EXHIBIT 99.1
[Yell logo]
17 May 2005
news release news release news release news release news release
YELL GROUP PLC FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2005
GROWTH MOMENTUM CONTINUING
o Group turnover up 8.3% to (pound)1,285.3 million; 12.8% at a constant
exchange rate
o Group adjusted EBITDA up 11.9% to (pound)402.8 million; 15.8% at a
constant exchange rate
o Group adjusted profit after tax (pound)117.0 million, excluding
exceptional costs from lawsuits ((pound)60.2 million last year,
excluding exceptional IPO costs)
o Group operating cash flow less capital expenditure up 14.4% to
(pound)347.2 million; up 17.6% at a constant exchange rate. Group free
cash flow of (pound)229.9 million
o Diluted earnings per share before amortisation and exceptional costs
up 20.2% to 30.4 pence (25.3 pence last year on a pro forma basis)
o Recommended final dividend up 40% to 8.4p per share
Note: Earnings, profit after tax and cash flow figures stated before exceptional
costs from lawsuits in our US operation of (pound)36.5 million ((pound)22.8
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)94.2 million (a loss of (pound)51.1 million last year).
JOHN CONDRON, CHIEF EXECUTIVE OFFICER, SAID:
"Yell has again delivered good growth in both its US and UK operations. In the
US, we continued to drive strong organic growth, augmented by acquisitions, and
in the UK, while our growth was driven by Yell.com, the printed directories
delivered a good performance against the background of increased competition.
"Looking ahead, we expect to deliver further profitable growth in all our
operations. We shall also actively contribute to the Competition Commission
investigation, presenting evidence of the dynamic and increasingly competitive
classified advertising market in which we compete and the customer benefits that
competition has delivered and continues to deliver."
JOHN DAVIS, CHIEF FINANCIAL OFFICER, SAID:
"Yell has continued to generate strong operating cash flow and deliver
significant free cash flow. In line with the increase in the interim dividend,
the Board is recommending a 40% increase in the final dividend, reflecting our
confidence in the Group's future prospects."
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., is expected to furnish its results for the
year ended 31 March 2005 to the SEC on Form 20-F in June 2005.
A copy of this filing can also be accessed on the Yell Group website.
2
YELL GROUP PLC SUMMARY FINANCIAL RESULTS
-------------------------------------------------------
YEAR ENDED
31 MARCH
2004 2005
-------------------------------------------------------
CHANGE AT
CONSTANT
(POUND)M (POUND)M CHANGE EXCHANGE RATE (6)
- -------------------------------------------------------------------------------------------------------
Turnover (1) 1,186.9 1,285.3 8.3% 12.8%
Adjusted EBITDA (1) (2) 360.1 402.8 11.9% 15.8%
Adjusted operating cash flow (1) (3) 303.5 347.2 14.4% 17.6%
Adjusted diluted earnings per share
(pence) (4) 25.3 30.4 20.2%
Cash conversion (1) (5) 84.3% 86.2%
Adjusted profit after tax (2) 60.2 117.0
Exceptional items after tax (111.3) 22.8
(Loss) profit on ordinary activities after
tax (51.1) 94.2
- ------------------------------------------------------------------------------------------------------
(1) Turnover, adjusted EBITDA, operating cash flow and cash conversion are
the key financial measures that we use to assess our growth and
operational efficiencies.
(2) Adjusted items in the period ended 31 March 2004 are stated before
exceptional costs arising on IPO. Adjusted items in the period ended
31 March 2005 are stated before exceptional costs from lawsuits
associated with a Yellow Book advertising campaign.
(3) Cash inflow from operations before payments of exceptional items, less
capital expenditure.
(4) Diluted earnings per share before amortisation and exceptional items.
(5) Adjusted operating cash flow as a percentage of adjusted EBITDA.
(6) Constant exchange rate states current year results at the same
exchange rate as that used to translate the results for the previous
year. Exchange impact is the difference between the results reported
at a constant exchange rate and the actual results using current year
exchange rates.
REVIEW OF OPERATING PERFORMANCE
TURNOVER
Group turnover increased 8.3% to (pound)1,285.3 million; or 12.8% at a constant
exchange rate, from (pound)1,186.9 million last year.
UK operations
UK turnover increased 4.6% to (pound)664.4 million. Turnover from printed
directories grew 3.1% to (pound)612.1 million. The effect of RPI-6% was to
reduce Yellow Pages prices by an average of 3.3%. Yell.com turnover increased by
40.3% to (pound)36.2 million.
The UK printed directories' retention rate was 75%, or 74% excluding national
and key accounts. The decline from 77% last year primarily reflects increased
competition and the substantial growth in our advertiser base over the last five
years as new customers typically dilute retention. As a result, the total number
of unique print advertisers was 478,000 compared with 480,000 last year. During
the year, we grew average turnover per unique print advertiser by 3.5% to
(pound)1,280 from (pound)1,237.
3
We rescoped 13 directories into 25 during the year, addressing changes in
demographic, shopping and trading patterns and enabling us to compete more
effectively with the wide range of alternative classified information available
to the user. We now publish 102 Yellow Pages directories and offer full coverage
of the UK, following the publication of the Hull directory for the first time.
Yell.com's continued rapid turnover growth of 40.3% reflected the 36.9% increase
in searchable advertisers to 141,000, including 23,000 who do not advertise in
our printed products. This brings our total UK unique advertisers to 501,000
(498,000 last year). Through our channel-neutral approach, Yell.com has
successfully captured new advertisers from new markets, taking advantage of the
widening usage of the internet within the classified advertising market. In line
with this, we are offering Yell.com advertisers additional exposure through our
recently announced distribution agreement with Google.
While the current Competition Commission review of the market is underway,
Yellow Pages continues to cut prices by RPI-6%. In the year ahead, we expect
total UK turnover to grow at around 3% with a significant contribution from
Yell.com.
US operations
US turnover grew 12.5% to (pound)620.9 million. At a constant exchange rate, the
increase was 22.3%; the average exchange rate was approximately $1.85:
(pound)1.00 against $1.69:(pound)1.00 in the previous year.
Unique advertisers increased 17.9% to 455,000 with average turnover per unique
advertiser up 3.7% to $2,525 and retention up from 70% to 71%.
Of the 22.3% turnover growth before the exchange impact, 14.2% was from organic
turnover growth. This comprised a contribution from strong same-market growth of
11.1%, which benefited from the successful relaunch of several major former
McLeod directories, and growth of 3.1% from 19 new launches. The contribution to
growth from acquisitions was 8.4%, mainly from Feist which we acquired in March
2004.
In the year ahead, we expect organic turnover growth of around 12%, helped by a
heavy schedule of launches in the first half. We also expect our 2005
acquisitions to contribute an extra 1.5% of turnover in 2006.
ADJUSTED EBITDA
Group adjusted EBITDA increased 11.9% to (pound)402.8 million, or 15.8% at a
constant exchange rate. The Group adjusted EBITDA margin increased one
percentage point to 31.3%, reflecting the strong US performance.
UK adjusted EBITDA rose 3.3% to (pound)240.7 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)9.6 million from (pound)5.3 million last year. The printed
directory adjusted EBITDA margin decreased from 38.3% to 36.8%, and the overall
UK adjusted EBITDA margin was 36.2%, compared with 36.7% the year before. In the
year ahead, we expect the UK EBITDA margin to reflect increasing competitive
pressure and additional charges under International Financial Reporting
Standards.
4
In the US, strong revenue growth and operational leverage resulted in 27.6%
growth in adjusted EBITDA to (pound)162.1 million - a 38.9% increase at a
constant exchange rate. The US adjusted EBITDA margin increased from 23.0% to
26.1%, as a result of the high conversion of revenue outperformance into profit.
In the year ahead, we expect the US EBITDA margin will continue to grow.
ADJUSTED OPERATING CASH FLOW AND NET DEBT
The Group converted 86.2% of adjusted EBITDA to cash, as compared to 84.3% last
year, benefiting from the timing of receipts around the year end. We expect to
continue to convert around 80% of EBITDA to cash in the year ahead.
Group adjusted operating cash flow increased 14.4% to (pound)347.2 million, or
17.6% at a constant exchange rate.
Free cash flow was (pound)229.9 million, comprising net cash inflow from
operating activities of (pound)357.6 million, less interest of (pound)72.2
million, taxation paid of (pound)31.5 million and purchase of fixed assets of
(pound)24.0 million. We made an additional annual pension contribution of
(pound)8.2 million in the year, and expect to make an additional annual
contribution of approximately (pound)8.5 million in the next financial year.
These contributions are the first step in alleviating the (pound)69.6 million
(net of tax) pension deficit reported under FRS 17. While the contributions
reduce free cash flow, they have no effect on the Group's profit and loss.
Net debt at (pound)1,106 million, down (pound)117 million from 31 March 2004,
represents a multiple of 2.7 times adjusted EBITDA.
NET RESULTS
AFTER TAX RESULTS
Profit after tax before exceptional items for the year to 31 March 2005 was
(pound)117.0 million, compared with an adjusted profit after tax of (pound)60.2
million for the prior 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)73.2 million, which represents 25.4% of profit before tax adjusted
for goodwill amortisation and exceptional costs. We expect the effective tax
rate to be around 30% of profits before amortisation and tax in the 2006
financial year under current UK GAAP and around 33% under IFRS.
The profit after tax for the year ended 31 March 2005, including exceptional
items, was (pound)94.2 million. The loss after tax for the year ended 31 March
2004, including the exceptional costs detailed below, was (pound)51.1 million.
5
EXCEPTIONAL COSTS
The exceptional costs of (pound)36.5 million ((pound)22.8 million after tax) are
the estimated costs relating to lawsuits brought against Yellow Book USA in
relation to an advertising campaign that finished in 2004.
As we previously disclosed, a lawsuit filed by Verizon was settled in October
2004. Following publication of our half year results, Yellow Book USA was served
with complaints filed as class actions in five US States and the District of
Columbia. In these actions, the plaintiffs allege violations of consumer
protection legislation and are placing reliance on findings of the New York
court in the now settled suit brought against Yellow Book USA by Verizon. On 13
May 2005, the court in New Jersey gave its preliminary approval to a
comprehensive national settlement, with no admission of liability. Notice of the
terms of settlement will be published to class members and the final approval
hearing is anticipated to be held in late summer 2005.
Last year, exceptional costs arose entirely on our IPO and amounted to
(pound)148.5 million before tax ((pound)111.3 million after tax).
EARNINGS AND DIVIDEND PER SHARE
Diluted earnings per share were 30.4 pence before amortisation and exceptional
costs; an increase of 20.2% on a pro forma basis. Basic earnings per share
before amortisation and exceptional costs were 30.8 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 25.6 pence last year.
In line with the increase in the interim dividend, the Board is proposing an
increase of 40% in the final dividend to 8.4 pence per share, bringing the
total dividend for the year to 12.6 pence per share.
The ex-dividend date will be 20 July 2005 and the final dividend will be paid on
19 August 2005 to shareholders registered on 22 July 2005.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
From 1 April 2005 onwards, we are required to prepare our consolidated financial
statements in accordance with International Financial Reporting Standards
("IFRS"), with comparative financial information for the prior year on the same
basis.
We expect to publish on our website in June 2005, conversion statements that
will set out the effects of the transition from UK GAAP to IFRS on our balance
sheet at 1 April 2004 and on the quarterly results thereafter. These statements
will be prepared on the basis of our best knowledge of what IFRS may require at
31 March 2006. The current standards are subject to ongoing review and
interpretation. There is a possibility that IFRS at 31 March 2006 will be
different from what we currently expect. Therefore, the financial information
for the 2005 financial year that we publish in our audited accounts for the year
ending 31 March 2006 may be different from our current expectations.
The conversion statements will include the three months ended 30 June 2004, the
six months ended 30 September 2004, the nine months ended 31 December 2004 and
the year ended 31 March 2005. Our first results under IFRS will be for the three
months ended 30 June 2005.
6
In reporting our IFRS results, the primary changes to our UK GAAP published
results arise from:
o discontinuing goodwill amortisation unless the value of goodwill is
impaired;
o accounting for pensions on a basis similar to what would have been
required under FRS 17;
o expensing the fair value of options granted to employees; and
o increasing the tax charge to remove certain benefits recorded under
UK GAAP.
The adjusted EBITDA under IFRS for 2005 is 2.4% lower than UK GAAP at
(pound)393.0 million. Profit before tax is (pound)234.4 million and profit after
tax is (pound)162.5 million, 52.5% and 72.5% higher respectively, primarily due
to discontinuing goodwill amortisation. The adjustments do not affect the
reported cash flows from operations. Additional information regarding the
effects of IFRS on our 2005 results is provided in the analyst presentation on
our website.
UK REGULATION
In August 2004, the UK Office of Fair Trading (OFT) announced a review of Yell
UK's undertakings in respect of our Yellow Pages directories. In November 2004
the OFT announced that this review would take the form of a market study under
the terms of the Enterprise Act. At the conclusion of their study in April 2005,
the OFT referred what it defined as "classified directory advertising services"
to the Competition Commission (the "Commission") for investigation.
The Commission's administrative timetable allows for the publication of its
final report by the end of June 2006. The Commission is not bound in the
remedies it can apply and a very wide range of outcomes is therefore possible.
Yell is committed to playing a proactive role in the demanding process of the
Commission's investigation. The internal team, led by John Condron, is supported
by external advisers and industry experts. Yell will ensure that the necessary
talent and resource is available throughout the process to make certain that our
arguments are supported and heard.
In the ten years since the Monopolies and Mergers Commission completed its first
review, the classified advertising market has become increasingly dynamic and
aggressively competitive. Recently there have been a number of new entrants into
the market. These include printed directories from BT and Trinity Mirror, more
than 80 phone-based services and numerous online services. We believe that this
has served advertisers and users well, and that the market is still evolving.
We are confident that the development and growth of our business in the UK and
US will continue unaffected during the investigation.
7
KEY OPERATIONAL INFORMATION
----------------------
YEAR ENDED 31 MARCH
-----------------------
2004 2005 CHANGE
- -------------------------------------------------------------------------------------------------------------------
UK PRINTED DIRECTORIES
Unique advertisers (thousands) (1) 480 478 (0.4)%
Directory editions published 99 111
Unique advertiser retention rate (%) (2) 77 75
Turnover per unique advertiser ((pound)) 1,237 1,280 3.5%
US PRINTED DIRECTORIES
Unique advertisers (thousands) (1) (3) 386 455 17.9%
Directory editions published 536 565
Unique advertiser retention rate (%) (3) 70 71
Turnover per unique advertiser ($) 2,434 2,525 3.7%
OTHER UK PRODUCTS AND SERVICES
Yell.com searchable advertisers at 31 March (thousands)(4) 103 141 36.9%
Yell.com page impressions for March (millions) (5) 67 68 1.5%
Yell.com searches for March (millions) 19 21 10.5%
- -------------------------------------------------------------------------------------------------------------------
(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 the year ended 31 March
2005 would have been 74%. We have not adjusted previously reported
figures for the year ended 31 March 2004. 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
figure for the year ended 31 March 2004 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.
(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.
(5) 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.
8
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEAR ENDED 31 MARCH
----------------------------
NOTES 2004 2005
------------ ------------
(POUND)M (POUND)M
TURNOVER 2 1,186.9 1,285.3
Cost of sales (552.9) (592.3)
------------ ------------
GROSS PROFIT 634.0 693.0
------------ ------------
Distribution costs (34.5) (38.3)
Administrative expenses
Ongoing activities (359.0) (373.5)
Exceptional items 4 (90.1) (36.5)
------------ ------------
(449.1) (410.0)
------------ ------------
OPERATING PROFIT 3 150.4 244.7
Net interest payable
Ongoing activities (136.1) (91.0)
Exceptional items 4 (58.4) -
------------ ------------
(194.5) (91.0)
------------ ------------
(LOSS) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (44.1) 153.7
TAXATION
On ongoing activities 4 (44.2) (73.2)
On exceptional items 4 37.2 13.7
------------ ------------
5 (7.0) (59.5)
------------ ------------
(LOSS) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION (51.1) 94.2
Dividend 6 (62.8) (88.3)
------------ ------------
(LOSS) PROFIT FOR THE FINANCIAL YEAR (113.9) 5.9
============ ============
(in pence) (in pence)
Basic (loss) earnings per share 7 (8.9) 13.4
Diluted (loss) earnings per share 7 (8.9) 13.3
EARNINGS PER SHARE BEFORE EXCEPTIONAL ITEMS
AND GOODWILL AMORTISATION (A)
Adjusted basic 7 25.6 30.8
Adjusted diluted 7 25.3 30.4
(a) Earnings per share before exceptional items and goodwill amortisation
for the year ended 31 March 2004 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.
9
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 MARCH
-------------------------------
NOTES 2004 2005
------------ ------------
(POUND)M (POUND)M
NET CASH INFLOW FROM OPERATING ACTIVITIES 294.2 357.6
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (120.4) (72.2)
Redemption premium paid (19.7) -
Finance fees paid (16.4) -
------------ ------------
NET CASH OUTFLOW FOR RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (156.5) (72.2)
------------ ------------
TAXATION (13.7) (31.5)
------------ ------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets, net
of sale proceeds (24.5) (24.0)
------------ ------------
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT (24.5) (24.0)
------------ ------------
ACQUISITIONS
Purchase of subsidiary undertakings, net of
cash acquired (108.9) (31.8)
------------ ------------
NET CASH OUTFLOW FOR ACQUISITIONS (108.9) (31.8)
------------ ------------
DIVIDENDS PAID 8 (20.9) (71.1)
------------ ------------
NET CASH (OUTFLOW) INFLOW BEFORE FINANCING
(30.3) 127.0
FINANCING
Issue of ordinary share capital 8 433.6 3.4
Expenses paid in connection with share issue (23.7) -
Purchase of own shares 8 (5.8) (6.6)
New loans issued 1,036.0 -
Borrowings repaid 8 (1,418.4) (85.0)
------------ ------------
NET CASH INFLOW (OUTFLOW) FROM FINANCING 21.7 (88.2)
------------ ------------
INCREASE IN NET CASH IN THE PERIOD (8.6) 38.8
============ ============
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW
FROM OPERATING ACTIVITIES
Total operating profit 150.4 244.7
Depreciation 22.9 23.0
Goodwill amortisation 96.7 98.6
Employee costs settled in shares 49.1 2.5
Increase in stocks (19.5) (23.0)
Increase in debtors (3.8) (38.4)
(Decrease) increase in creditors (3.7) 47.3
Other non-cash items 2.1 2.9
------------ ------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 294.2 357.6
============ ============
NET CASH INFLOW FROM OPERATING ACTIVITIES 294.2 357.6
Cash payments of accrued exceptional items 33.8 13.6
Purchase of tangible fixed assets, net of sale proceeds (24.5) (24.0)
------------ ------------
NET CASH INFLOW FROM OPERATING ACTIVITIES BEFORE PAYMENTS
OF EXCEPTIONAL ITEMS AND AFTER CAPITAL EXPENDITURE 303.5 347.2
============ ============
See notes to the financial information for additional details.
10
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
AT AT
31 MARCH 31 MARCH
NOTES 2004 2005
------------- -------------
(POUND)M (POUND)M
------------- -------------
FIXED ASSETS
Intangible assets 1,725.3 1,635.0
Tangible assets 45.9 47.8
Investment 1.8 2.0
------------- -------------
TOTAL FIXED ASSETS 1,773.0 1,684.8
------------- -------------
CURRENT ASSETS
Stocks 151.9 172.6
Debtors 460.6 478.7
Cash at bank and in hand 8 18.7 55.5
------------- -------------
TOTAL CURRENT ASSETS 631.2 706.8
------------- -------------
CREDITORS: AMOUNTS FALLING DUE WITHIN
ONE YEAR
Loans and other borrowings 8,9 (85.8) (91.3)
Other creditors (273.0) (345.7)
------------- -------------
TOTAL CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
(358.8) (437.0)
------------- -------------
NET CURRENT ASSETS 272.4 269.8
------------- -------------
TOTAL ASSETS LESS CURRENT LIABILITIES 2,045.4 1,954.6
CREDITORS: AMOUNTS FALLING DUE AFTER
MORE THAN ONE YEAR
Loans and other borrowings 8,9 (1,155.9) (1,070.3)
------------- -------------
NET ASSETS 889.5 884.3
============= =============
CAPITAL AND RESERVES
Called up share capital 10 7.0 7.0
Share premium account 10 1,184.7 1,191.0
Profit and loss account 10 (302.2) (313.7)
------------- -------------
EQUITY SHAREHOLDERS' FUNDS 889.5 884.3
============= =============
See notes to the financial information for additional details.
11
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 under the historical
cost convention 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.
12
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
2. TURNOVER
YEAR ENDED 31 MARCH CHANGE
----------------------------------------
2004 2005 %
------------ ------------
(POUND)M (POUND)M
UK operations:
UK printed directories 593.9 612.1 3.1%
Other products and services 41.0 52.3 27.6%
------------ ------------
TOTAL UK TURNOVER 634.9 664.4 4.6%
------------ ------------
US printed directories at constant exchange rate (a) 552.0 675.0 22.3%
Exchange impact (a) - (54.1)
------------ ------------
TOTAL US TURNOVER 552.0 620.9 12.5%
------------ ------------
GROUP TURNOVER 1,186.9 1,285.3 8.3%
============ ============
(a) Constant exchange rate states current year results at the same exchange
rate as that used to translate the results for the previous year. Exchange
impact is the difference between the results reported at a constant
exchange rate and the actual results using current year exchange rates.
3. OPERATING PROFIT AND EBITDA INFORMATION
ADJUSTED EBITDA BY SEGMENT
YEAR ENDED 31 MARCH CHANGE
---------------------------------------
2004 2005 %
---------------------------------------
(POUND)M (POUND)M
UK operations :
UK printed directories 227.7 225.5 (1.0)%
Other products and services 5.4 15.2
------------ ------------
TOTAL UK OPERATIONS 233.1 240.7 3.3%
------------ ------------
US printed directories at constant exchange rate (a) 127.0 176.4 38.9%
Exchange impact (a) - (14.3)
------------ ------------
TOTAL US OPERATIONS 127.0 162.1 27.6%
------------ ------------
GROUP ADJUSTED EBITDA 360.1 402.8 11.9%
============ ============
(a) Constant exchange rate states current year results at the same exchange
rate as that used to translate the results for the previous year. Exchange
impact is the difference between the results reported at a constant
exchange rate and the actual results using current year exchange rates.
13
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)
YEAR
ENDED 31 MARCH CHANGE
------------------------------------------------
2004 2005 %
------------------------------------------------
(POUND)M (POUND)M
UK operations
OPERATING PROFIT 129.8 170.6
Depreciation and amortisation 69.4 70.1
------------- -------------
UK OPERATIONS EBITDA 199.2 240.7
Exceptional items 33.9 -
------------- -------------
UK OPERATIONS ADJUSTED EBITDA 233.1 240.7 3.3%
------------- -------------
UK OPERATIONS ADJUSTED EBITDA MARGIN 36.7% 36.2%
============= =============
US operations
OPERATING PROFIT 20.6 74.1
Depreciation and amortisation 50.2 51.5
------------- -------------
US OPERATIONS EBITDA 70.8 125.6
Exceptional items 56.2 36.5
Exchange impact (b) - 14.3
------------- -------------
US OPERATIONS ADJUSTED EBITDA AT CONSTANT 127.0 176.4 38.9%
EXCHANGE RATE (b)
Exchange impact (b) - (14.3)
------------- -------------
US OPERATIONS ADJUSTED EBITDA 127.0 162.1 27.6%
------------- -------------
US OPERATIONS ADJUSTED EBITDA MARGIN (c) 23.0% 26.1%
============= =============
Group
OPERATING PROFIT 150.4 244.7
Depreciation and amortisation 119.6 121.6
------------- -------------
GROUP EBITDA 270.0 366.3 35.7%
Exceptional items 90.1 36.5
Exchange impact (b) - 14.3
------------- -------------
GROUP ADJUSTED EBITDA AT CONSTANT EXCHANGE 360.1 417.1 15.8%
RATE (b)
Exchange impact (b) - (14.3)
------------- -------------
GROUP ADJUSTED EBITDA 360.1 402.8 11.9%
============= =============
GROUP ADJUSTED EBITDA MARGIN 30.3% 31.3%
============= =============
(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 year results at the same
exchange rate as that used to translate the results for the previous
year. Exchange impact is the difference between the results reported
at a constant exchange rate and the actual results reported using
current year exchange rates.
(c) US operations EBITDA margin including exceptional items is 20.2% in
the year ended 31 March 2005 (2004 - 12.8%).
We do not allocate interest or taxation charges by product or geographic
segment.
14
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
4. RESULTS BEFORE AND AFTER EXCEPTIONAL ITEMS
YEAR ENDED 31 MARCH
-------------------------------------------------------------------------------------
2004 2005
-------------------------------------------------------------------------------------
ORDINARY EXCEPTIONAL ORDINARY EXCEPTIONAL
ITEMS ITEMS TOTAL ITEMS ITEMS TOTAL
-------------------------------------------------------------------------------------
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
GROSS PROFIT 634.0 - 634.0 693.0 - 693.0
Distribution costs (34.5) - (34.5) (38.3) - (38.3)
Administrative expenses (359.0) (90.1) (449.1) (373.5) (36.5) (410.0)
-------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS) 240.5 (90.1) 150.4 281.2 (36.5) 244.7
Net interest payable (136.1) (58.4) (194.5) (91.0) - (91.0)
-------------------------------------------------------------------------------------
PROFIT (LOSS) BEFORE
TAXATION 104.4 (148.5) (44.1) 190.2 (36.5) 153.7
Taxation (44.2) 37.2 (7.0) (73.2) 13.7 (59.5)
-------------------------------------------------------------------------------------
PROFIT (LOSS) FOR THE
PERIOD 60.2 (111.3) (51.1) 117.0 (22.8) 94.2
=====================================================================================
Exceptional costs for the year ended 31 March 2005 are the estimated costs
relating to settlement of lawsuits brought against our US operations (see
note 12). Exceptional administrative costs in the year ended 31 March 2004
relate to costs incurred in connection with our IPO.
5. TAXATION
YEAR ENDED 31 MARCH
------------------------------
2004 2005
------------ ------------
(POUND)M (POUND)M
UK corporation tax at 30% 21.6 44.6
Adjustment in respect of prior period 0.4 0.6
Foreign taxes 1.1 1.5
------------ ------------
Total current tax 23.1 46.7
------------ ------------
Origination and reversal of timing differences:
UK (1.8) 2.6
Foreign (14.3) 10.2
------------ ------------
Total deferred tax (16.1) 12.8
------------ ------------
Tax charge on profit on ordinary activities 7.0 59.5
============ ============
15
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
5. TAXATION (CONTINUED)
The effective tax rate for the year is different from the standard rate of
corporation tax in the United Kingdom (30%) as explained below:
YEAR ENDED 31 MARCH
------------------------------
2004 2005
------------ ------------
(POUND)M (POUND)M
Loss on ordinary activities before taxation (44.1) 153.7
------------ ------------
Loss on ordinary activities before taxation multiplied
by the standard rate of corporation tax in the
United Kingdom (30%) (13.2) 46.1
Effects of:
Adjustments from prior years 0.4 0.6
Goodwill amortisation disallowed for tax 22.6 20.2
Higher rates on overseas earnings (1.9) 1.3
Other permanent differences for tax purposes 12.9 (3.8)
US tax losses (used) created in the year 0.7 (19.3)
Other timing differences 1.6 1.6
------------ ------------
Total current tax 23.1 46.7
============ ============
6. INTERIM AND FINAL DIVIDEND PER SHARE
The interim dividend of 4.2 pence per share (2004 - 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)29.4 million (2004 -
(pound)20.9 million). A proposed final dividend of 8.4 pence per share
(2004 - 6.0 pence per share) will be paid on 19 August 2005 to shareholders
registered at the close of business on 22 July 2005.
16
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
--------------------------------------------------------------------------------
YEAR ENDED 31 MARCH 2005
Group profit for the
financial period ((pound)m) 94.2 - 22.8 98.6 215.6
Weighted average number of
issued ordinary shares
(millions) (d) 701 - 701
------------- -------------
BASIC EARNINGS PER
SHARE (PENCE) 13.4 30.8
Effect of share options
(pence) (0.1) (0.4)
------------- -------------
DILUTED EARNINGS PER
SHARE (PENCE) 13.3 30.4
============= =============
YEAR ENDED 31 MARCH 2004
Group (loss) profit for the
financial period ((pound)m) (51.1) 21.1 111.3 96.7 178.0
Weighted average number of
issued ordinary shares
(millions) (d) 572 123 695
------------- -------------
BASIC (LOSS) EARNINGS PER
SHARE (PENCE) (8.9) 25.6
Effect of share options
(pence) - (0.3)
------------- -------------
DILUTED (LOSS) EARNINGS PER
SHARE (PENCE) (8.9) 25.3
============= =============
(a) Group losses for the year ended 31 March 2004 were adjusted to exclude
interest charges on the long-term debt we repaid as a result of the
IPO. Interest was 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 were tax effected at the UK
corporation tax rate of 30%. The weighted average number of shares for
the year ended 31 March 2004 was 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)88.0 million, as opposed to
(pound)98.6 million, and (pound)86.4 million, as opposed to
(pound)96.7 million, in 2005 and 2004, 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 28.9 pence, as opposed to 30.4 pence, in the year ended 31 March
2005 and 23.8 pence, as opposed to 25.3 pence in the year ended 31
March 2004.
(d) The calculation of the basic and diluted earnings (loss) per ordinary
share was based on the profit (loss) for the relevant financial year
and on 695 million shares for the year ended 31 March 2004, being the
weighted average share capital during the year after taking into
account the restructuring of the existing share capital on the IPO.
For the year ended 31 March 2005, the calculation was based on 701
million shares, the weighted average share capital during the year.
17
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 MARCH 2005
---------------- ----------------
(POUND)M (POUND)M
Long-term loans and other borrowings
falling due after more than one year 1,155.9 1,070.3
Short-term borrowings and long-term
loans and other borrowings falling due within
one year 85.8 91.3
---------------- ----------------
Total debt 1,241.7 1,161.6
Cash at bank and in hand (18.7) (55.5)
---------------- ----------------
NET DEBT AT END OF PERIOD 1,223.0 1,106.1
================ ================
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 198.1 - - 198.1
Dividend paid (71.1) - - (71.1)
Long term debt becoming due within one year - (90.0) 90.0 -
Borrowings repaid (85.0) 85.0 - -
Issue of ordinary share capital 3.4 - - 3.4
Purchase of own shares (6.6) - - (6.6)
Non-cash charges - (0.5) (16.3) (16.8)
Currency movements (2.0) - 11.9 9.9
----------------------------------------------------------
AT 31 MARCH 2005 55.5 (91.3) (1,070.3) (1,106.1)
==========================================================
18
YELL GROUP PLC AND SUBSIDIARIES
UNAUDITED NOTES TO THE FINANCIAL INFORMATION (CONTINUED)
9. LOANS AND OTHER BORROWINGS
AT AT
31 MARCH 31 MARCH
2004 (a) 2005 (a)
---------------- ----------------
(POUND)M (POUND)M
AMOUNTS FALLING DUE WITHIN ONE YEAR
Senior credit facilities (b) 80.0 90.0
Revolver loan (b) 5.0 -
Net obligations under finance leases 0.8 1.3
---------------- ----------------
TOTAL AMOUNTS FALLING DUE WITHIN ONE YEAR 85.8 91.3
---------------- ----------------
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Senior credit facilities (b) 856.6 761.0
Senior notes:
Senior sterling notes 158.1 159.8
Senior dollar notes 68.1 67.4
Senior discount dollar notes 73.1 82.1
---------------- ----------------
TOTAL AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 1,155.9 1,070.3
---------------- ----------------
NET LOANS AND OTHER BORROWINGS 1,241.7 1,161.6
================ ================
(a) Balances are shown net of deferred financing fees of (pound)14.0
million at 31 March 2005 and (pound)20.1 million at 31 March 2004.
(b) Yell made payments of (pound)85 million in the year ended 31 March
2005 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 31 MARCH 2004
7.0 1,184.7 (302.2) 889.5
Profit on ordinary
activities after taxation - - 94.2 94.2
Dividends
- - (88.3) (88.3)
Ordinary shares issued - 6.3 (0.3) 6.0
Capital Accumulation Plan and
other employee share schemes (a) - - (3.7) (3.7)
Currency movements (b)
- - (13.4) (13.4)
------------- ------------ ------------ ------------
BALANCE AT 31 MARCH 2005 7.0 1,191.0 (313.7) 884.3
(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)116.1
million loss at 31 March 2005 (31 March 2004 - (pound)102.7 million
loss).
19
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
YEAR ENDED 31 MARCH
------------------------------
2004 2005
-------------- --------------
(POUND)M (POUND)M
(Loss) profit on ordinary activities
after taxation under UK GAAP (51.1) 94.2
Adjustment for:
Directories in progress (20.8) (14.3)
Pensions (8.0) (13.2)
Goodwill 96.7 98.6
Other intangible assets (86.5) (73.0)
Derivative financial instruments 21.7 6.1
Employee incentive plans (1.3) (3.1)
Deferred taxation 28.6 25.3
Other (0.6) (0.8)
-------------- --------------
NET (LOSS) PROFIT AS ADJUSTED FOR US GAAP (21.3) 119.8
============== ==============
20
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 31 MARCH
2004 2005
------------- -------------
(POUND)M (POUND)M
Equity shareholders' funds under UK GAAP 889.5 884.3
Adjustment for:
Directories in progress (103.2) (115.6)
Pensions (0.3) (13.5)
Additional minimum pension liability (37.9) (59.0)
Goodwill (562.3) (485.9)
Other intangible assets 746.6 678.2
Derivative financial instruments (3.2) 2.9
Deferred taxation (182.9) (136.9)
Dividends proposed 41.9 58.9
Other 2.3 1.5
------------- -------------
EQUITY SHAREHOLDERS' FUNDS AS ADJUSTED FOR US GAAP 790.5 814.9
============= =============
12. LITIGATION
The exceptional costs of (pound) 36.5 million ((pound)22.8 million after tax) in
the year ended 31 March 2005 are the estimated costs relating to lawsuits
brought against Yellow Book USA in relation to an advertising campaign that
finished in 2004.
The lawsuit filed by Verizon was settled in October 2004. Following publication
of our half year results, Yellow Book USA was served with complaints filed as
class actions in five US States and the District of Columbia. In these actions,
the plaintiffs allege violations of consumer protection legislation and are
placing reliance on findings of the New York court in the now settled suit
brought against Yellow Book USA by Verizon. On 13 May 2005, the court in New
Jersey gave its preliminary approval to a comprehensive national settlement,
with no admission of liability. Notice of the terms of settlement will be
published to class members and the final approval hearing is anticipated to be
held in late summer 2005.
21
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 2005, Yell published 111 directories in the United
Kingdom and 565 in the United States; in the United Kingdom, where it is a
leading player in the classified advertising market, it served 478,000 unique
advertisers. In the United States, where it is the leading independent
directories business, it served 455,000 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.