EXHIBIT 99.1
[ ] YELL
15 February 2005
NEWS RELEASE NEWS RELEASE NEWS RELEASE NEWS RELEASE NEWS RELEASE
YELL GROUP PLC FINANCIAL RESULTS FOR THE NINE MONTHS ENDED 31 DECEMBER 2004
STRONG GROWTH CONTINUES. FIRMLY ON TRACK TO MEET FULL YEAR EXPECTATIONS.
o Group turnover up 6.7% to (pound)897.9 million; 12.5% at a constant
exchange rate
o Group adjusted EBITDA up 10.0% to (pound)286.0 million; 14.8% at a constant
exchange rate
o Group adjusted profit after tax (pound)78.0 million, excluding exceptional
legal costs ((pound)31.1 million last year, excluding exceptional IPO
costs)
o Group operating cash flow less capital expenditure up 9.8% to (pound)261.2
million; up 13.7% at a constant exchange rate
o Diluted earnings per share before amortisation and exceptional costs up
20.8% to 21.5 pence (17.8 pence last year on a pro forma basis)
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 the 2005 financial year, and exceptional IPO costs of
(pound)148.5 million ((pound)111.3 million net of tax credit) in the 2004
financial year. Including these costs the Group made a profit after tax of
(pound)70.0 million (a loss of (pound)80.2 million last year).
JOHN CONDRON, CHIEF EXECUTIVE OFFICER, SAID:
"Yell's consistent strategy and focused execution continue to deliver good
performance across our operations both in the UK and the US and we continue to
invest in them for future growth. We are confident of meeting expectations for
the full year, as well as seeing a positive outlook beyond this."
JOHN DAVIS, CHIEF FINANCIAL OFFICER, SAID:
"The Group's strong operational performance continues to drive high levels of
cash generation and profitability, with over 91% of adjusted EBITDA converted to
cash. Consequently net debt now stands at 2.9 times adjusted EBITDA for the last
12 months, compared with 3.3 times for the same period last year."
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
-------------------------------
Our subsidiary, Yell Finance B.V., will furnish its results for the
nine months ended 31 December 2004 to the SEC on Form 6-K on 15 February 2005.
A copy of this filing can also be accessed on the Yell Group website.
2
YELL GROUP PLC SUMMARY FINANCIAL RESULTS
-----------------------------------------------------------
NINE MONTHS ENDED
31 DECEMBER
2003 2004
-----------------------------------------------------------
CHANGE AT
CONSTANT
EXCHANGE
(POUND)M (POUND)M CHANGE RATE (f)
- ------------------------------------------------------------------------------------------------------
Turnover (a) 841.3 897.9 6.7% 12.5%
Adjusted EBITDA (a) (b) 260.1 286.0 10.0% 14.8%
Operating cash flow (a) (c) 237.8 261.2 9.8% 13.7%
Adjusted diluted earnings per share
(pence) (d) 17.8p 21.5p 20.8%
Cash conversion (a) (e) 91.4% 91.3%
Adjusted profit after tax (b) 31.1 78.0
Exceptional items after tax (111.3) (8.0)
(Loss) profit on ordinary activities
after tax (80.2) 70.0
- ------------------------------------------------------------------------------------------------------
(a) 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.
(b) Adjusted items in the period ended 31 December 2003 are stated before
exceptional costs arising on IPO. Adjusted items in the period ended 31
December 2004 are stated before exceptional legal costs.
(c) Cash inflow from operations before payments of exceptional items, less
capital expenditure.
(d) Diluted earnings per share before amortisation and exceptional items.
(e) Operating cash flow as a percentage of adjusted EBITDA.
(f) 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 6.7% to (pound)897.9 million; or 12.5% at a constant
exchange rate, from (pound)841.3 million last year.
UK operations
UK turnover increased 4.3% to (pound)466.6 million. Turnover from printed
directories grew 2.6% to (pound)428.8 million. The effect of RPI-6% was to
reduce Yellow Pages prices by an average of 3.4%. Yell.com turnover increased by
41.0% to (pound)25.8 million.
The total number of unique print advertisers increased slightly to 354,000. The
UK retention rate was in line with the first half of the year at 75% (or 74%
excluding national and key accounts). The decline from 78% last year primarily
reflects the substantial growth in our advertiser base over the last four years
as new customers typically dilute retention.
During the nine months, we grew average turnover per unique advertiser by 2.1%
to (pound)1,210 from (pound)1,185 last year.
In order to reflect changes in demographic, shopping and trading patterns, we
rescoped seven directories into thirteen during the first nine months. We plan
to rescope a further six directories in the last quarter.
3
Yell.com continued to grow rapidly. This reflected the growth in searchable
advertisers of 41.5% to 133,000.
Overall, we are confident that UK turnover remains firmly on track to meet full
year expectations.
US operations
US turnover grew 9.5% to (pound)431.3 million. At a constant exchange rate, the
increase was 21.8%; the average exchange rate was approximately $1.83:
(pound)1.00 against $1.65: (pound)1.00 in the same period last year.
Unique advertisers increased 10.9% to 346,000 with average turnover per unique
advertiser up 9.7% to $2,285 and retention up from 69% to 71%.
Organic turnover grew 15.4%. This comprised strong same-market growth of 12.3%,
which benefited from the successful relaunch last year of several major former
McLeod directories, and growth of 3.1% from ten new launches. The contribution
to growth from acquisitions was 9.3%, mainly from Feist which we acquired in
March 2004. Feist's contribution in the final quarter is expected to be a
relatively smaller proportion of overall turnover growth. Growth was slowed by
2.9% owing to changes in operating practices including the intentional run down
of the CCD partnership as well as production rescheduled to the final quarter.
We are confident that US turnover remains firmly on track to meet full year
expectations.
ADJUSTED EBITDA
Group adjusted EBITDA increased by 10.0% to (pound)286.0 million, or 14.8% at a
constant exchange rate. The Group adjusted EBITDA margin increased one
percentage point to 31.9%, driven by the strong US performance.
UK adjusted EBITDA rose 2.0% to (pound)172.2 million, reflecting the continued
excellent progress of Yell.com, which partially offset significant investment to
support the continuing revenue growth of printed directories. Yell.com increased
its EBITDA to (pound)7.2 million from (pound)3.7 million last year. The overall
UK adjusted EBITDA margin was 36.9%, compared with 37.7% last year.
In the US, strong revenue growth and operational leverage resulted in 24.8%
growth in adjusted EBITDA to (pound)113.8 million - a 38.7% increase at a
constant exchange rate. The US adjusted EBITDA margin increased from 23.2% to
26.4%, as a result of the high conversion of revenue outperformance into profit.
OPERATING CASH FLOW AND NET DEBT
The Group converted 91.3% of adjusted EBITDA to cash, as compared to 91.4% last
year. Cash generation is expected to slow in the final quarter owing to planned
investment in next year's US launches. Group operating cash flow increased 9.8%
to (pound)261.2 million, or 13.7% at a constant exchange rate.
4
Free cash flow (net cash inflow from operating activities ((pound)263.2 million)
less interest ((pound)49.4 million) and taxation paid ((pound)24.3 million) and
purchase of fixed assets ((pound)15.6 million)) generated during the nine months
was (pound)173.9 million. We intend to make special pensions contributions
totalling (pound)17 million, paying approximately half before the financial year
end. These contributions are the first step in alleviating the level of the
pension deficit and, while reducing free cash flow, will have no effect on the
Group's profit and loss.
Net debt at (pound)1,122 million, down (pound)102 million from 31 March 2004,
represents a multiple of 2.9 times adjusted EBITDA for the last 12 months.
NET RESULTS
AFTER TAX RESULTS
Profit after tax before exceptional items for the nine months to 31 December
2004 was (pound)78.0 million, compared with an adjusted profit after tax of
(pound)31.1 million for the same period last year. This reflects the strong
EBITDA growth, as well as the lower interest charges arising from the new
capital structure put in place at the time of our IPO on 15 July 2003. The tax
charge before exceptional items was (pound)47.5 million, which represents 23.8%
of profit before tax adjusted for goodwill amortisation and exceptional costs.
The profit after tax for the nine months ended 31 December 2004, including
exceptional items, was (pound)70.0 million. Including the exceptional costs
detailed below, the loss after tax for the nine months ended 31 December 2003
was (pound)80.2 million.
EXCEPTIONAL COSTS
As previously reported, exceptional costs of (pound)12.8 million ((pound)8.0
million after tax) are the 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. In the equivalent period last year exceptional costs arose
entirely 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.
Since the half year results were announced, Yellow Book USA has been served with
complaints filed as class actions in four US states by customers alleging
violations of consumer protection legislation. We believe that the plaintiffs
are relying on findings of the New York court in the now-settled suit brought
against Yellow Book USA by Verizon. We are in consultation with our legal
advisers and those of the plaintiffs as regards the merits and possible
financial effect of these actions. We are unable to reliably estimate any
potential cost arising from these actions at this time; therefore, we have not
provided for any costs in connection with these actions.
EARNINGS AND DIVIDEND PER SHARE
Diluted earnings per share were 21.5 pence before amortisation and exceptional
costs; an increase of 20.8%. Basic earnings per share before amortisation and
exceptional costs were 21.7 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 18.1 pence last year.
5
CURRENT UK REGULATORY REVIEW
The current regulatory regime is being reviewed by the Office of Fair Trading
(OFT). In August last year, the OFT stated that they expected the review to be
completed in the spring of this year.
In November, they announced that this review would now take the form of a Market
Study under the terms of the Enterprise Act - still keeping to the spring
completion date. As we have consistently stated, a Market Study can have a
number of outcomes such as the withdrawal of undertakings, the acceptance by the
OFT of new undertakings or a referral to the Competition Commission.
The OFT has carried out its initial information gathering exercise and is now
consulting with us and other industry participants. This is a confidential
dialogue and no further information can be given at this stage.
6
KEY OPERATIONAL INFORMATION
-------------------------------------
NINE MONTHS ENDED 31 DECEMBER
-------------------------------------
2003 2004 CHANGE
- ------------------------------------------------------------------------------------------------------------------
UK PRINTED DIRECTORIES
Unique advertisers (thousands) (a) 353 354 0.3%
Directory editions published 68 74
Unique advertiser retention rate (%) (b) 78 75
Turnover per unique advertiser ((pound)) 1,185 1,210 2.1%
US PRINTED DIRECTORIES
Unique advertisers (thousands) (a) (c) 312 346 10.9%
Directory editions published 390 401
Unique advertiser retention rate (%) (c) 69 71
Turnover per unique advertiser ($) 2,083 2,285 9.7%
OTHER UK PRODUCTS AND SERVICES
Yell.com page impressions for December (millions) (d) 46 50 8.7%
Yell.com searchable advertisers at 31 December (thousands)(e) 94 133 41.5%
- ------------------------------------------------------------------------------------------------------------------
(a) 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.
(b) 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 the nine months ended 31 December 2004 would have been 74%. We
have not adjusted previously reported figures for the nine months ended 31
December 2003. These improvements to our systems have not affected the
reporting of our financial results.
(c) 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 figures for the
nine months ended 31 December 2003 for any duplicated records in that
period. There remains some overlap in reporting unique advertisers between
Yellow Book and acquired businesses 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.
(d) Growth in page impressions is lower than in previous periods as a result of
a site redesign that has reduced the number of pages a user has to access
when searching Yell.com.
(e) 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.
7
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
NINE MONTHS ENDED 31
DECEMBER
--------------------------------
NOTES 2003 2004
----------------- --------------
(POUND)M (POUND)M
TURNOVER 2 841.3 897.9
Cost of sales (384.5) (410.6)
------------------ ---------------
GROSS PROFIT 456.8 487.3
------------------ ---------------
Distribution costs (24.9) (26.1)
Administrative expenses
Ongoing activities (262.3) (266.4)
Exceptional items 4 (90.1) (12.8)
------------------ ---------------
(352.4) (279.2)
------------------ ---------------
OPERATING PROFIT 3 79.5 182.0
Net interest payable
Ongoing activities (112.6) (69.3)
Exceptional items 4 (58.4) -
------------------ ---------------
(171.0) (69.3)
------------------ ---------------
(LOSS) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (91.5) 112.7
TAXATION
On ongoing activities 5 (25.9) (47.5)
On exceptional items 4,5 37.2 4.8
------------------ ---------------
11.3 (42.7)
------------------ ---------------
(LOSS) PROFIT FOR THE FINANCIAL PERIOD (80.2) 70.0
Interim dividend 6 (20.8) (29.5)
------------------ ---------------
RETAINED (LOSS) PROFIT FOR THE FINANCIAL PERIOD (101.0) 40.5
================= ===============
(in pence) (in pence)
Basic (loss) earnings per share 7 (15.1) 10.0
Diluted (loss) earnings per share 7 (15.1) 9.9
EARNINGS PER SHARE BEFORE EXCEPTIONAL ITEMS
AND GOODWILL AMORTISATION (A)
Basic 7 18.1 21.7
Diluted 7 17.8 21.5
(a) Earnings per share before exceptional items and goodwill amortisation for
the nine months ended 31 December 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.
8
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
NINE MONTHS ENDED 31 DECEMBER
------------------------------------
NOTES 2003 2004
----------------- -----------------
(POUND)M (POUND)M
NET CASH INFLOW FROM OPERATING ACTIVITIES 223.7 263.2
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (94.8) (49.4)
Redemption premium paid (19.7) -
Finance fees paid (16.4) -
----------------- -----------------
NET CASH OUTFLOW FOR RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (130.9) (49.4)
----------------- -----------------
TAXATION (10.2) (24.3)
----------------- -----------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets, net
of sales proceeds (17.9) (15.6)
----------------- -----------------
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT (17.9) (15.6)
----------------- -----------------
ACQUISITIONS
Purchase of subsidiary undertakings, net of
cash acquired (5.8) -
----------------- -----------------
NET CASH OUTFLOW FOR ACQUISITIONS (5.8) -
----------------- -----------------
DIVIDENDS PAID 8 (20.8) (71.3)
----------------- -----------------
NET CASH INFLOW BEFORE FINANCING 38.1 102.6
FINANCING
Issue of ordinary share capital 8 433.6 1.4
Expenses paid in connection with share
issue (23.7) -
Purchase of own shares 8 - (6.6)
New loans issued 1,031.0 -
Borrowings repaid 8 (1,378.4) (45.0)
------------------ -----------------
NET CASH INFLOW (OUTFLOW) FROM FINANCING 62.5 (50.2)
------------------ -----------------
INCREASE IN NET CASH IN THE PERIOD 100.6 52.4
================== =================
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW
FROM OPERATING ACTIVITIES
Total operating profit 79.5 182.0
Depreciation 17.2 17.1
Goodwill amortisation 73.3 74.1
Exceptional employee costs settled in shares
49.1 -
Increase in stocks (29.1) (40.2)
Decrease in debtors 30.6 18.2
Increase in creditors 1.1 7.6
Other non-cash items 2.0 4.4
----------------- ------------------
Net cash inflow from operating activities 223.7 263.2
================= ==================
NET CASH INFLOW FROM OPERATING ACTIVITIES 223.7 263.2
Cash payments of accrued exceptional items 32.0 13.6
Purchase of tangible fixed assets, net of sale
proceeds (17.9) (15.6)
------------------ ------------------
NET CASH INFLOW FROM OPERATING ACTIVITIES BEFORE PAYMENTS
OF EXCEPTIONAL ITEMS AND AFTER CAPITAL EXPENDITURE 237.8 261.2
================== ==================
See notes to the financial information for additional details.
9
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
AT AT
31 MARCH 31 DECEMBER
NOTES 2004 2004
(POUND)M (POUND)M
-------------------- -------------------
FIXED ASSETS
Intangible assets 1,725.3 1,623.7
Tangible assets 45.9 42.3
Investment 1.8 2.2
------------------- -------------------
TOTAL FIXED ASSETS 1,773.0 1,668.2
------------------- -------------------
CURRENT ASSETS
Stocks 151.9 187.0
Debtors 460.6 418.8
Cash at bank and in hand 8 18.7 68.9
------------------- -------------------
TOTAL CURRENT ASSETS 631.2 674.7
------------------- -------------------
CREDITORS: AMOUNTS FALLING DUE WITHIN
ONE YEAR
Loans and other borrowings 8,9 (85.8) (86.4)
Other creditors (273.0) (244.5)
------------------- -------------------
TOTAL CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR (358.8) (330.9)
------------------- -------------------
Net current assets 272.4 343.8
------------------- -------------------
Total assets less current liabilities 2,045.4 2,012.0
Creditors: amounts falling due after
more than one year
Loans and other borrowings 8,9 (1,155.9) (1,104.0)
------------------- -------------------
NET ASSETS 889.5 908.0
=================== ===================
CAPITAL AND RESERVES
Called up share capital 10 7.0 7.0
Share premium account 10 1,184.7 1,188.6
Profit and loss account 10 (302.2) (287.6)
------------------- -------------------
EQUITY SHAREHOLDERS' FUNDS 889.5 908.0
=================== ===================
See notes to the financial information for additional details.
10
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.
11
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued)
2. TURNOVER
NINE MONTHS
ENDED 31 DECEMBER CHANGE
----------------------------------------------
2003 2004 %
------------------ --------------------------
(POUND)M (POUND)M
UK printed directories 417.8 428.8 2.6%
Other products and services 29.7 37.8 27.3%
------------------ --------------
TOTAL UK TURNOVER 447.5 466.6 4.3%
------------------ --------------
US printed directories:
US printed directories at constant exchange rate
(a) 393.8 479.6 21.8%
Exchange impact (a) - (48.3)
------------------ --------------
TOTAL US TURNOVER 393.8 431.3 9.5%
------------------ --------------
GROUP TURNOVER 841.3 897.9 6.7%
================== ==============
(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
NINE MONTHS
ENDED 31 DECEMBER CHANGE
-----------------------------------------------
2003 2004 %
------------------ ----------------------------
(POUND)M (POUND)M
UK printed directories 167.4 160.8 (3.9)%
Other products and services 1.5 11.4
------------------ ---------------
TOTAL UK OPERATIONS 168.9 172.2 2.0%
------------------ ----------------
US operations:
US printed directories at
constant exchange rate (a) 91.2 126.5 38.7%
Exchange impact (a) - (12.7)
------------------ ----------------
TOTAL US OPERATIONS 91.2 113.8 24.8%
------------------ ----------------
GROUP ADJUSTED EBITDA 260.1 286.0 10.0%
================== ================
(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.
12
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)
NINE MONTHS
ENDED 31 DECEMBER CHANGE
------------------------------------------------------
2003 2004 %
-------------------------------------------------------
(POUND)M (POUND)M
UK operations
OPERATING PROFIT 81.7 119.6
Depreciation and amortisation 51.9 52.6
-------------------- ---------------------
UK OPERATIONS EBITDA 133.6 172.2
Exceptional items 35.3 -
-------------------- ---------------------
UK OPERATIONS ADJUSTED EBITDA 168.9 172.2 2.0%
-------------------- ---------------------
UK OPERATIONS ADJUSTED EBITDA MARGIN 37.7% 36.9%
==================== =====================
US operations
OPERATING (LOSS) PROFIT (2.2) 62.4
Depreciation and amortisation 38.6 38.6
-------------------- ---------------------
US OPERATIONS EBITDA 36.4 101.0
Exceptional items 54.8 12.8
Exchange impact (b) - 12.7
-------------------- ---------------------
US OPERATIONS ADJUSTED EBITDA AT CONSTANT 91.2 126.5 38.7%
EXCHANGE RATE (b)
Exchange impact (b) - (12.7)
-------------------- ---------------------
US OPERATIONS ADJUSTED EBITDA 91.2 113.8 24.8%
-------------------- ---------------------
US OPERATIONS ADJUSTED EBITDA MARGIN (c) 23.2% 26.4%
==================== =====================
Group
OPERATING PROFIT 79.5 182.0
Depreciation and amortisation 90.5 91.2
-------------------- ---------------------
GROUP EBITDA 170.0 273.2 60.7%
Exceptional items 90.1 12.8
Exchange impact (b) - 12.7
-------------------- ---------------------
GROUP ADJUSTED EBITDA AT CONSTANT EXCHANGE 260.1 298.7 14.8%
RATE (b)
Exchange impact (b) - (12.7)
-------------------- ---------------------
GROUP ADJUSTED EBITDA 260.1 286.0 10.0%
==================== =====================
GROUP ADJUSTED EBITDA MARGIN 30.9% 31.9%
==================== =====================
(a) Adjusted EBITDA is one of the key financial measures that we use to assess
the growth in the business and operational efficiencies.
(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 23.4% in the
nine months ended 31 December 2004 (2003 - 9.2%).
We do not allocate interest or taxation charges by product or geographic
segment.
13
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued)
4. RESULTS BEFORE AND AFTER EXCEPTIONAL ITEMS
NINE MONTHS ENDED 31 DECEMBER
------------------------------------------------------------------------------------
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 456.8 - 456.8 487.3 - 487.3
Distribution costs (24.9) - (24.9) (26.1) - (26.1)
Administrative expenses (262.3) (90.1) (352.4) (266.4) (12.8) (279.2)
-------------- ---------------- ----------- ------------- ---------------- ------------
OPERATING PROFIT (LOSS) 169.6 (90.1) 79.5 194.8 (12.8) 182.0
Net interest payable (112.6) (58.4) (171.0) (69.3) - (69.3)
-------------- ---------------- ----------- ------------- ---------------- ------------
PROFIT (LOSS) BEFORE
TAXATION 57.0 (148.5) (91.5) 125.5 (12.8) 112.7
Taxation (25.9) 37.2 11.3 (47.5) 4.8 (42.7)
-------------- ---------------- ----------- ------------- ---------------- ------------
PROFIT (LOSS) FOR THE
PERIOD 31.1 (111.3) (80.2) 78.0 (8.0) 70.0
============== ================ =========== ============= ================ ============
Exceptional costs for the nine months to 31 December 2004 are the total
costs relating to litigation brought against our US operations (see note
12). Exceptional administrative costs in the nine months ended 31 December
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:
NINE MONTHS ENDED 31 DECEMBER
----------------------------------
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%) 17.1 37.6
Effects of:
Non-allowable goodwill amortization 15.7 15.6
US tax losses (5.1) (4.2)
Other permanent differences (1.8) (1.5)
--------------- ---------------
Tax charge on ongoing activities 25.9 47.5
--------------- ---------------
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 (11.3) 42.7
=============== ===============
6. INTERIM DIVIDEND
The interim dividend of 4.2 pence per share (2003 - 3.0 pence per share)
was paid on 17 December 2004 to shareholders registered at the close of
business on 19 November 2004 and amounted to (pound)29.5 million (2003 -
(pound)20.8 million).
14
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
------------ ------------- ----------------- -------------------- -------------
NINE MONTHS ENDED 31 DECEMBER 2004
Group profit for the
financial period ((pound)m) 70.0 - 8.0 74.1 152.1
Weighted average number of
issued ordinary shares
(millions) (d) 700.4 - 700.4
------------ -------------
BASIC EARNINGS PER SHARE
(PENCE) 10.0 21.7
Effect of share options
(pence) (0.1) (0.2)
------------ -------------
DILUTED EARNINGS PER SHARE
(PENCE) 9.9 21.5
============ =============
NINE MONTHS ENDED 31 DECEMBER 2003
Group (loss) profit for the
financial period ((pound)m) (80.2) 21.1 111.3 73.3 125.5
Weighted average number of
issued ordinary shares
(millions) (d) 529.9 165.0 694.9
------------ -------------
BASIC (LOSS) EARNINGS
PER SHARE (PENCE) (15.1) 18.1
Effect of share options
(pence) - (0.3)
------------ -------------
DILUTED (LOSS) EARNINGS
PER SHARE (PENCE) (15.1) 17.8
============ =============
(a) Group losses for the nine months ended 31 December 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 nine months ended 31 December 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)66.4 million, as opposed to (pound)74.1 million, and
(pound)64.9 million, as opposed to (pound)73.3 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 20.4 pence, as opposed to 21.5 pence, in
the nine months ended 31 December 2004 and 16.6 pence, as opposed to 17.8
pence in the nine months ended 31 December 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 694.9 million shares for the nine months ended 31 December 2003, being
the weighted average share capital during the period after taking into
account the restructuring of the existing share capital on the IPO. For the
nine months ended 31 December 2004, the calculation was based on 700.4
million shares, the weighted average share capital during the period.
15
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued)
8. NET DEBT
ANALYSIS OF NET DEBT
AT AT
31 MARCH 2004 31 DECEMBER 2004
------------------ --------------------
(POUND)M (POUND)M
Long-term loans and other borrowings
falling due after more than one year 1,155.9 1,104.0
Short-term borrowings and long-term
loans and other borrowings falling due within
one year 85.8 86.4
------------------- --------------------
Total debt 1,241.7 1,190.4
Cash at bank and in hand (18.7) (68.9)
------------------- --------------------
NET DEBT AT END OF PERIOD 1,223.0 1,121.5
=================== ====================
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 173.9 - - 173.9
Dividend paid (71.3) - - (71.3)
Long term debt becoming due within one year - (45.0) 45.0 -
Borrowings repaid (45.0) 45.0 - -
Issue of ordinary share capital 1.4 - - 1.4
Purchase of own shares (6.6) - - (6.6)
Non-cash charges - (0.6) (11.9) (12.5)
Currency movements (2.2) - 18.8 16.6
------------- ------------- -------------- -------------
AT 31 DECEMBER 2004 68.9 (86.4) (1,104.0) (1,121.5)
============= ============= ============== =============
16
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued)
9. LOANS AND OTHER BORROWINGS
AT AT
31 MARCH 2004 31 DECEMBER 2004
(a) (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 1.4
---------------- ------------------
TOTAL AMOUNTS FALLING DUE WITHIN ONE YEAR 85.8 86.4
---------------- ------------------
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Senior credit facilities (b) 856.6 800.9
Senior notes:
Senior sterling notes 158.1 159.1
Senior dollar notes 68.1 66.0
Senior discount dollar notes 73.1 78.0
---------------- ------------------
TOTAL AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 1,155.9 1,104.0
---------------- ------------------
NET LOANS AND OTHER BORROWINGS 1,241.7 1,190.4
================ ==================
(a) Balances are shown net of deferred financing fees of (pound)16.9 million at
31 December 2004 and (pound)20.1 million at 31 March 2004.
(b) Yell made payments of (pound)40.0 million in the nine months ended 31
December 2004 on amounts owed under the senior facility as required by the
senior facility agreement and also repaid (pound)5.0 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 31 March 2004 7.0 1,184.7 (302.2) 889.5
Profit on ordinary
activities after taxation - - 70.0 70.0
Interim dividend - - (29.5) (29.5)
Ordinary share issue - 3.9 - 3.9
Capital Accumulation Plan (a) - - (4.7) (4.7)
Currency movements (b) - - (21.2) (21.2)
------------ ------------- ----------------- -----------
Balance at 31 December 2004 7.0 1,188.6 (287.6) 908.0
============ ============= ================= ===========
(a) Purchase of shares ((pound)6.6 million) and amortisation of the costs
incurred in buying shares held in an ESOP trust for employees.
(b) The cumulative currency translation adjustment was a (pound)123.9 million
loss at 31 December 2004 (31 March 2004 - (pound)102.7 million loss).
17
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
NINE MONTHS ENDED 31 DECEMBER
-----------------------------------------
2003 2004
------------------- --------------------
(POUND)M (POUND)M
(Loss) profit on ordinary activities
after taxation under UK GAAP (80.2) 70.0
Adjustment for:
Directories in progress
-Deferred costs (28.7) (19.5)
-Acquisition accounting(a) - (4.0)
Pensions (6.9) (10.3)
Goodwill 73.3 74.1
Other intangible assets (70.2) (54.4)
Derivative financial instruments 21.2 3.4
Employee incentive plans (0.6) (2.3)
Amortisation of deferred financing costs - (0.4)
Deferred taxation 13.2 25.5
Other (1.9) (0.3)
------------------ ---------------------
NET (LOSS) PROFIT AS ADJUSTED FOR US GAAP (80.8) 81.8
================== =====================
(a) Represents adjustments that arose as a result of acquisitions.
18
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued)
11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
Equity shareholders' funds
At
31 March At
2004 31 December 2004
------------------- ------------------
(POUND)M (POUND)M
Equity shareholders' funds under UK GAAP 889.5 908.0
Adjustment for:
Directories in progress (103.2) (123.6)
Pensions (0.3) (10.6)
Additional minimum pension liability (37.9) (37.9)
Goodwill (562.3) (483.6)
Other intangible assets 746.6 684.8
Derivative financial instruments (3.2) 0.2
Deferred taxation (182.9) (153.0)
Dividends proposed 41.9 -
Other 2.3 1.6
------------------ -------------------
EQUITY SHAREHOLDERS' FUNDS AS ADJUSTED FOR US GAAP 790.5 785.9
================== ===================
12. LITIGATION
Since the half year results were announced, Yellow Book USA has been served
with complaints filed as class actions in four US states by customers
alleging violations of consumer protection legislation. We believe that the
plaintiffs are relying on findings of the New York court in the now-settled
suit brought against Yellow Book USA by Verizon. We are in consultation
with our legal advisers and those of the plaintiffs as regards the merits
and possible financial effect of these actions. We are unable to reliably
estimate any potential cost arising from these actions at this time;
therefore, we have not provided for any costs in connection with these
actions.
19
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 United
Kingdom and 536 in the United States; in the United Kingdom, where it is a clear
market leader, it served 480,000 unique advertisers. In the United States, where
it is the leading independent directories business, it served 386,000 unique
advertisers.
Yell's brands in the United Kingdom are Yellow Pages, Business Pages, Yell.com
and Yellow Pages 118 24 7, and in the United States are Yellow Book and
Yellowbook.com, all of which are trademarks.
20