HIBU.L Regulatory News (HIBU)

14 February 2012

Yell Group Plc ("Yell")

Interim management statement for the quarter ended 31 December 2011

Financial headlines(1)

·; Group revenue of £382.8m decreased 15.1%

- Digital services revenues grew 111.8% to £35.4m

- Digital directories (Internet Yellow Pages) revenue fell 15.7% to £77.6m

- Print and other directory (enquiry services) revenues fell 22.0% to £269.8m

·; EBITDA(2) of £108.6m was down £12.7m

·; Profit after tax of £16.6m was up £15.0m

·; Free cash flow of £71.3m increased £9.0m

·; Net debt was £2,566.7m

Operational headlines

·; Total digital revenue rose from 25.5% to29.5% of revenue

- Total digital customers grew 9.8% to 945,000

- Annual digital revenue per customer was down 2.5% to £508 (3) 

·; Live customer websites built by Yell increased from 184,000 to 337,000(4)

·; Digital directories visitors declined 25.5% to 42.1m

·; Mobile directories visitors were 3.7m(5)

·; Print advertisers were down 17.5% to 235,000(6) 

·; Print revenue per advertiser was down 2.7% to £1,029 (3)(6)

Mike Pocock, Chief Executive Officer, said:

"Our digital services revenue continued to grow strongly, reaching an annual run rate of over £140m. We expect this growth to accelerate as our strategic new products come to market. The deteriorating macro environment and a more competitive digital directory market are however driving a faster rate of directory revenue decline. Tight cost management has reduced the impact of lower revenues on both EBITDA and cash flow, allowing us to reduce net debt by £67.3m, even after paying the majority of the initial £22m of fees associated with the covenant reset. Full year EBITDA is expected to be within current market expectations.

The quarter has seen good progress on implementing the new strategy as we have continued to develop our partnerships, restructure from a national to a global business model, launch new product pilots and complete our senior management team. During the quarter, we successfully launched local newsletter pilots, agreed a key partnership with the UK Government and made progress with our partners, most notably Microsoft. In early January we also successfully launched our first ecommerce pilots.

In December, our lenders agreed to increase Net Debt to EBITDA covenant headroom and release an additional £51m for below par debt buy backs. In January, the Group realised an exceptional pre tax profit of £89.4m, purchasing £137.5m of debt below par. This buy back was funded by cash in the bank which stood at £250.2m at the end of December."

Forward looking statement

This news release contains a forward-looking statement regarding Yell's intentions, beliefs or current expectations concerning, among other things, Yell's results of operations, revenue, financial condition, liquidity, prospects, growth, strategies, new products, the level of new directory launches and the markets in which Yell operates. Readers are cautioned that any such forward-looking statement is not a guarantee of future performance and involves risks and uncertainties, and that actual results may differ materially from those in the forward-looking statement as a result of various factors. These factors include any adverse change in regulations, unforeseen operational or technical problems, the nature of the competition that Yell will encounter, wider economic conditions including economic downturns and changes in financial and equity markets. Readers are advised to read pages 16 to 25 in Yell Group plc's annual report for the financial year ended 31 March 2011. Yell undertakes no obligation publicly to update or revise any forward-looking statements, except as may be required by law.

Risk Statement

Yell's risks and uncertainties include strategic and operational risks faced by Yell's businesses; debt and financing risks faced in funding Group operations and the financial reporting and related risks faced in reporting Yell's results. The Group net assets of £1,601.6m include goodwill and other intangible assets totalling £4,234.2m which is supported by the Group's strategic plans. It is clear that the Group faces challenges and material uncertainties which may affect the carrying value of these intangible assets. The new strategic direction for the Group may also have a positive influence on the other uncertainties reported in the annual report.

The Group is in full compliance with the financial covenants and undertakings contained in all its borrowing agreements, and in December 2011 Yell's lenders agreed to provide more headroom in its Net Debt to EBITDA covenants. However, there is a risk that in the future the Group would need to reset again its financial covenants with, or obtain a waiver from, its lenders, either of which would require a two thirds majority vote.

The cash interest cover ratio covenant is disclosed on page 21 of Yell's annual report for the financial year ended 31 March 2011. The revised Net Debt to EBITDA covenants are disclosed on page 7 of the Lenders' Memorandum relating to the December facility amendment. Copies of both documents are available on Yell's website at www.yellgroup.com.

If the Group were required but not able to reset its financial covenants with, or obtain a waiver from, its lenders such that undertakings to the Group's lenders were breached, the lenders' facility agent may, and must if directed by two-thirds of lenders (by reference to debt held) demand immediate repayment of all amounts due to them. Whilst this eventuality would, if it arose, cast doubt on the future capital funding of the Group, the Group's cash flow forecasts show that in the twelve months ending 31 December 2012 interest payments will be fully met, with further cash generated to repay debt.

A discussion of all the Group's risks is presented on pages 16 to 25 of Yell's annual report for the financial year ended 31 March 2011.

Notes to Editors

Yell Group is a leading provider of digital services within the emerging local eMarketplace for consumers and SMEs across its operations in the UK, US, Spain and some countries in Latin America.

Building on its strong presence in the local market through its current digital and print portfolio, Yell is developing a broad range of digital services tailored to the converging needs of SMEs and consumers.

These address both the SMEs' need to grow, transact and be efficient in the digital world, and the consumers' need to connect locally to the goods and services they want, in a way which saves them time and money, and moves their lives forward.

In the year ended 31 March 2011, Yell Group had 1.3m SME customers.

Enquiries:

RLM Finsbury

Andrew Dowler or Charles Chichester

Tel: + 44 (0) 207 251 3801

www.yellgroup.com