HIBU.L Regulatory News (HIBU)

8 November 2011

Yell Group Plc ("Yell")

Interim results for the six months ended 30 September 2011

Trading in line with expectations. Strategic progress continues. Commencement of discussions on covenant amendments.

Financial headlines(1)

·; Group revenue of £787.2m decreased 12.2%

- Digital services revenues grew 149.1% to £63.6m

- Digital directories (Internet Yellow Pages) revenue fell 9.7% to £172.7m

- Print and other directory (enquiry services) revenues fell 19.3% to £550.9m

·; EBITDA of £231.4m was down £26.5m(2)

·; Profit after tax of £47.9m was up £26.1m

·; Free cash flow of £156.6m increased £21.8m and reduced net debt to £2,634.0m

Operational headlines(1)

·; Total digital revenue increased by 9.1%, rising from 25.3% to 30.0% of revenue

- Total digital customers grew 11.1% to 940,000

- Average annual total digital revenue per customer was up 3.2% to £523

·; Live customer websites increased from 124,000 to 355,000

·; Digital directories visitors declined 15.1% to 42.9m

·; Mobile directories visitors were 3.2m

·; Print advertisers were down 8.1% to 541,000(3)

·; Print revenue per advertiser was down 7.8% to £902 (3)

Mike Pocock, Chief Executive Officer, said:

"We continue to make significant progress in transforming Yell from a provider of print and digital advertising to small and medium-sized enterprises (SMEs) to a leader in the emerging local eMarketplace. Since announcing our strategy in July, we have succeeded in cementing key strategic relationships in critical areas including eCommerce, mobile, social media and with Microsoft. Before the end of the year, we expect to begin to realise the potential of these partnerships through our expanded range of sophisticated digital solutions. We have made significant progress in improving the Group operating model with the consolidation of legacy platforms well underway, laying the foundations for the build out of a new platform for growth. As well as enabling us to improve customer experience, this will allow us to focus investment in key areas.

Despite the increasingly difficult economic environment, trading is in line with recent trends and expectations, with the continued very strong growth of our digital services partially offsetting the decline in directories. We now have 355,000 customer websites live, demonstrating our ability to bring to market and sell new digital products that prove attractive to our large base of SME customers.

(1) Results are for the six months, unaudited and compared with the same period in the prior year. Revenue and EBITDA changes before page 5 are at constant currency. Revenue percentage changes are also adjusted for rescheduling, changes in bundled revenue allocation in the US and acquisitions.

(2) EBITDA is profit for the period before interest, tax, depreciation, amortisation and exceptional items.

(3) Excluding White Pages and other directories.

The actions we have taken to improve efficiency across the Group are evident in stable gross margins and the £22.2m decrease in fixed costs. We continue to generate significant cash flow and have now reduced our net debt to £2.6bn resulting in covenant headroom of above ten percent despite the covenants decreasing since March. For this financial year, we continue to expect EBITDA to be within current market expectations.

In order to ensure the Group has an appropriate level of covenant headroom to deliver the new strategy successfully, we have begun speaking to our lenders about amending our Net Debt:EBITDA covenant levels. It is also currently our intention to seek purchases of up to £108m of debt below par, thus creating significant value for the Group."

Strategic update

Since announcing its strategy in July, Yell has made significant progress in building the eMarketplace. The local eMarketplace comprises an innovative platform and digital portal where consumers and SMEs can connect and transact, allowing Yell to offer a broader range of digital solutions and services.

Strategic partnerships form an important part of this strategy. As a consequence, the Group has rapidly built a strong portfolio of business partners focused on further enhancing its SME and consumer offerings and contributing to the creation of the local eMarketplace platform. In the second quarter, Yell announced the following:

·; The acquisition of industry leader in multi-store eCommerce Znode. Znode's technology underpins the Group's new digital service offerings

·; A global strategic alliance with Microsoft, enabling Yell to deepen and enhance its advertising products and services as well as offer Microsoft Office 365 and the full suite of cloud and software-based productivity and business solutions, which includes Microsoft Dynamics to its growing SME customer base

·; A strategic partnership with customer-powered marketing specialist Bazaarvoice, which will bring customer conversations online and help SMEs capitalise on and monetise the benefits of word of mouth endorsement

·; An alliance with Netbiscuits, the leading platform for developing, publishing, and monetising sites and apps across all mobile and connected devices. The alliance will enable eMarketplace participants to quickly move their products and services into the mobile environment

Additional agreements that will further strengthen and accelerate the pace of Yell's transformation will be announced in due course.

Yell is also strengthening its management team with the recruitment of key leaders to head up its digital, consumer, marketing and operations functions. Internally, the Group has taken many steps to build a global rather than geographic organisation and establish a common technology platform. This approach generates synergies by delivering solutions once rather than several times, improves efficiency and enables Yell to focus its considerable resources appropriately. Last month Yell appointed Landor Associates to help build a brand architecture more appropriate for the new digital market.

Yell has begun to launch new products, identified during the strategic review, and has recently begun trials of a local newsletter in the US. Further product launches are expected in the coming months.

Covenants and debt buy back

The Group is currently in full compliance with its covenants and expects to remain so for the remainder of this financial year. In order to ensure that the Group can undertake its new value-creating strategy, Yell has commenced a formal facility amendment process with lenders. The principal amendment Yell is seeking is to the Net Debt:EBITDA covenant levels, to create an appropriate level of headroom. The amendment requires the approval of two-thirds of lenders by value, and will be voted upon before Christmas.

The existing facilities agreement gives the Group the right to seek to purchase debt, at prices below par, for cancellation. It is currently Yell's intention to seek purchases up to £108m after the amendment process has been concluded. If completed, these would create significant value for the Group by reducing net debt by the net discount achieved.

Group results

Economic recovery and SME confidence remain low and Yell's market continues to evolve, with consumers and SMEs seeking digital alternatives to print. Revenue trends reflect this with the first six months down 12.2%, as the strong growth in digital services only partly offsets the decline in printed and digital directories. These trends were reflected across the Group's three main geographies. Latin American revenue continues to grow, although the trends Yell is seeing elsewhere are also beginning to become apparent.

Total digital revenue grew 9.1% to £236.3m from 940,000 customers at the half year and now accounts for 30.0% of revenue. The growth is driven entirely by new digital services, as digital directory revenue declined 9.7%, over the six months with the second quarter decline accelerating to 12.3% from 7.1% in quarter 1. Digital directory usage declined 15.1% on the prior year to 42.9m unique users as the Group is purchasing fewer, but higher quality users in the US. This does not include users of Yell's mobile applications and sites, which stood at 3.2m in September.

Digital services revenue contributed £63.6m over the period, up 149.1% on the prior year (with the second quarter slowing slightly to 136.5% from 164.9% in quarter 1). This revenue, primarily from selling websites, of which Yell now has 355,000 live, and online search, demonstrates the Group's ability to sell new and sophisticated digital solutions to its core customer SME base. The opportunity to expand the market through a wider choice of offers and address a larger base of customers are central to Yell's new strategy.

Print and other directory revenue declined 19.3% in the six months with the second quarter down 20.1% compared to 18.5% in the first quarter.

Fixed costs declined £22.2m and gross margin remained broadly flat on the prior year, as cost actions offset the effect of the changing product mix and reduced semi variable costs within direct costs. The cost savings were driven by increased cost management and control and were seen across all major geographies. Despite the impact of the lower fixed costs and the improved margins, the decline in revenue led to a fall in EBITDA of £26.5m. There were £3.9m of exceptional costs in the period, primarily relating to one-off costs associated with implementing the new strategy. Yell expects to incur further exceptional costs associated with implementing the strategy as the year progresses.

Profit after tax increased £26.1m primarily because the decrease in EBITDA was more than offset by £70.4m decrease in interest charges due to the reduced net debt and the unwinding of interest rate hedges which reduced the average interest rate from circa 9% to 6%.

The lower interest charge benefited free cash flow, which was up £21.8m on the prior year to £156.6m, despite the lower EBITDA. This reduced net debt by £131.1m from March, reflecting the strong free cash flow, offset by adverse currency movements of £15.1m and the £10.4m amortisation of deferred financing fees. The Group had £201.0m of cash after the £25.0m of scheduled debt repayments in September, the cash sweep of £27.3m, the final £66.5m repayment of the old A debt and the £41.0m paid to meet the minimum reduction amount all in the first quarter.

Forward looking statements

This news release contains forward-looking statements 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.

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:

Yell - Investors Yell - Media

Rob Hall Jon Salmon

Tel +44 (0)118 358 2838 Tel +44 (0)118 358 2656

Mobile +44 (0)7793 957848 Mobile +44 (0)7801 977340

RLM Finsbury

Andrew Dowler or Charles Chichester

Tel: + 44 (0) 207 251 3801

www.yellgroup.com

Key operational metrics for Yell Group plc

White Pages, other

directories (including

enquiry services)

FINANCIAL INFORMATION FOR YELL GROUP PLC AND SUBSIDIARIES

All of the following financial information is unaudited except the comparative information for 31 March 2011 which was presented in Yell's 31 March 2011 Annual Report.

Group income statement

Group statement of comprehensive income

See notes to the financial information for additional details.

Group statement of cash flows

See notes to the financial information for additional details.

Group balance sheet

See notes to the financial information for additional details.

Group statement of changes in equity

(1) Cumulative foreign currency gains attributable to owners at 30 September 2011 are £320.1m (31 March 2011 - £312.7m gain).

See notes to the financial information for additional details.

Notes to the financial information

1. Statutory disclosures

Basis of preparation and consolidation

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. The principal activity of Yell Group plc and its subsidiaries is the sale of quality business leads and marketing solutions to small and medium sized enterprises through an integrated portfolio of simple-to-use, cost effective advertising.

This unaudited condensed set of financial statements for the six months ended 30 September 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting', as adopted by the European Union.

The unaudited financial information contained herein does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.

The audit opinion on the statutory accounts for the year ended 31 March 2011 was unqualified and unmodified, and included an emphasis of matter in respect of the uncertainty relating to the carrying value of goodwill. The financial information herein should be read in conjunction with Yell's 2011 annual report published in June 2011, which was prepared in accordance with the International Financial Reporting Standards as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006.

The financial information contained herein has been prepared on a going concern basis. The Group is in full compliance with the financial covenants and undertakings contained in all its borrowing agreements. The Group is also cash generative and profitable. The Board, in considering going concern, looked at various factors including Yell's ability to meet debt repayments and satisfy debt covenants. The Board concluded that adoption of the going concern basis in preparing these financial statements is appropriate.

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, retirement benefits, acquisitions, impairment testing and taxation.

Where change at constant currency is stated in this document it states the change in the current period compared with the previous period as if the current period results were translated at the same exchange rates as those used to translate the results for the previous period. Figures reported at constant exchange rates are stated at the same exchange rates as those used to translate the comparative figures for the previous period. Exchange impact is the difference between the results reported at constant exchange rates and the results reported using current period exchange rates. The average effective exchange rates for the six months ended 30 September 2011 were $1.62: £1.00 and €1.14: £1.00 as compared to $1.52: £1.00 and €1.18: £1.00 for the same period last year.

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 financial statements for the year ending 31 March 2012 are not expected to be materially affected by implementation of new standards, amendments to standards, or interpretations.

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 £1,570.2m include goodwill of £3,168.2m which is supported by the Group's new strategic plans. It is clear that the Group faces challenges and material uncertainties which may affect the carrying value of goodwill. The new strategic direction for the Group may also have a positive influence on the other uncertainties reported in the annual report. However, there is a risk that in the future the Group would need to reset its financial covenants with, or obtain a waiver from, its lenders, either of which would require a two-thirds majority vote.

The financial covenants are disclosed in note 14 on page 18 of this financial information. A discussion of the risks associated with the debt covenants is presented on pages 19 to 21 of Yell's annual report for the financial year ended 31 March 2011, a copy of which is available on Yell's website at http://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 30 September 2012 interest payments will be fully met, with further cash generated to repay debt. Yell is currently seeking acceptance from lenders to revise the debt cover covenant to allow management to focus on the new strategy. The existing covenants are described in Note 14.

The Group is in full compliance with the financial covenants and undertakings contained in all its borrowing agreements.

Related Parties

There are no related party transactions in the six months ended 30 September 2011 except compensation for key management. Key management compensation for the financial year ended 31 March 2011 is detailed in note 25 on page 114 of Yell Group plc's 2011 Annual Report. A copy of Yell Group plc's Annual Report is available on Yell's website at http://www.yellgroup.com.

2. Revenue

3. EBITDA and operating profit

4. Taxation

The tax charge for the six months is different from the standard rate of corporation tax in the United Kingdom of 26% (2010 - 28%). The differences are explained below:

The tax on the Group's profit before tax is analysed as follows:

Taxation credited (charged) directly to equity is as follows:

5. Earnings per share

The calculation of basic and diluted earnings per share is based on the profit for the relevant financial period and on the weighted average share capital during the period.

(1) Details of exceptional items are set out in note 6.

(2) Other items include amortisation of acquired intangibles and the fair valuation charge for the time value of interest rate caps taken directly to the Income Statement.

6. Exceptional items

Exceptional items are transactions which, by virtue of their incidence, size or a combination of both, are disclosed separately. Exceptional items comprise the following:

7. Capital expenditure

Proceeds on the sale of property, plant and equipment were £nil in the six months ended 30 September 2011 and 2010. Capital expenditure committed at 30 September 2011 was £7.1m (2010 - £14.3m).

8. Acquisitions and disposals

In the six months to 30 September 2011, the Yell Group paid $19.4m (£12.1m) for an eCommerce business in the US with recorded net assets of £0.6m. Total costs were allocated to the acquired assets and liabilities as follows:

(1) Goodwill of £6.2m was attributable to the expected future synergies, the workforces acquired and the expected future growth of the businesses.

Six months ended 30 September 2010

In the six months ended 30 September 2010, the Yell Group paid £1.2m for a new media company in the UK with recorded net assets of £0.3m and £10.2m for in-fill acquisitions in the US. Goodwill of £5.9m was attributable to the expected future synergies, the workforces acquired and the expected future growth of the businesses.

Cash flow

A reconciliation of cash paid on acquisitions, including deferred payments for prior year acquisitions, to the cash flow on page 7 is as follows:

The Yell Group did not make any disposals in any of the periods presented in this financial information.

9. Goodwill

Goodwill is not amortised but is tested, at least annually, for impairment. The impairment analysis is based on certain assumptions, including future revenue and profit growth, that can change the conclusion on whether goodwill is impaired.

No impairment charges have been required in the periods presented in this financial information.

10. Other intangible assets

11. Property, plant and equipment

12. Deferred tax assets and liabilities

The elements of deferred tax assets recognised in the financial statements were as follows:

The elements of deferred tax liabilities recognised in the financial statements were as follows:

13. Trade and other receivables

(1) The Group's trade receivables and accrued income are stated after deducting a provision of £157.4m (March 2011 - £178.4m) for bad and doubtful debts.

14. Loans and other borrowings, net debt

(1) Balances are shown net of deferred financing fees of £53.7m (March 2011 - £64.1m).

The movement in net debt for the six months ended 30 September 2011 and 2010 arose as follows:

The extended bank facilities became effective on 30 November 2009 and are committed until July 2014. Amounts outstanding under the old and extended debt facilities at 30 September 2011 were as follows: