HIBU.L Regulatory News (HIBU)

6 Nov 2007 07:00

Yell Group plc06 November 2007 6 November 2007 Yell Group plc financial report for the six months ended 30 September 2007 Good progress, in line with expectations. Strong online performance. • Revenue up 13.7% to £965.4 million; up 17.7% at constant exchange rate • Adjusted EBITDA up 18.8% to £319.8 million; up 22.4% at constant exchange rate • Adjusted profit after tax and minority interests up 7.3% to £114.7 million • Adjusted diluted earnings per share up 5.8% to 14.6 pence; underlying up 9.0% at constant exchange rate • Operating cash flow up 14.7% to £281.6 million; up 17.3% at constant exchange rate. Cash conversion 88.1% (2006 - 91.2%) • Interim dividend up 10.5% to 6.3 pence per share Six months ended 30 September Statutory results (unaudited) 2006 2007 Change £m £m % Revenue 848.8 965.4 13.7 EBITDA * 269.2 331.6 23.2 Profit after tax and minority interests 58.1 83.8 44.2 Cash generated from operations 262.6 301.3 14.7 Diluted earnings per share (pence) 7.5 10.7 42.7 * EBITDA is reconciled to operating profit in note 3 to the financial information on page 16 John Condron, Chief Executive Officer, said: "We have made good progress in the first half of this challenging year and havestrengthened the foundations of future growth across the Group. We have onceagain demonstrated the power of our channel-neutral strategy with rapid growthin our online products. "Yellow Book's performance is as expected but the US market remains verycompetitive. Yell UK has taken the first steps to realise the opportunity thatmore even-handed regulation will give us. We continue to invest in the Back toBasics approach at Yell Publicidad which will allow us to take full advantage ofthe opportunities in its markets." John Davis, Chief Financial Officer, said: "These results are in line with expectations with strong margins and cashconversion showing the strength of our business. For the full year, weanticipate that Group performance will be in line with expectations. "Our proposed dividend growth of 10.5% reflects our confidence looking forward." Enquiries Yell - Investors Jill SherrattTel +44 (0)118 950 6984Mobile +44 (0)7764 879808 Yell - Media Jon SalmonTel +44 (0)118 950 6656Mobile +44 (0)7801 977340 Citigate Dewe Rogerson Anthony CarlisleTel +44 (0)20 7638 9571Mobile +44 (0)7973 611888 This news release contains forward-looking statements. These statements appearin a number of places in this news release and include statements regarding ourintentions, beliefs or current expectations concerning, among other things, ourresults of operations, revenue, financial condition, liquidity, prospects,growth, strategies, new products, the level of new directory launches and themarkets in which we operate. Readers are cautioned that any suchforward-looking statements are not guarantees of future performance and involverisks and uncertainties, and that actual results may differ materially fromthose in the forward-looking statements as a result of various factors. Youshould read the section entitled "Risk Management" in Yell Group plc's annualreport for the financial year ended 31 March 2007 for a discussion of some ofthese factors. We undertake no obligation publicly to update or revise anyforward-looking statements, except as may be required by law. A copy of this release can be accessed at: www.yellgroup.com/announcements INTERIM MANAGEMENT REPORT Yell Group plc summary financial results Six months Change at ended 30 September constant exchangeUnaudited 2006 2007 Change rate (a) £m £m % %Revenue (b) 848.8 965.4 13.7 17.7Adjusted EBITDA (b) (c) 269.2 319.8 18.8 22.4 Operating cash flow (b) (d) 245.5 281.6 14.7 17.3Cash conversion (b) (e) 91.2% 88.1% Adjusted profit after tax and minority interests(f) 106.9 114.7 7.3Adjusted diluted earnings per share (pence)(f) 13.8 14.6 5.8 (a) Change at constant exchange rate states the change in current periodcompared with the previous period as if the current period results weretranslated at the same exchange rate as that used to translate the results forthe previous period. (b) Revenue, adjusted EBITDA, operating cash flow and cash conversion arethe key financial measures that we use to assess the growth in the business andoperational efficiencies. (c) Adjusted EBITDA in the six months ended 30 September 2007 is statedbefore exceptional credits of £11.8 million arising from the release of some ofthe class action accrual in the US. EBITDA was not adjusted in the six monthsended 30 September 2006. (d) Cash generated from operations before payments of exceptional costs,less capital expenditure. (e) Operating cash flow as a percentage of adjusted EBITDA. (f) Adjusted profit after tax and adjusted diluted earnings per shareare stated before exceptional items and amortisation of acquired intangibles,all net of related tax. A reconciliation to the related statutory figures ispresented in note 6 to the financial information. Group operating performance Group revenue for the six months ended 30 September 2007 increased 13.7% to£965.4 million, or 17.7% at a constant exchange rate, from £848.8 million lastyear. We estimate that pro forma Group organic growth was 3.0% at a constantexchange rate. Group adjusted EBITDA increased by 18.8% to £319.8 million, or 22.4% at aconstant exchange rate. The Group adjusted EBITDA margin of 33.1% is up from31.7% in the same period last year. Operating cash flow increased 14.7% to £281.6 million, or 17.3% at a constantexchange rate, resulting in conversion of 88.1% of adjusted EBITDA to cash.Free cash flow before payment of exceptional items was £118.4 million. Yell UK operations UK revenue increased 3.0% to £362.3 million driven entirely by a 51.7% increasein revenue by Yell.com, which more than offset the expected 4.4% decline inprint. Total unique customers live at 30 September declined by 0.8% to 488,000,reflecting a decrease in print-only advertisers partly offset by Yell.com-onlyadvertisers. Revenue from UK printed directories was, as expected, 4.4% lower at £284.0million, as the number of unique print advertisers during the six monthsdeclined by 4.7% to 224,000, largely as a result of competition. Retention wasstable at 74%. Average revenue per unique advertiser was 0.3% higher than thesame period in the prior year at £1,268. The effect of our regulatoryundertaking of RPI-6% was to reduce Yellow Pages rate card prices by an averageof 3.3% during the six months. The new rate cap of RPI-0% comes into effect fordirectories publishing from 1 April 2008 and the benefits will begin to be feltin the 2009 financial year. Yell.com's revenue grew 51.7% to £65.1 million, driven by a 31.5% increase inrecognised revenue per average searchable advertiser achieved mainly throughup-sell to higher value products. Searchable advertisers at 30 September grew14.3% to 208,000. Unique users grew 8.1% to 6.7 million in the month ofSeptember compared with the same period last year. Overall adjusted EBITDA grew 3.5% to £137.9 million, reflecting a margin of38.1%, slightly higher than 37.9% in the same period last year. The margin isahead of guidance for the full year due to the phasing of investment as in theprevious year. We reiterate guidance in the UK of full year revenue growth of around 3% and astable EBITDA margin of around 35%. Yellow Book USA operations US revenue grew 4.1% at a constant exchange rate but fell 3.4% in sterling to£439.7 million. The average exchange rate was approximately $2.00: £1.00 against$1.86: £1.00 in the same period last year. Growth before rescheduling at a constant exchange rate was 5.0%. This compriseda 1.9% contribution from net organic growth and a 3.1% contribution fromacquired directories publishing for the first time ($26.4 million). As expected, the effect of increased competition in printed directories,particularly during the second quarter, is reflected in the 1.9% contribution ofnet organic revenue growth. This comprised 1.3% growth from directory launchesand 2.4% from internet revenue, reduced by 0.2% from print same market and 1.6%primarily from acquired directories that were discontinued because theyoverlapped existing Yellow Book directories. Yellow Book unique advertisers in printed directories declined 4.9% to 346,000,around half of which is due to rescheduling and is likely to reverse during theyear. The remainder reflects increased competition and slightly lower retentionof 69%. Average revenue per unique advertiser was up 7.1% at $2,404. Yellowbook.com revenue grew 68.0% to $49.9 million driven by a 76.3% increase inrevenue per average searchable advertiser from $76 to $134 on the back ofincreased usage. More than 50% of Yellow Book print customers are now onYellowbook.com and the 6.2% decline in advertisers was expected as we price morefully to reflect usage. Unique visitor numbers grew 48.1% from 5.2 million to7.7 million in September 2007. Adjusted EBITDA grew 6.0% at a constant exchange rate but declined by 1.6% insterling to £125.7 million. The adjusted EBITDA margin in the six months was28.6% (compared with 28.1% last year) in line with expectations. Looking forward, we reiterate full year guidance of around 3% organic growthalthough competition remains fierce. While we have sold 80% of our targetedrevenue we have only closed 20% of the directories in the heavily weightedfourth quarter. In addition, we expect around $30 million revenue from thepublication of directories acquired. We also reiterate the guidance for a fullyear adjusted EBITDA margin of around 29%, reflecting the investment being madeto address the competition. Yell Publicidad operations Yell Publicidad revenue for the six months was £163.4 million in line withexpectations and reflecting the usual lower weighting of revenue in the firsthalf. The average exchange rate was approximately €1.47: £1.00 during the twomonths ended 30 September 2006 and the six months ended 30 September 2007. Printed directory revenue in Spain grew 3.8% on a like-for-like basis comparedwith 2.4% for the comparable period last year. Adjusted EBITDA was £56.2 million and the margin was 34.4% compared with anadjusted proforma margin of 27% last year, excluding loss-making non-coreoperations. As expected, this half-year's margin is lower than full yearguidance owing to the usual seasonally low first half revenue. For the full year, we expect revenue to be in line with expectations. However,this is a year of transition and the full benefit of the new sales approach isstill to be felt. As a result, we believe organic revenue growth will beslightly lower than guided. This is expected to be offset by the contributionof the now breakeven Italian directory assistance business, which has not beensold. Adjusted EBITDA is expected to be ahead of expectations reflecting margins inexcess of guidance of 37%. The expected margin improvement is after asignificant increase in the investment in the core products. The capacity forthis investment arises from synergy and efficiency savings. Cash flow and net debt Operating cash flow increased 14.7% to £281.6 million, or 17.3% at a constantexchange rate. The Group converted 88.1% of adjusted EBITDA to cash, ascompared with 91.2% last year. Six months ended 30 September 2006 2007Unaudited £m £mAdjusted EBITDA 269.2 319.8 Exceptional items in administrative expenses - 11.8 Working capital movements and non-cash charges (6.6) (30.3) Cash generated from operations (see page 13) 262.6 301.3 Cash payments of exceptional items - 1.5Purchase of property, plant and equipment (17.1) (21.2)Operating cash flow 245.5 281.6 Adjusted EBITDA 269.2 319.8 Cash conversion 91.2% 88.1% Net debt at 30 September 2007 of £3,689.5 million was 5.1 times adjusted EBITDAon a pro forma basis over the last twelve months, compared with 5.2 times at 31March 2007. The movement in net debt for the six months ended 30 September 2007arose as follows: Net debtUnaudited £m At 31 March 2007 3,662.6Operating cash flow (281.6)Cash payments of exceptional items 1.5Interest and tax payments 163.2Purchase of subsidiary undertakings and minority interests, net of cashacquired 84.7Net cash inflow on disposal of subsidiary (1.1)Purchase of own shares 1.5Proceeds of shares issued (0.2)Dividends paid to company shareholders 88.3Finance costs increasing debt 6.3Currency movements (35.7)At 30 September 2007 3,689.5 Taxation Adjusted taxation of £51.9 million represents an effective rate of 31.1% onadjusted profit before tax of £167.1 million, in line with guidance. Thiscompared with 34.0% in the same period last year. Net results and exceptional items Adjusted profit after tax of £114.7 million was up 7.3% (after £0.5 millionattributable to minority interests in Yell Publicidad earnings). Adjusted diluted earnings per share were up 5.8% to 14.6 pence (see note 6 tothe financial information on page 18 for a reconciliation between statutory andadjusted figures). Underlying adjusted diluted earnings per share grew 9.0% ata constant exchange rate if we adjust this half-year's earnings for theconsolidation for the first time of Yell Publicidad's seasonally low first fourmonths' revenue and the weaker US dollar, and if we adjust last year's earningsfor the timing of the equity placement and the phasing of tax. . Adjusted results exclude a non-recurring exceptional credit of £11.8 millionbefore tax, or £7.4 million after tax, which arose from releasing £11.8 million($23.6 million) of the £23.8 million ($45.0 million) costs we accrued in March2005 for a class action settlement in the US. An additional exceptional taxcharge of £0.4 million relates to the change in UK tax rates. Interim dividend The Board has declared a 10.5% increase in the interim dividend to 6.3 pence pershare, and this is expected to account for one third of the full year dividend. The ex-dividend date will be 14 November 2007 and the interim dividend will bepaid on 14 December 2007 to shareholders registered on 16 November 2007. Minority interests On 26 September 2007, we reached agreement with the minority shareholders toacquire the remaining 1.28% of the share capital of Yell Publicidad held byminority shareholders (see note 17 to the financial information on page 24). Risks and uncertainties The principal risks and uncertainties affecting the business activities of theGroup for the remaining six months of the financial year remain those detailedin the section entitled "Risk Management" on pages 34-39 of Yell Group plc'sannual report for the financial year ended 31 March 2007, a copy of which isavailable on our website www.yellgroup.com. Related party transactions Related party transactions in the six months ended 30 September 2007 are limitedto compensation for key management. Key management compensation for thefinancial year ended 31 March 2007 is detailed in note 27 to Yell Group plc'sAnnual Report. Key performance indicatorsUnaudited Full year ended 31 March Six months ended 30 September Change 2007 2006 2007 %Yell UKTotal live advertisers at period end (thousands) (a) 492 492 488 (0.8) Printed directoriesRevenue (£million) 600.5 297.1 284.0 (4.4)Unique advertisers (thousands) (b) 450 235 224 (4.7)Directory editions published 113 57 57Unique advertiser retention rate (%) (c) 75 74 74Revenue per unique advertiser (£) 1,335 1,264 1,268 0.3 InternetRevenue (£million) 95.9 42.9 65.1 51.7Searchable advertisers at period end (thousands) (d) 196 182 208 14.3Searches for the month of period end (millions) 33 29 28 (3.4)Unique users for the month of period end (millions) (e) 7.6 6.2 6.7 8.1Revenue per average searchable advertiser (£) (f) 518 241 317 31.5 Yellow Book USA Printed directoriesRevenue ($million) 1,862.9 817.1 831.8 1.8Unique advertisers (thousands) (b)(g) 692 364 346 (4.9)Directory editions published 969 431 432Unique advertiser retention rate (%) (c) (h) 69 70 69Revenue per unique advertiser ($) 2,694 2,245 2,404 7.1 InternetRevenue ($million) 68.7 29.7 49.9 68.0Searchable advertisers at period end (thousands)(d)(g) 380 390 366 (6.2)Unique visitors for month of period end (millions) (i) 6.1 5.2 7.7 48.1Revenue per average searchable advertiser ($) (f) 178 76 134 76.3 Yell Publicidad (Spain) Paginas Amarillas classified directoriesRevenue (•million) 106.9Unique advertisers (thousands) (b) 150Directory editions published 48Unique advertiser retention rate (%) (c) 87Revenue per unique advertiser (•) 712 Explanations of significant period to period changes are given in the analysisof operations on pages 1 through 5. See notes to the table on the following page. (a) The number of total live advertisers is a count of alladvertisers at the date of the period end with a live advertisement, regardlessof product. It cannot be used to calculate average revenue per advertiser, asthe basis of measurement differs for each product and should not be aligned withrevenue recognised in the current period. (b) Number of unique advertisers in printed directories that wererecognised for revenue purposes and have been billed. Unique advertisers arecounted once only, regardless of the number of advertisements they purchase orthe number of directories in which they advertise. (c) The proportion of prior year unique advertisers that haverenewed their advertising. (d) Unique customers with a live contract at month end. Thesefigures refer only to those advertisers for whom users can search. They excludeadvertisers who purchase only products such as banners and domain names. (e) The number of unique users who have visited Yell.com once ormore often in the indicated month. Unique users are measured according toindependently established industry standard measures. (f) UK and US internet revenue per average searchable advertiser iscalculated by dividing the recognised revenue in the six month period by theaverage number of searchable advertisers in that period. Yell.com year ended 31March 2007 - 185,000; six months ended 30 September 2006 - 178,000; six monthsended 30 September 2007 - 205,000. Yellowbook.com year ended 31 March 2007 -386,000; six months ended 30 September 2006 - 391,000; six months ended 30September 2007 - 373,000. (g) As a result of the progress in the United States towardsintegrating our customer databases, we have been able to make improvements inthe ways in which we capture, record and analyse customer information. This hasled to an overall elimination of duplicate records of unique advertisers. Wehave not adjusted the previously reported figure for the six months ended 30September 2006 for any duplicated records in that period. There remains someoverlap in reporting unique advertisers between Yellow Book and acquiredbusinesses that we expect to be removed. These improvements to our systems havenot affected the reporting of our financial results. (h) Retention in the US is based on unique directory advertisers. (i) The number of individuals who have visited Yellowbook.com atleast once in the month shown. In the year ended 31 March 2007 we changed ourdata provider; we have not adjusted the previously reported figure for the sixmonths ended 30 September 2006. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED INCOME STATEMENT Six months ended 30 September Notes 2006 2007 £m £mRevenue 2 848.8 965.4Cost of sales (380.4) (404.1)Gross profit 468.4 561.3Distribution costs (28.0) (36.9)Administrative expenses (226.6) (272.3)Operating profit 3 213.8 252.1Finance costs (131.8) (136.6)Finance income 5.2 6.1Net finance costs (126.6) (130.5)Profit before taxation 87.2 121.6Taxation 4 (29.7) (37.7)Profit for the financial period 57.5 83.9Attributable to:Minority interests (0.6) 0.1Equity shareholders of the group 58.1 83.8 57.5 83.9 (pence) (pence)Basic earnings per share 6 7.6 10.8Diluted earnings per share 6 7.5 10.7 £m £mDeclared interim ordinary dividend (a) 44.2 49.1 (a) The interim ordinary dividend for the six months ended 30September 2007 of an estimated £49.1 million (6.3 pence per share) was declaredon 6 November 2007. The interim ordinary dividend of £44.2 million (5.7 penceper share) was declared on 7 November 2006. In accordance with IFRS, dividendsare not recognised until the period in which they are declared or approved. See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months ended 30 September Notes 2006 2007 £m £mProfit for the financial period 57.5 83.9Exchange (loss) gain on translation of foreign operations (50.6) 29.1Actuarial gains on defined benefit pension schemes 14 4.6 25.9Change in fair value of financial instruments used as hedges (13.7) 4.4Tax effect of net losses (gains) not recognised in the income statement 4.5 (9.2)Net increase (decrease) in tax benefit on share based payments 3.8 (9.7)Net (expense) income not recognised in the income statement (51.4) 40.5Total recognised income for the period 6.1 124.4 Attributable to:Minority interests (1.1) 0.4Equity shareholders of the group 7.2 124.0 6.1 124.4 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET Audited Unaudited At At 31 March 30 September Notes 2007 2007 £m £m Non-current assets Goodwill 7 3,645.3 3,672.0 Other intangible assets 8 1,229.5 1,212.7 Property, plant and equipment 9 94.5 89.1 Deferred tax assets 10 143.2 114.9 Investment and other assets 8.2 8.0 Total non-current assets 5,120.7 5,096.7 Current assets Inventories 12.0 21.0 Directories in development 257.2 293.6 Trade and other receivables 11 947.4 923.0 Cash and cash equivalents 66.7 47.7 Total current assets 1,283.3 1,285.3 Current liabilities Loans and other borrowings 12 (224.3) (292.9) UK corporation and foreign income tax (54.4) (35.3) Trade and other payables 13 (633.8) (629.6) Total current liabilities (912.5) (957.8) Net current assets 370.8 327.5 Non-current liabilities Loans and other borrowings 12 (3,505.0) (3,444.3) Deferred tax liabilities 10 (497.7) (502.6) Retirement benefit obligations 14 (27.2) (1.5) Trade and other payables 13 (13.0) (12.6) Total non-current liabilities (4,042.9) (3,961.0) Net assets 1,448.6 1,463.2 Capital and reserves attributable to equity shareholders Share capital 15 1,201.7 1,200.4 Other reserves 15 (218.0) (187.5) Retained earnings 15 454.8 450.3 1,438.5 1,463.2 Minority interests 15 10.1 - Total equity 1,448.6 1,463.2 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED CASH FLOW STATEMENT Six months ended 30 September Notes 2006 2007 £m £mNet cash inflow from operating activitiesCash generated from operations 262.6 301.3Interest paid (142.1) (129.6)Interest received 5.2 6.1Redemption premium paid (22.1) -Net income tax paid (34.5) (39.7)Net cash inflow from operating activities 69.1 138.1 Cash flows from investing activitiesPurchase of property, plant and equipment 16 (17.1) (21.2)Purchase of subsidiary undertakings, and minority interestshares, net of cash acquired 17 (2,019.3) (84.7)Net cash inflow on disposal of subsidiary - 1.1Net cash outflow from investing activities (2,036.4) (104.8) Cash flows from financing activitiesProceeds from issuance of ordinary shares 346.3 0.2Purchase of own shares (0.3) (1.5)Net (payments) receipts on revolving credit facility (222.6) 12.7Acquisition of new loans 3,841.4 83.8Repayment of borrowings (1,815.7) (58.3)Financing fees paid (64.6) -Dividends paid to Company's shareholders (78.5) (88.3)Net cash inflow (outflow) from financing activities 2,006.0 (51.4) Net increase (decrease) in cash and cash equivalents 38.7 (18.1)Cash and cash equivalents at beginning of the period 28.5 66.7Exchange losses on cash and cash equivalents (1.2) (0.9)Cash and cash equivalents at period end 66.0 47.7 Profit for the period 57.5 83.9Adjustments for:Tax 29.7 37.7Finance income (5.2) (6.1)Finance costs 131.8 136.6Depreciation of property, plant and equipment andamortisation of software 16.7 22.2Amortisation of other acquired intangibles 38.7 57.3Changes in working capital:Inventories and directories in development (54.9) (51.2)Trade and other receivables (28.0) 26.0Trade and other payables 70.3 (12.5)Share based payments and other 6.0 7.4Cash generated from operations 262.6 301.3 See notes to the financial information for additional details. 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 publishingclassified advertising directories in the United Kingdom, the United States,Spain, and certain countries in Latin America. This condensed set of financial statements in the half-yearly report for the sixmonths ended 30 September 2007 has been prepared in accordance withInternational Financial Reporting Standards as adopted by the European Union("IFRSs") as set out in our annual report for the year ended 31 March 2007, withIAS 34 - Interim Financial Reporting, as adopted by the European Union, and inaccordance with the Disclosure and Transparency Rules of the Financial ServicesAuthority. The financial information contained in the half-yearly financial report does notconstitute statutory financial statements within the meaning of section 240 ofthe Companies Act 1985. The audit opinion on the statutory accounts for theyear ended 31 March 2007, which were approved by the Board of directors on 5June 2007, was unqualified. In the opinion of management, the financial information included herein includesall adjustments necessary for a fair presentation of the consolidated results,financial position and cash flows for each period presented. The financial information in the half-yearly financial report should be read inconjunction with Yell's 2007 annual report published in June 2007, whichincluded the audited consolidated financial statements of Yell Group plc and itssubsidiaries for the year ended 31 March 2007. The preparation of the consolidated financial information requires management tomake estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial information and the reported amounts of income and expenditureduring the period. Actual results could differ from those estimates. Estimatesare used principally when accounting for doubtful debts, depreciation,retirement benefit obligations and the related employee pension costs,acquisition accounting and taxes. The following new standards, amendments to standards, or interpretations aremandatory for the first time for the financial year ending 31 March 2008: IFRS 7 - Financial Instruments: Disclosures, and IAS 1 (Amendment) -Presentation of Financial Statements - Capital Disclosures (effective from 1April 2007) and IFRS 4 - Insurance Contracts, revised implementation guidance,effective when an entity adopts IFRS 7. As the half-yearly financial reportcontains only condensed financial statements, and as there are no materialfinancial instrument related transactions in the six months, full IFRS 7disclosures are not required at this stage. The full IFRS 7 disclosures,including the sensitivity analysis to market risk and capital disclosuresrequired by the amendment of IAS 1, will be given in the 2008 annual report. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 2. Revenue Six months ended 30 September Change 2006 2007 % £m £m Yell UK printed directories 297.1 284.0 (4.4) Other products and services 54.5 78.3 43.7 Total Yell UK revenue 351.6 362.3 3.0 Yellow Book USA revenue at constant exchange rate (a) 455.0 473.8 4.1 Exchange impact (a) - (34.1) Total Yellow Book USA revenue 455.0 439.7 (3.4) Spanish operations 33.0 142.9 Latin American operations 9.2 20.1 Yell Publicidad revenue at constant exchange rate (a) 42.2 163.0 286.3 Exchange impact (a) - 0.4 Total Yell Publicidad revenue 42.2 163.4 287.2 Group revenue 848.8 965.4 13.7 (a) Constant exchange rate states current period results at the sameexchange rate as that used to translate the results for the previous period.Exchange impact is the difference between the results reported at a constantexchange rate and the results using current period exchange rates. 3. Operating profit and EBITDA information Adjusted EBITDA by segment Six months Change ended 30 September 2006 2007 % £m £m Yell UK printed directories 112.5 104.4 (7.2) Other products and services 20.8 33.5 61.1 Total Yell UK 133.3 137.9 3.5 Yellow Book USA at constant exchange rate (a) 127.8 135.5 6.0 Exchange impact (a) - (9.8) Total Yellow Book USA 127.8 125.7 (1.6) Spanish operations 8.8 58.7 Latin American operations (0.7) (2.6) Yell Publicidad at constant exchange rate (a) 8.1 56.1 592.6 Exchange impact (a) - 0.1 Total Yell Publicidad 8.1 56.2 593.8 Group adjusted EBITDA 269.2 319.8 18.8 (a) Constant exchange rate states current period results at the sameexchange rate as that used to translate the results for the previous period.Exchange impact is the difference between the results reported at a constantexchange rate and the results using current period exchange rates. 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 EBITDA (a) Six months ended 30 September 2006 2007 ChangeYell UK operations £m £m %Operating profit 126.8 129.7Depreciation and amortisation in admin expenses 6.5 8.2Yell UK operations EBITDA 133.3 137.9 3.5Yell UK operations EBITDA margin 37.9% 38.1% Yellow Book USAOperating profit 101.8 113.6Depreciation and amortisation in admin expenses 26.0 23.9Yellow Book USA EBITDA 127.8 137.5 7.6Exceptional items - (11.8)Exchange impact (b) - 9.8Yellow Book USA adjusted EBITDA at constant exchange rate 127.8 135.5 6.0(b)Exchange impact (b) - (9.8)Yellow Book USA adjusted EBITDA 127.8 125.7 (1.6)Yellow Book USA adjusted EBITDA margin 28.1% 28.6% Yell PublicidadSpanish operations (10.3) 17.1Latin American operations (4.5) (8.3)Yell Publicidad operating (loss) profit (14.8) 8.8Spanish depreciation and amortisation 19.1 41.6Latin American depreciation and amortisation 3.8 5.8Depreciation and amortisation in admin expenses 22.9 47.4Yell Publicidad EBITDA 8.1 56.2Exchange impact (b) - (0.1)Yell Publicidad EBITDA at constant exchange rate (b) 8.1 56.1 592.6Exchange impact (b) - 0.1Yell Publicidad EBITDA 8.1 56.2 593.8Yell Publicidad EBITDA margin 19.2% 34.4% GroupOperating profit 213.8 252.1Depreciation and amortisation in admin expenses 55.4 79.5Group EBITDA 269.2 331.6 23.2Exceptional items - (11.8)Exchange impact (b) - 9.7Group adjusted EBITDA at constant exchange rate(b) 269.2 329.5 22.4Exchange impact (b) - (9.7)Group adjusted EBITDA 269.2 319.8 18.8Group adjusted EBITDA margin 31.7% 33.1% (a) EBITDA is one of the key financial measures that we use to assessgrowth and operational efficiencies in the business. (b) Constant exchange rate states current period results at the sameexchange rate as that used to translate the results for the previous period.Exchange impact is the difference between the results reported at a constantexchange rate and the results reported using current period exchange rates. We do not allocate interest or taxation charges by product or geographicsegment. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 4. Taxation The effective tax rate for the period is different from the standard rate ofcorporation tax in the United Kingdom (30%) as explained below: Six months ended 30 September 2006 2007 £m £mProfit before tax multiplied by the standard rate ofcorporation tax in the United Kingdom (30%) 26.2 36.5Effects of:Differing tax rates on overseas earnings 4.0 5.1Other (0.5) (3.9)Tax charge on profit before tax 29.7 37.7 Current tax 25.2 33.0Deferred tax 4.5 4.7Tax charge on profit before tax 29.7 37.7 5. Interim Dividend The interim dividend of 6.3 pence per share (2006 - 5.7 pence per share) ispayable on 14 December 2007 to shareholders registered at the close of businesson 16 November 2007 and is estimated to amount to £49.1 million (2006 - £44.2million). YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 6. Earnings per share The calculation of basic and diluted earnings per share is based on the profitfor the relevant financial period and on the weighted average share capitalduring the period. Actual Amortisation of acquired Exceptional intangibles items AdjustedSix months ended 30 September 2007EBITDA (£m) 331.6 (11.8) - 319.8Depreciation and amortisation (£m) (79.5) - 57.3 (22.2)Net finance costs (£m) (130.5) - - (130.5)Group profit before tax (£m) 121.6 (11.8) 57.3 167.1Taxation (£m) (37.7) 4.8 (19.0) (51.9)Group profit after tax (£m) 83.9 (7.0) 38.3 115.2Minority interests (£m) (0.1) - (0.4) (0.5)Group profit after tax and minority 83.8 (7.0) 37.9 114.7interests (£m) Weighted average number of issued ordinary 779.3 779.3shares (millions)Basic earnings per share (pence) 10.8 14.7Effect of share options (pence) (0.1) (0.1)Diluted earnings per share (pence) 10.7 14.6 Six months ended 30 September 2006EBITDA (£m) 269.2 - - 269.2Depreciation and amortisation (£m) (55.4) - 38.7 (16.7)Net finance costs (£m) (126.6) 36.3 - (90.3)Group profit before tax (£m) 87.2 36.3 38.7 162.2Taxation (£m) (29.7) (11.4) (14.0) (55.1)Group profit after tax (£m) 57.5 24.9 24.7 107.1Minority interests (£m) 0.6 - (0.8) (0.2)Group profit after tax and minority 58.1 106.9interests (£m) 24.9 23.9Weighted average number of issued ordinary 763.7 763.7shares (millions)Basic earnings per share (pence) 7.6 14.0Effect of share options (pence) (0.1) (0.2)Diluted earnings per share (pence) 7.5 13.8 Exceptional administrative credits of £11.8 million in the six months ended 30September 2007 relate to the release of a portion of the legal costs accrued in2005, but no longer required, for the class action suit in the US. Exceptionaltax of £4.8 million represents the tax effect on the £11.8 million exceptionalcredit and an additional charge of £0.4 million related to changes in UK taxrates. The exceptional interest costs for the six months ended 30 September2006 comprised £13.8 million for accelerated amortisation of deferred financingfees and £22.5 million premium on the redemption of our Notes, which wererefinanced prior to the Yell Publicidad acquisition. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 7. Goodwill Six months ended 30 September 2006 2007 £m £mOpening net book value at 1 April 2006 and 2007, respectively 2,486.0 3,645.3Acquisitions 1,321.5 43.8Currency movements (115.9) (17.1)Net book value at period end 3,691.6 3,672.0 8. Other non-current intangible assets Six months ended 30 September 2006 2007 £m £mOpening net book value at 1 April 2006 and 2007, respectively 200.3 1,229.5Acquisitions 1,139.6 19.4Additions 5.2 6.3Disposals and write-offs - (0.5)Amortisation (34.6) (63.4)Currency movements (23.9) 21.4Net book value at period end 1,286.6 1,212.7 9. Property, plant and equipment Six months ended 30 September 2006 2007 £m £mOpening net book value at 1 April 2006 and 2007, respectively 53.8 94.5Acquisitions 39.5 0.3Additions 11.3 9.6Disposals and write-offs (1.4) (1.4)Depreciation (12.0) (13.1)Currency movements (2.4) (0.8)Net book value at period end 88.8 89.1 10. Deferred tax assets and liabilities The elements of deferred tax assets recognised in the accounts were as follows: At At 31 March 30 September 2007 2007 £m £mTax effect of timing differences due to:Bad debt provisions 44.8 40.8Defined benefit pension scheme 17.9 7.1Other allowances and accrued expenses 20.1 18.1Recognised tax net operating losses 18.7 17.2Share options 16.4 9.1Depreciation 7.3 8.7Financial instruments 4.9 5.4Post-acquisition alignment of accounting policies 4.1 3.8Other 9.0 4.7Recognised deferred tax assets 143.2 114.9 The elements of deferred tax liabilities recognised in the accounts were asfollows: At At 31 March 30 September 2007 2007 £m £mTax effect of timing differences due to:Intangible assets 415.8 424.3Directories in development 31.5 32.6Deferred selling costs 14.0 13.5Post-acquisition alignment of accounting policies 11.4 2.4Financial instruments 9.1 11.3Other 15.9 18.5Recognised deferred tax liabilities 497.7 502.6 YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 11. Trade and other receivables At At 31 March 30 September 2007 2007 £m £mNet trade receivables (a) 830.7 822.7Other receivables 62.0 62.3Accrued income (a) 42.0 25.6Prepayments 12.7 12.4Total trade and other receivables 947.4 923.0 (a) The Group's trade receivables and accrued income are statedafter deducting a provision of £197.4 million at 30 September 2007 (31 March2007 - £208.6 million). 12. Loans and other borrowings and net debt At At 31 March 30 September 2007 (a) 2007 (a) £m £mAmounts falling due within one yearTerm loans under senior credit facilities 121.7 158.7Revolving loan under credit facilities 97.2 110.1Net obligations under finance leases and other shortterm borrowings 5.4 24.1Total amounts falling due within one year 224.3 292.9Amounts falling due after more than one year Term loans under senior credit facilities 3,505.0 3,444.3Net loans and other borrowings 3,729.3 3,737.2Cash and cash equivalents (66.7) (47.7)Net debt at end of year 3,662.6 3,689.5 (a) Balances are shown net of deferred financing fees of £40.5million at 30 September 2007 (31 March 2007 - £46.8 million). YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 13. Trade and other payables At At 31 March 30 September 2007 2007Due within one year £m £mTrade payables 88.4 63.3Other taxation and social security 18.2 18.1Accruals and other payables 237.5 201.4Deferred income 289.7 346.8Trade and other payables falling due within one year 633.8 629.6 Amounts falling due after more than one yearTrade payables 11.1 12.4Accruals and other payables 1.1 -Deferred income 0.8 0.2Trade and other payables falling due after more than one year 13.0 12.6Total trade and other payables 646.8 642.2 14. Retirement benefit obligations Six months ended 30 September 2006 2007 £m £mObligations at 1 April 2006 and 2007, respectively 39.9 27.2Net actuarial gain ondefined benefit pension schemes (4.6) (25.9)Charges in excess of contributions 0.1 0.2Net decrease in retirement benefit obligations (4.5) (25.7)Retirement benefit obligation at period end 35.4 1.5 (a) The gains in the periods ended 30 September 2006 and 2007 were largely theresult of changes in real interest rates which are determined by reference tocorporate and government bond rates at the balance sheet date. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 15. Statement of changes in equity Attributable to equity shareholders Share Other Retained Minority capital reserves earnings interest Total £m £m £m £m £mBalance at 31 March 2007 1,201.7 (218.0) 454.8 10.1 1,448.6Profit on ordinary activities - - 83.8 83.9after taxation 0.1Net gain recognised - 40.2 - 40.5directly in equity 0.3Total recognised income - 40.2 83.8 124.4for the period 0.4Value of services provided in - 7.4 - 7.4return for share based payments -Ordinary share capital issued to 0.2 - - 0.2employees -Own shares purchased by (1.5) - - (1.5)ESOP trust (a) -Purchase of minority interest - (17.1) - (10.5) (27.6)sharesDividends paid - - (88.3) - (88.3) (1.3) 30.5 (4.5) (10.1) 14.6Balance at 30 September 2007 1,200.4 (187.5) 450.3 - 1,463.2 (a) Purchase of shares held in an ESOP trust for employees. Cumulative foreign currency losses attributable to equity shareholders at 30September 2007 are £110.6 million (31 March 2007 - £139.4 million). 16. Capital Expenditure Capital expenditure on property, plant and equipment in the six months ended 30September 2006 and 2007 was £17.1 million and £21.2 million, respectively.Proceeds on the sale of property, plant and equipment were £nil in the sameperiods. Capital expenditure committed at 30 September 2006 and 2007 was £5.4 million and£4.9 million, respectively. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 17. Acquisitions Six months ended 30 September 2007 In the six months to 30 September 2007, the Yell Group paid £62.1 million for anumber of acquisitions, the most significant of which were Publicom in Argentinaand McGregor in the US. The purchase prices were allocated to the acquiredassets and liabilities as follows: Acquiree's Provisional carrying amount fair value Provisional adjustments fair value £m £m £mNon current assetsOther intangible assets 2.1 17.3 19.4Property, plant and equipment 0.2 0.1 0.3Deferred tax assets 1.2 - 1.2Total non current assets 3.5 17.4 20.9Current assetsDirectories in development 1.6 1.2 2.8Trade and other receivables 3.7 1.3 5.0Cash and cash equivalents 0.2 - 0.2Total current assets 5.5 2.5 8.0Current liabilitiesCorporation tax (0.6) - (0.6)Trade and other payables (5.0) (0.6) (5.6)Total current liabilities (5.6) (0.6) (6.2)Total assets less current liabilities 3.4 19.3 22.7Non-current liabilitiesDeferred tax liabilities - (4.4) (4.4)Identifiable net assets 3.4 14.9 18.3Goodwill 43.8Total cost 62.1 Goodwill of £43.8 million is attributable to the expected future synergies, theworkforces acquired, and expected future growth of the businesses. On 26 September 2007, we reached agreement with the minority shareholders toacquire the remaining 1.28% of the share capital of Yell Publicidad held byminority shareholders for €40.0 million (£27.6 million), including expenses of€0.6 million (£0.4 million), of which we paid €32.5 million (£22.4 million) on28 September 2007. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 17. Acquisitions (continued) Six months ended 30 September 2006 In the six months to 30 September 2006, the Yell Group paid £2,016.9 million foracquisitions, the largest of which was that of 94.25% of the share capital ofTelefonica Publicidad e Informacion, S.A. on 31 July 2006, for €2,939.8 million(£2,010.3 million). We also made other acquisitions in the half year whichcomprised a number of directories businesses in the US, for cash of $12.2million (£6.6 million). A reconciliation of cash paid on acquisitions, including deferred payments forthe acquisition of TransWestern Publishing (TWP), payments in relation to thepurchase of minority interest shares and capital duties paid, to the cash flowon page 13 is as follows: Six months ended 30 September 2006 2007 £m £mCosts of acquisitions in the period 2,016.9 62.1Less cash acquired (16.8) (0.2)Purchase of minority interest shares - 27.6Deferred payment for minority interest shares - (5.2)Deferred payment for TWP 6.2 0.4Capital duties paid 13.0 -Net cash outflow in period 2,019.3 84.7 18. Litigation A lawsuit filed by Verizon was settled in October 2004. Yellow Book USA waslater served with complaints filed as class actions in five US states and theDistrict of Columbia. In these actions, the plaintiffs alleged violations ofconsumer protection legislation and placed reliance on findings of the court inthe settled Verizon suit. These class actions were consolidated into a singleclass action before a New Jersey state court. In the year ended 31 March 2005,Yell Group accrued $45 million as a prudent estimate of the likely costs arisingfrom the class action. On 26 August 2005, the New Jersey court approved acomprehensive national settlement, with no admission of liability. However,several appeals were subsequently lodged against the approved settlement, themost significant of which were resolved as of 30 June 2007. With resolution ofthese appeals, Yellow Book USA was able to reassess the likely costs of thesettlement, and Yell Group reversed $23.6 million (£11.8 million) of theoriginally accrued settlement obligation as an exceptional credit through theincome statement in the first quarter of the 2008 financial year. At 30September 2007, we have remaining $20.1 million of accrued settlement obligationrepresenting our best estimate of the amounts to be settled after resolution ofall appeals. INDEPENDENT REVIEW REPORT TO YELL GROUP PLC Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007, which comprises the income statement, statement of recognisedincome and expense, balance sheet, cash flow statement and related notes. Wehave read the other information contained in the half-yearly financial reportand considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the Disclosure and Transparency Rules of theFinancial Services Authority and for no other purpose. We do not, in producingthis report, accept or assume responsibility for any other purpose or to anyother person to whom this report is shown or into whose hands it may come savewhere expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. PricewaterhouseCoopers LLPChartered Accountants5 November 2007London STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors confirm that to the best of their knowledge the condensed set offinancial statements in the half-yearly financial report has been prepared inaccordance with International Accounting Standard 34, Interim FinancialReporting, as adopted by the European Union, and that the interim managementreport herein includes a fair review of the information required by DTR 4.2.7and DTR 4.2.8 of the Disclosure and Transparency Rules. By order of the Board (Signature) Howard Rubenstein 5 November 2007 Company Secretary (Signature) John Davis 5 November 2007 Chief Financial Officer On behalf of the Board: Bob Scott, Chairman John Condron, Chief Executive Officer John Davis, Chief Financial Officer John Coghlan Joachim Eberhardt Lyndon Lea Lord Powell of Bayswater Richard Hooper Tim Bunting FINANCIAL CALENDAR Financial year ending 31 March 2008 Interim dividend record date 16 November 2007 Interim dividend payment date 14 December 2007 Third quarter results 7 February 2008 Full year results 20 May 2008 Shareholder Contact Details Website for viewing information about your holding:www.shareview.co.uk Lloyds TSB Registrars' telephone line for shareholders:08706 094 537 Lloyds TSB Registrars' telephone line for employee shareholders:08706 094 538 Text phone for the hard of hearing:08706 003 950 Lloyds TSB RegistrarsThe CausewayWorthingWest SussexBN99 6DA Yell Group plc Yell Group plcQueens WalkReadingBerkshire RG1 7PT www.yellgroup.com NOTES TO EDITORS Yell Group Yell is a leading international directories business operating in classifiedadvertising markets in the UK, US, Spain and certain countries in Latin Americathrough printed, online and telephone-based media. In the year ended 31 March 2007, Yell published 113 directories in the UnitedKingdom, 969 in the United States, and 92 Paginas Amarillas directories inSpain. In the United Kingdom, where it is a leading player in the classifiedadvertising market, it served 450,000 unique advertisers. In the United States,where it is the leading independent directories business, it served 692,000unique advertisers. In Spain, the Paginas Amarillas directories served 191,000unique advertisers. Yell's principal brands include: in the United Kingdom, Yellow Pages, BusinessPages, Yell.com and Yellow Pages 118 24 7; in the United States, Yellow Book andYellowbook.com; and in Spain, Paginas Amarillas and PaginasAmarillas.es. Allthese brands are trade marks. This information is provided by RNS The company news service from the London Stock Exchange