HIBU.L Regulatory News (HIBU)

24 Jul 2007 07:00

Yell Group plc24 July 2007 Yell Group plc financial results for the three months ended 30 June 2007 On track to meet year end expectations • Revenue up 18.6% to £441.1 million; up 22.6% at constant exchange rate• Adjusted EBITDA up 21.1% to £143.9 million; up 24.6% at constant exchange rate• Adjusted profit after tax and minority interests down 10.2% to £46.8 million• Adjusted diluted earnings per share down 11.8% to 6.0 pence; underlying up 12.5% at constant exchange rate• Operating cash conversion 83.3% (2006 - 70.2%) Three months ended 30 June Statutory results (unaudited) 2006 2007 Change £m £m % Revenue 371.9 441.1 18.6 EBITDA * 118.8 155.7 31.1 Profit after tax and minority interests 21.3 34.3 61.0 Cash generated from operations 90.6 131.0 44.6 Diluted earnings per share (pence) 2.7 4.4 63.0 * 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 a vigorous start to the year and integration is progressing wellin Spain. Our online businesses are delivering very good growth in both the UKand US. "While trading in the first quarter has been demanding, particularly in the US,we are confident looking forward that our actions to address competition in theUS market are beginning to take effect for directories publishing in the secondhalf of the year. In the UK, we are putting plans in place to take fulladvantage of the more even-handed regulatory environment in the next financialyear. In Spain integration is continuing apace with our investment to generateusage and drive revenue growth." John Davis, Chief Financial Officer, said: "Yell's first quarter performance gives us confidence that we are on track tomeet full year guidance. As we guided, the first quarter's lower earningsreflect the consolidation for the first time of Yell Publicidad's seasonally lowfirst quarter revenue, the planned rescheduling of directories in the US fromthe first quarter to later quarters and the weaker US dollar. Without thesefactors, underlying earnings per share growth was 12.5%. Cash flow remainsstrong with conversion in line with guidance." Enquiries Yell - Investors Jill SherrattTel +44 (0)118 950 6984Mobile +44 (0)7764 879808 Yell - MediaJon 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 such forward-looking statements are not guarantees of future performance and involve risksand uncertainties, and that actual results may differ materially from those inthe forward-looking statements as a result of various factors. You should readthe section entitled "Risk Management" in Yell Group plc's 31 March 2007 annualreport for a discussion of some of these factors. We undertake no obligationpublicly to update or revise any forward-looking statements, except as may berequired by law. A copy of this release can be accessed at: www.yellgroup.com/announcements YELL GROUP PLC SUMMARY FINANCIAL RESULTS Three months Change at ended 30 June constant exchangeUnaudited 2006 2007 Change rate (a) £m £m % %Revenue (b) 371.9 441.1 18.6 22.6Adjusted EBITDA (b) (c) 118.8 143.9 21.1 24.6 Operating cash flow (b) (d) 83.4 119.9 43.8 50.4Cash conversion (b) (e) 70.2% 83.3% Adjusted profit after tax and minority 52.1 46.8 (10.2)interests(f) Adjusted diluted earnings per share (pence) 6.8 6.0 (11.8)(f) (a) Change at constant exchange rate states the change in current period compared with the previous period as if the current period results were translated at the same exchange rate as that used to translate the results for the previous period. (b) Revenue, adjusted EBITDA, operating cash flow and cash conversion are the key financial measures that we use to assess the growth in the business and operational efficiencies. (c) Adjusted EBITDA in the three months ended 30 June 2007 is stated before exceptional credits of £11.8 million arising from the release of some of the class action accrual in the US. EBITDA was not adjusted in the three months ended 30 June 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 share are stated before exceptional items and amortisation of acquired intangibles, all net of related tax. A reconciliation to the related statutory figures is presented in note 5 to the financial information. REVIEW OF OPERATING PERFORMANCE Group Group revenue increased 18.6% to £441.1 million, or 22.6% at a constant exchangerate, from £371.9 million last year. Group organic growth, which excludes therevenue from acquired directories publishing for the first time and the effectsof rescheduling directories into later periods, was 3.9% at a constant exchangerate. Group adjusted EBITDA increased by 21.1% to £143.9 million, or 24.6% at aconstant exchange rate. The Group adjusted EBITDA margin of 32.6% is up from31.9% in the same period last year. Adjusted EBITDA in the three months ended30 June 2007 excludes an exceptional credit from releasing £11.8 million ($23.6million) of the £23.8 million ($45.0 million) costs we prudently accrued inMarch 2005 for a class action settlement in the US. Operating cash flow increased 43.8% to £119.9 million, or 50.4% at a constantexchange rate, resulting in conversion of 83.3% of adjusted EBITDA to cash.Free cash flow was low at £37.3 million due, as expected, to the lower EBITDA inthe first quarter. Yell UK operations UK revenue increased 4.1% to £175.1 million driven entirely by a 53.5% increasein revenue by Yell.com, which more than offset a 3.4% decline in print. Revenue from UK printed directories was 3.4% lower at £137.7 million, as thetotal number of unique print advertisers declined by 4.6% to 125,000, largely asa result of competition, with retention stable at 74%. Average revenue perunique advertiser was 1.3% higher than the same period in the prior year at£1,102. The effect of our regulatory undertaking of RPI-6% was to reduce YellowPages rate card prices by an average of 3.3% during the three months. Yell.com's revenue grew 53.5% to £31.0 million, driven by a 36.0% increase inrecognised revenue per average searchable advertiser achieved mainly throughup-sell to higher value products. Searchable advertisers at 30 June grew 13.4%to 203,000. Unique users grew 8.3% to 6.5 million in the month of June comparedwith the same period last year. Adjusted EBITDA grew 2.0% to £61.3 million, reflecting a margin of 35.0%,broadly in line with 35.7% in the same period last year. We reiterate full year guidance in the UK of 3% revenue growth and a stableEBITDA margin of around 35%. Yellow Book USA operations US revenue fell 8.6% to £186.2 million, or 1.4% at a constant exchange rate inline with expectations. Growth was 4.1% before the 5.5% reduction in revenuefrom rescheduling directories from the first quarter into later quarters as partof integration of acquired directories. The average exchange rate wasapproximately $1.99: £1.00 against $1.83: £1.00 in the same period last year. As expected, net organic revenue growth contributed 3.7% to the 4.1% revenuegrowth before rescheduling. Organic revenue growth comprised 1.8% fromdirectory launches, 2.6% from internet revenue and 2.2% from print same marketgrowth, reduced by 2.9% from discontinued, acquired directories that previouslyoverlapped existing Yellow Book directories. Revenue from directories publishing for the first time since acquisitioncontributed $1.6 million or 0.4% to revenue growth. Yellow Book unique advertisers in printed directories decreased by 7.8% to165,000, reflecting directories that have been rescheduled to publish later inthe year and competition. Average revenue per unique advertiser was slightly upat $2,098 and retention was slightly down at 72%. Yellowbook.com revenue grew 70.0% to $23.8 million driven by an 80.0% increasein revenue per average searchable advertiser from $35 to $63 as prices wereincreased to reflect greater usage. Unique visitor numbers grew from 2.9million to 6.2 million in June 2007. The 8.2% decline in searchable advertisersreflected ongoing improvements in the ways in which we capture customerinformation and the effect of higher prices. Looking forward, we believe that, as previously indicated, the second quarterdirectories are those most significantly affected by the increased competitionin the US. Growth in the first half will reflect this and a diluted effect fromthe discontinued directories discussed above. We expect that the range of stepswe have taken to become more competitive will begin to take effect during thesecond half of the financial year. These steps include improving our products,value offerings, sales training, sales incentivisation and focus on customers. We reiterate full year guidance of 3% organic growth. In addition, we expectaround $30 million revenue from the publication of directories acquired. Adjusted EBITDA fell 2.7% to £57.1 million, but grew 4.3% at a constant exchangerate. The adjusted EBITDA margin in the three months increased from 28.8% to30.7% as directories developed. The increased costs of the investment toaddress the competition will be reflected when the revenue is recognised laterin the year, which will result in an adjusted EBITDA margin of around 29% inline with our guidance. Yell Publicidad operations As expected, revenue for the three months was £79.8 million, representing around1/6th of guided full year revenue due to the seasonally low publicationschedule. The average exchange rate was approximately €1.47: £1.00 during theperiod. Printed directory revenue in Spain grew 3.5% on a like-for-like basis. Overallorganic growth was 5%, reflecting the faster growth rate that is typical offirst quarter directories. This revenue reflects sales made before the fullbenefits of the integration of Yell Publicidad into Yell Group took effect. Adjusted EBITDA was £25.5 million and the margin was 32.0%, lower than full yearguidance as expected due to seasonally low first quarter revenue. We reiterate full year guidance of 5% revenue growth and 37% EBITDA margins forYell Publicidad with both revenue and EBITDA weighted to the second half.CASH FLOW AND NET DEBT Operating cash flow increased 43.8% to £119.9 million, or 50.4% at a constantexchange rate. The Group converted 83.3% of adjusted EBITDA to cash, ascompared with 70.2% last year. Three months ended 30 June 2006 2007Unaudited £m £m Adjusted EBITDA 118.8 143.9 Exceptional items in administrative expenses - 11.8 Working capital movements and non-cash charges (28.2) (24.7) Cash generated from operations (see page 13) 90.6 131.0 Cash payments of exceptional items - 1.4Purchase of property, plant and equipment (7.2) (12.5)Operating cash flow 83.4 119.9 Adjusted EBITDA 118.8 143.9 Cash conversion 70.2% 83.3% Net debt at 30 June 2007 of £3,649.6 million was 5.1 times adjusted EBITDA on apro forma basis over the last twelve months, compared with 5.2 times at 31 March2007. The movement in net debt for the three months ended 30 June 2007 arose asfollows: Net debtUnaudited £m At 31 March 2007 3,662.6Operating cash flow (119.9)Cash payments of exceptional items 1.4Interest and tax payments 81.2Purchase of subsidiary undertakings, net of cash acquired 57.5Net cash inflow on disposal of subsidiary (1.1)Purchase of own shares 1.5Proceeds of shares issued (0.2)Finance costs increasing debt 3.9Currency movements (37.3)At 30 June 2007 3,649.6 TAXATION Adjusted taxation of £20.9 million represents an effective rate of 30.8% onadjusted profit before tax of £67.9 million, in line with guidance. Thiscompared with 33.4% in the same period last year. NET RESULTS AND EXCEPTIONAL ITEMS Adjusted profit after tax of £46.8 million was down 10.2% (after £0.2 millionattributable to minority interests in Yell Publicidad earnings). Adjusted diluted earnings per share were down 11.8% to 6.0 pence (see note 5 tothe financial information on page 18 for a reconciliation between statutory andadjusted figures). As expected, the lower first quarter earnings reflected theconsolidation for the first time of Yell Publicidad's seasonally low firstquarter revenue; the planned rescheduling of directories in the US from thefirst quarter to later quarters; and the weaker US dollar. Underlying adjusteddiluted earnings per share excluding the affect of these factors grew 12.5% at aconstant exchange rate. Adjusted results exclude a non-recurring exceptional credit of £11.8 millionbefore tax, or £7.4 million after tax, that arose from releasing £11.8 million($23.6 million) of the £23.8 million ($45.0 million) costs we prudently accruedin March 2005 for a class action settlement in the US. An additionalexceptional tax charge of £0.3 million relates to the change in UK tax rates. KEY PERFORMANCE INDICATORSUnaudited Three months ended 30 June 2006 2007 ChangeYell UK %Printed directoriesRevenue (£million) 142.5 137.7 (3.4)Unique advertisers (thousands) (a) 131 125 (4.6)Directory editions published 29 29Unique advertiser retention rate (%) (b) 74 74Revenue per unique advertiser (£) 1,088 1,102 1.3 InternetRevenue (£million) 20.2 31.0 53.5Searchable advertisers at 30 June (thousands) (c) 179 203 13.4Searches for June (millions) 29 29 -Unique users for June (millions) (d) 6.0 6.5 8.3Revenue per average searchable advertiser (£) (e) 114 155 36.0 Yellow Book USAPrinted directoriesRevenue ($million) 361.0 346.1 (4.1)Unique advertisers (thousands) (a) (f) 179 165 (7.8)Directory editions published 181 169Unique advertiser retention rate (%) (b) (g) 73 72Revenue per unique advertiser ($) 2,017 2,098 4.0 InternetRevenue ($million) 14.0 23.8 70.0Searchable advertisers at 30 June (thousands)(c)(f) 404 371 (8.2)Unique visitors for June (millions) (h) 2.9 6.2 113.8Revenue per average searchable advertiser ($) (e) 35 63 80.0 Yell Publicidad (Spain) (i)Paginas Amarillas classified directoriesRevenue (•million) 53.0Unique advertisers (thousands) (a) 80Directory editions published 27Unique advertiser retention rate (%) (b) 86Revenue per unique advertiser (•) 663 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) Number of unique advertisers in printed directories that were recognised for revenue purposes and have been billed. Unique advertisers are counted once only, regardless of the number of advertisements they purchase or the number of directories in which they advertise. (b) The proportion of unique advertisers that have renewed their advertising from the preceding publication. (c) Unique customers with a live contract at month end. These figures refer only to those advertisers for whom users can search. They exclude advertisers who purchase only products such as banners and domain names. (d) The number of unique users who have visited Yell.com once or more often in the indicated month. Unique users are measured according to independently established industry standard measures. (e) Yell.com revenue per average searchable advertiser is calculated by dividing the recognised revenue in the three month period by the average number of searchable advertisers in that period. (Yell.com three months ended 30 June 2007 - 199,000; three months ended 30 June 2006 - 177,000). Yellowbook.com revenue per average searchable advertiser is calculated by dividing the recognised revenue in the three month period by the average number of searchable advertisers in that period. (Yellowbook.com three months ended 30 June 2007 - 376,000; three months ended 30 June 2006 - 398,000). (f) 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 an overall elimination of duplicate records of unique advertisers. We have not adjusted the previously reported figure for the three months ended 30 June 2006 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. (g) Retention in the US is based on unique directory advertisers. (h) The number of individuals who have visited Yellowbook.com at least once in the month shown. In the year ended 31 March 2007 we changed our data provider; we have not adjusted the previously reported figure for the three months ended 30 June 2006. (i) Figures given for Yell Publicidad in Spain refer only to the period since acquisition. They are not comparable to figures previously reported by Telefonica Publicidad e Informacion S.A. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED INCOME STATEMENT Three months ended 30 June Notes 2006 2007 £m £m Revenue 2 371.9 441.1 Cost of sales (167.3) (179.5) Gross profit 204.6 261.6 Distribution costs (11.1) (16.3) Administrative expenses (91.0) (130.6) Operating profit 3 102.5 114.7 Finance costs (73.7) (65.9) Finance income 3.6 0.8 Net finance costs (70.1) (65.1) Profit before taxation 32.4 49.6 Taxation 4 (11.1) (15.3) Profit for the financial period 21.3 34.3 Attributable to: Minority interests - - Equity shareholders of the group 21.3 34.3 21.3 34.3 (in pence) (in pence) Basic earnings per share 5 2.8 4.4 Diluted earnings per share 5 2.7 4.4 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Three months ended 30 June Notes 2006 2007 £m £m Profit for the financial period 21.3 34.3 (4.2) Exchange loss on translation of foreign operations (38.2) Actuarial gains on defined benefit pension schemes 10 13.3 31.8 Gain in fair value of financial 6.2 42.8 instruments used as hedges Tax effect of net gains not (5.8) (22.6) recognised in the income statement Net decrease in tax benefit (2.2) (7.6) on share based payments Net (expense) income not (26.7) 40.2 recognised in the income statement Total recognised (expense) income for the period (5.4) 74.5 Attributable to: Minority interests - (0.1) Equity shareholders of the group (5.4) 74.6 (5.4) 74.5 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 June Notes 2007 2007 £m £m Non-current assets Goodwill 3,645.3 3,648.8 Other intangible assets 1,229.5 1,208.8 Property, plant and equipment 94.5 89.9 Deferred tax assets 6 143.2 112.3 Retirement benefit surplus 10 - 4.9 Investment and other assets 8.2 8.1 Total non-current assets 5,120.7 5,072.8 Current assets Inventories 12.0 19.9 Directories in development 257.2 278.8 Trade and other receivables 7 947.4 917.1 Cash and cash equivalents 66.7 53.3 Total current assets 1,283.3 1,269.1 Current liabilities Loans and other borrowings 8 (224.3) (156.8) UK corporation and foreign income tax (54.4) (28.8) Trade and other payables 9 (633.8) (563.9) Total current liabilities (912.5) (749.5) Net current assets 370.8 519.6 Non-current liabilities Loans and other borrowings 8 (3,505.0) (3,546.1) Deferred tax liabilities 6 (497.7) (507.8) Retirement benefit obligations 10 (27.2) - Trade and other payables 9 (13.0) (13.1) Total non-current liabilities (4,042.9) (4,067.0) Net assets 1,448.6 1,525.4 Capital and reserves attributable to equity shareholders Share capital 11 1,201.7 1,200.4 Other reserves 11 (218.0) (214.4) Retained earnings 11 454.8 529.4 1,438.5 1,515.4 Minority interests 11 10.1 10.0 Total equity 1,448.6 1,525.4 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED CASH FLOW STATEMENT Notes Three months ended 30 June 2006 2007 £m £m Net cash inflow from operating activities Cash generated from operations 90.6 131.0 Interest paid (85.6) (63.0) Interest received 3.6 0.8 Redemption premium paid (22.5) - Net income tax paid (10.7) (19.0) Net cash (outflow) inflow from operating activities (24.6) 49.8 Cash flows from investing activities Purchase of property, plant and equipment 12 (7.2) (12.5) Purchase of subsidiary (9.6) (57.5) undertakings, net of cash acquired 13 Net cash inflow on disposal of - 1.1 subsidiary Net cash outflow from investing activities (16.8) (68.9) Cash flows from financing activities Proceeds from issuance of ordinary shares 344.8 0.2 Purchase of own shares (0.3) (1.5) Net payments on revolving credit facility (241.1) (88.2) Acquisition of new loans 2,025.2 96.4 Repayment of borrowings (1,656.3) (0.2) Financing fees paid (29.5) (0.4) Net cash inflow from financing activities 442.8 6.3 Net increase (decrease) in cash and cash equivalents 401.4 (12.8) Cash and cash equivalents at beginning of the period 28.5 66.7 Exchange losses on cash and cash equivalents (1.0) (0.6) Cash and cash equivalents at end of the period 428.9 53.3 Profit for the period 21.3 34.3 Adjustments for: Tax 11.1 15.3 Finance income (3.6) (0.8) Finance costs 73.7 65.9 Depreciation of property, plant and equipment and 6.8 10.9 amortisation of software costs Amortisation of other acquired intangible assets 9.5 30.1 Changes in working capital: Inventories and directories in development (28.3) (32.1) Trade and other receivables 44.1 65.8 Trade and other payables (47.3) (62.0) Share based payments and other 3.3 3.6 Cash generated from operations 90.6 131.0 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 unaudited financial information for the three months ended 30 June 2007 hasbeen prepared in accordance with International Financial Reporting Standards asadopted by the European Union ("IFRSs") as set out in our annual report for theyear ended 31 March 2007, and in accordance with the Listing Rules of theFinancial Services Authority. The unaudited information contained herein does not constitute statutoryfinancial statements within the meaning of section 240 of the Companies Act1985. The audit opinion on the statutory accounts for the year ended 31 March2007 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. This financial information should be read in conjunction with Yell's 2007 annualreport published in June 2007, which included the audited consolidated financialstatements of Yell Group plc and its subsidiaries for the year ended 31 March2007. 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. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 2. Revenue Three months ended 30 June Change 2006 2007 % £m £m Yell UK printed directories 142.5 137.7 (3.4) Other products and services 25.7 37.4 45.5 Total Yell UK revenue 168.2 175.1 4.1 Yellow Book USA revenue at constant exchange (1.4) rate (a) 203.7 200.9 Exchange impact (a) - (14.7) Total Yellow Book USA revenue 203.7 186.2 (8.6) Yell Publicidad revenue - 79.8 Group revenue 371.9 441.1 18.6 (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 management segment Three months Change ended 30 June 2006 2007 % £m £m Yell UK printed directories 49.8 47.1 (5.4) Other products and services 10.3 14.2 37.9 Total Yell UK 60.1 61.3 2.0 Yellow Book USA at constant exchange rate (a) 58.7 61.2 4.3 Exchange impact (a) - (4.1) Total Yellow Book USA 58.7 57.1 (2.7) Yell Publicidad - 25.5 Group adjusted EBITDA 118.8 143.9 21.1 (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) Three months ended 30 June 2006 2007 ChangeYell UK operations £m £m %Operating profit 57.0 57.1Depreciation and amortisation in admin expenses 3.1 4.2Yell UK operations EBITDA 60.1 61.3 2.0Yell UK operations EBITDA margin 35.7% 35.0% Yellow Book USAOperating profit 45.5 56.4Depreciation and amortisation in admin expenses 13.2 12.5Yellow Book USA EBITDA 58.7 68.9 17.4Exceptional items - (11.8)Exchange impact (b) - 4.1Yellow Book USA adjusted EBITDA at constant exchange 58.7 61.2 4.3rate (b)Exchange impact (b) - (4.1)Yellow Book USA adjusted EBITDA 58.7 57.1 (2.7)Yellow Book USA adjusted EBITDA margin 28.8% 30.7% Yell PublicidadOperating profit 1.2Depreciation and amortisation in admin expenses 24.3Yell Publicidad adjusted EBITDA 25.5Yell Publicidad adjusted EBITDA margin 32.0% GroupOperating profit 102.5 114.7Depreciation and amortisation in admin expenses 16.3 41.0Group EBITDA 118.8 155.7 31.1Exceptional items - (11.8)Exchange impact (b) - 4.1Group adjusted EBITDA at constant exchange rate(b) 118.8 148.0 24.6Exchange impact (b) - (4.1)Group adjusted EBITDA 118.8 143.9 21.1Group adjusted EBITDA margin 31.9% 32.6% (a) EBITDA is one of the key financial measures that we use to assess growth and operational efficiencies in the business. (b) Constant exchange rate states current period results at the same exchange rate as that used to translate the results for the previous period. Exchange impact is the difference between the results reported at a constant exchange 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: Three months ended 30 June 2006 2007 £m £mProfit before tax multiplied by the standard rate ofcorporation tax in the United Kingdom (30%) 9.7 14.9Effects of:Differing tax rates on overseas earnings 1.2 1.9Other 0.2 (1.5) Tax charge on profit before tax 11.1 15.3 Current tax 3.6 5.6Deferred tax 7.5 9.7 Tax charge on profit before tax 11.1 15.3 YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 5. 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 AdjustedThree months ended 30 June 2007EBITDA (£m) 155.7 (11.8) - 143.9Depreciation and amortisation (£m) (41.0) - 30.1 (10.9)Net finance costs (£m) (65.1) - - (65.1)Group profit before tax (£m) 49.6 (11.8) 30.1 67.9Taxation (£m) (15.3) 4.7 (10.3) (20.9)Group profit after tax (£m) 34.3 (7.1) 19.8 47.0Minority interests (£m) - - (0.2) (0.2)Group profit after tax and minority 34.3 46.8interests (£m) (7.1) 19.6Weighted average number of issued ordinary 779.3 779.3shares (millions)Basic earnings per share (pence) 4.4 6.0Effect of share options (pence) - -Diluted earnings per share (pence) 4.4 6.0 Three months ended 30 June 2006EBITDA (£m) 118.8 - - 118.8Depreciation and amortisation (£m) (16.3) - 9.5 (6.8)Net finance costs (£m) (70.1) 36.3 - (33.8)Group profit before tax (£m) 32.4 36.3 9.5 78.2Taxation (£m) (11.1) (11.4) (3.6) (26.1)Group profit after tax (£m) 21.3 24.9 5.9 52.1Weighted average number of issued ordinary 751.4 751.4shares (millions)Basic earnings per share (pence) 2.8 6.9Effect of share options (pence) (0.1) (0.1)Diluted earnings per share (pence) 2.7 6.8 Exceptional administrative credits of £11.8 million in the three months ended 30June 2007 relate to the release of a portion of the legal costs accrued in 2005,but no longer required, for the class action suit in the US. Exceptional tax of£4.7 million represents the tax effect on the £11.8 million exceptional creditand an additional charge of £0.3 million related to changes in UK tax rates.The exceptional interest costs for the three months ended 30 June 2006 comprised£13.8 million for accelerated amortisation of deferred financing fees and £22.5million premium on the redemption of our Notes, which were refinanced prior tothe Yell Publicidad acquisition. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 6. Deferred tax assets and liabilities The elements of deferred tax assets recognised in the accounts were as follows: At At 31 March 30 June 2007 2007 £m £mTax effect of timing differences due to:Bad debt provisions 44.8 43.0Defined benefit pension scheme 17.9 6.2Other allowances and accrued expenses 20.1 17.7Recognised tax net operating losses 18.7 17.3Share options 16.4 10.0Depreciation 7.3 4.4Financial instruments 4.9 0.6Post-acquisition alignment of accounting policies 4.1 3.5Other 9.0 9.6Recognised deferred tax assets 143.2 112.3 The elements of deferred tax liabilities recognised in the accounts were asfollows: At At 31 March 30 June 2007 2007 £m £mTax effect of timing differences due to:Intangible assets 415.8 413.4Directories in development 31.5 32.3Deferred selling costs 14.0 13.7Post-acquisition alignment of accounting policies 11.4 11.9Financial instruments 9.1 18.3Other 15.9 18.2Recognised deferred tax liabilities 497.7 507.8 YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 7. Trade and other receivables At At 31 March 30 June 2007 2007 £m £mNet trade receivables (a) 830.7 783.0Other receivables 62.0 86.2Accrued income (a) 42.0 32.6Prepayments 12.7 15.3Total trade and other receivables 947.4 917.1 (a) The Group's trade receivables and accrued income are stated after deducting a provision of £199.7 million at 30 June 2007 (31 March 2007 - £208.6 million). 8. Loans and other borrowings and net debt At At 31 March 30 June 2007 (a) 2007 (a) £m £mAmounts falling due within one yearTerm loans under senior credit facilities 121.7 121.7Revolving loan under credit facilities 97.2 9.0Net obligations under finance leases and other shortterm borrowings 5.4 26.1 Total amounts falling due within one year 224.3 156.8Amounts falling due after more than one year Term loans under senior credit facilities 3,505.0 3,546.1Total amounts falling due after more than one year 3,505.0 3,546.1 Net loans and other borrowings 3,729.3 3,702.9Cash and cash equivalents (66.7) (53.3) Net debt at end of year 3,662.6 3,649.6 (a) Balances are shown net of deferred financing fees of £43.3 million at 30 June 2007 (31 March 2007 - £46.8 million). YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 9. Trade and other payables At At 31 March 30 June 2007 2007Due within one year £m £mTrade payables 88.4 63.3Other taxation and social security 18.2 20.2Accruals and other payables 237.5 167.6Deferred income 289.7 312.8Trade and other payables falling due within one year 633.8 563.9 Amounts falling due after more than one yearTrade payables 11.1 12.7Accruals and other payables 1.1 -Deferred income 0.8 0.4Trade and other payables falling due after more than one year 13.0 13.1 Total trade and other payables 646.8 577.0 10. Retirement benefit obligations / surplus Three months ended 30 June 2006 2007 £m £mObligations at 31 March 2006 and 2007, respectively (39.9) (27.2)Net actuarial gain ondefined benefit pension schemes 13.3 31.8Charges in excess of contributions (0.8) -Contributions in excess of charges - 0.3Net decrease in retirement benefit obligations 12.5 32.1Retirement benefit (obligation) surplus at period end (27.4) 4.9 (a) The gains in the periods ended 30 June 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) 11. 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 - - 34.3 34.3after taxation -Net expense recognised - - 40.3 40.2directly in equity (0.1)Total recognised income - - 74.6 74.5(expense) for the period (0.1)Value of services provided in return - 3.6 - 3.6for share based payments -Ordinary share capital issued to 0.2 - - 0.2employees -Own shares purchased by (1.5) - - (1.5)ESOP trust (a) - (1.3) 3.6 74.6 (0.1) 76.8Balance at 30 June 2007 1,200.4 (214.4) 529.4 10.0 1,525.4 (a) Purchase of shares held in an ESOP trust for employees. Cumulative foreign currency losses attributable to equity shareholders at 30June 2007 are £143.5 million (31 March 2007 - £139.4 million). 12. Capital Expenditure Capital expenditure on property, plant and equipment in the three months ended30 June 2006 and 2007 was £7.2 million and £12.5 million, respectively.Proceeds on the sale of property, plant and equipment were £nil in the sameperiods. Capital expenditure committed at 30 June 2006 and 2007 was £7.6 million and £6.1million, respectively. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 13. Acquisitions Three months ended 30 June 2007 In the three months to 30 June 2007, the Yell Group paid £57.5 million foracquisitions, the most significant of which were Publicom in Argentina andMcGregor in the US. The purchase price was allocated to the acquired assets andliabilities as follows: Acquiree's Provisional carrying amount fair value Provisional adjustments fair value £m £m £m Non current assetsOther intangible assets 2.0 16.1 18.1Property, plant and equipment 0.1 0.1 0.2Deferred tax assets 1.2 - 1.2Total non current assets 3.3 16.2 19.5Current assetsDirectories in development 1.6 1.2 2.8Trade and other receivables 3.7 0.6 4.3Cash and cash equivalents 0.2 - 0.2Total current assets 5.5 1.8 7.3Current liabilitiesCorporation tax (0.6) - (0.6)Trade and other payables (5.1) 0.1 (5.0)Total current liabilities (5.7) 0.1 (5.6)Total assets less current liabilities 3.1 18.1 21.2Non-current liabilitiesDeferred tax liabilities - (4.4) (4.4)Identifiable net assets 3.1 13.7 16.8Goodwill 40.3Total cost 57.1 Goodwill of £40.3 million is attributable to the expected future synergies, theworkforce acquired and expected future growth of the business. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 13. Acquisitions (continued) A reconciliation of cash paid on acquisitions, including a deferred payment of$1.2 million (£0.6 million) for the acquisition of TransWestern Publishing(TWP), to the cash flow on page 13 is as follows: Three months ended 30 June 2007 £m Costs of acquisitions in the period 57.1 Less cash acquired (0.2)Deferred payment for TWP 0.6Net cash outflow in period 57.5 Three months ended 30 June 2006 In the three months to 30 June 2006, the Yell Group paid £9.6 million foracquisitions, which comprised a number of directories businesses in the US. 14. 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 30 June2007, we have remaining $20.1 million of accrued settlement obligationrepresenting our best estimate of the amounts to be settled after resolution ofall appeals. NOTES TO EDITORS Yell Group Yell is an international directories business operating in the classifiedadvertising market through 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