ------------------
TOTAL AMOUNTS FALLING DUE WITHIN ONE YEAR 85.8 85.6
---------------- ------------------
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Senior credit facilities 856.6 817.9
Senior notes:
Senior sterling notes 158.1 158.5
Senior dollar notes 68.1 69.5
Senior discount dollar notes 73.1 79.6
---------------- ------------------
TOTAL AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 1,155.9 1,125.5
---------------- ------------------
NET LOANS AND OTHER BORROWINGS 1,241.7 1,211.1
================ ==================
(a) Balances are shown net of deferred financing fees of (pound)18.1 million at
30 September 2004 and (POUND)20.1 million at 31 March 2004.
(b) Yell made payments of (pound)40.0 million in the six months ended 30
September 2004 on amounts owed under the senior facility as required by the
senior facility agreement and also repaid (pound)5 million that had been
drawn down against the senior revolving credit facility at 31 March 2004.
10. CHANGES IN EQUITY SHAREHOLDERS' FUNDS
SHARE SHARE PROFIT AND
CAPITAL PREMIUM LOSS ACCOUNT TOTAL
-----------------------------------------------------------
(POUND)M (POUND)M (POUND)M (POUND)M
BALANCE AT 1 APRIL 2004 7.0 1,184.7 (302.2) 889.5
Profit on ordinary
activities after taxation - - 52.7 52.7
Interim dividend - - (29.5) (29.5)
Ordinary share issue - 1.2 - 1.2
Capital Accumulation Plan (a) - - 1.2 1.2
Currency movements (b) - - 8.3 8.3
------------ ------------ ------------ ------------
BALANCE AT 30 SEPTEMBER 2004 7.0 1,185.9 (269.5) 923.4
============ ============ ============ ============
(a) Amortisation of the costs incurred in buying shares held in an ESOP trust
for employees.
(b) The cumulative currency translation adjustment was a (pound)94.4 million
loss at 30 September 2004 (31 March 2004 - (pound)102.7 million loss).
16
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Our consolidated financial information is prepared in accordance with
accounting principles generally accepted in the United Kingdom which differ
in certain respects from those applicable in the United States ("US GAAP").
Differences result primarily from acquisition accounting, which affects the
accounting for directories in progress, goodwill and other intangibles and
taxation. Timing differences also arise when recognising certain costs
associated with directories in progress, interest that is fixed by
derivative financial instruments, and deferred tax assets associated with
net operating losses in the United States. Differences in accounting for
pensions arise from the requirements to use different actuarial methods and
assumptions. Differences in accounting for our share options arise from the
adoption of option pricing models to value options under US GAAP in
circumstances where the options are valued at (pound)nil value under UK
GAAP. Dividends are recorded, under UK GAAP, in the period in respect of
which they are proposed by the board of directors to the shareholders.
Under US GAAP, dividends are recorded in the period in which they are
declared.
The following information summarises estimated adjustments, gross of their
tax effect, which reconcile net (loss) profit and shareholders' funds from
that reported under UK GAAP to that which would have been recorded had US
GAAP been applied.
NET (LOSS) PROFIT
SIX MONTHS ENDED 30 SEPTEMBER
------------------------------
2003 2004
------------------------------
(POUND)M (POUND)M
(Loss) profit on ordinary activities
after taxation under UK GAAP (89.2) 52.7
Adjustment for:
Directories in progress
-Deferred costs (21.0) (11.5)
-Acquisition accounting(a) - (4.0)
Pensions (4.3) (6.9)
Goodwill 49.2 49.6
Other intangible assets (48.3) (36.4)
Derivative financial instruments 12.7 3.4
Employee incentive plans - (1.5)
Amortisation of deferred financing costs 2.4 (0.3)
Deferred taxation (4.6) 18.9
Other (1.5) (0.3)
------------- -------------
NET (LOSS) PROFIT AS ADJUSTED FOR US GAAP (104.6) 63.7
============= =============
(a) Represents adjustments that arose as a result of acquisitions.
17
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
EQUITY SHAREHOLDERS' FUNDS
AT AT
31 MARCH 30 SEPTEMBER
2004 2004
------------------- -------------------
(POUND)M (POUND)M
Equity shareholders' funds under UK GAAP 889.5 923.4
Adjustment for:
Directories in progress (103.2) (119.8)
Pensions (0.3) (7.2)
Additional minimum pension liability (37.9) (37.9)
Goodwill (562.3) (514.7)
Other intangible assets 746.6 713.5
Derivative financial instruments (3.2) 0.2
Deferred taxation (182.9) (165.1)
Dividends proposed 41.9 29.5
Other 2.3 1.7
------------------ -------------------
EQUITY SHAREHOLDERS' FUNDS AS ADJUSTED FOR US GAAP
790.5 823.6
================== ===================
12. LITIGATION
On 22 January 2004, Verizon filed suit in New York alleging that sales and
marketing communications published by Yellow Book USA were misleading and
caused Verizon to lose revenue. On 7 October 2004, the court delivered its
final judgment in which it approved the terms of a settlement agreement
reached between the parties.
18
NOTES TO EDITORS
YELL GROUP
Yell is an international directories business operating in the classified
advertising market through printed, online and telephone-based media.
In the year ended 31 March 2004, Yell published 99 directories in the UK and 536
in the US; in the UK, where it is a clear market leader, it served 480,000
unique advertisers. In the US, where it is the leading independent directories
business, it served 386,000 unique advertisers.
Yell's brands in the UK are Yellow Pages, Business Pages, Yell.com and Yellow
Pages 118 24 7, and in the US are Yellow Book and Yellowbook.com, all of which
are trademarks.
19