HIBU.L Regulatory News (HIBU)

7 Feb 2008 07:01

Yell Group plc07 February 2008 Yell Group plc financial report for the nine months ended 31 December 2007 Earnings and cash on track. Revenue growth in all geographic markets with strong online performances. Sound fundamentals. • Revenue up 7.9% to £1,546.9 million; up 10.9% at constant exchange rates • Adjusted EBITDA up 10.3% to £522.0 million; up 12.8% at constant exchange rates • Adjusted profit after tax and minority interests up 6.2% to £202.4 million • Adjusted diluted earnings per share up 5.3% to 25.8 pence; underlying up 9.8% at constant exchange rates • Operating cash flow up 16.5% to £450.9 million; up 18.7% at constant exchange rates. Cash conversion 86.4% (2006 - 81.8%) Nine months ended 31 December Statutory results (unaudited) 2006 2007 Change £m £m % Revenue 1,433.9 1,546.9 7.9 EBITDA * 471.1 531.5 12.8 Profit before tax 175.3 216.3 23.4 Profit after tax and minority interests** 159.8 150.6 (5.8) Cash generated from operations 420.6 477.1 13.4 Diluted earnings per share (pence)** 20.6 19.2 (6.8) *EBITDA is reconciled to operating profit in note 3 to the financial information on page 17 **Statutory earnings are reconciled to adjusted earnings in Note 5 to the financial information on page 19. John Condron, Chief Executive Officer, said: "These are good results, fully in line with expectations in all our markets.Despite toughened trading conditions, particularly in the UK, these results keepus well on track to meet year end earnings and cash expectations. "We will, as usual, guide the 2009 financial year at the year end results in Maybut, based on current macro economic forecasts, we believe that we will growacross our markets at rates either similar to or higher than this year. Thisgrowth will be driven by the strength of our online businesses; the moreflexible pricing we are introducing in the UK; the new approach to sales beingrolled out in Spain; and the reinforcement of our proposition in the US." John Davis, Chief Financial Officer, said: "We continue to generate strong underlying earnings and cash flow, demonstratingthe fundamental strengths of our business, including the resilience of ourearnings." 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 Yell Group plc summary financial results Nine months Change at ended 31 December constant exchangeUnaudited 2006 2007 Change rates (a) £m £m % %Revenue (b) 1,433.9 1,546.9 7.9 10.9Adjusted EBITDA (b) (c) 473.1 522.0 10.3 12.8 Operating cash flow (b) (d) 387.0 450.9 16.5 18.7Cash conversion (b) (e) 81.8% 86.4% Adjusted profit after tax and minority interests(f) 190.6 202.4 6.2 Adjusted diluted earnings per share (pence)(f) 24.5 25.8 5.3 9.8 (a) Change at constant exchange rates states the change in current periodcompared with the previous period as if the current period results weretranslated at the same exchange rates 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 nine months ended 31 December 2007 is statedbefore exceptional credits of £11.8 million arising from the release of some ofthe class action accrual in the US and for a charge of £2.3 million from postacquisition restructuring within Yell Publicidad . Adjusted EBITDA in the ninemonths ended 31 December 2006 is stated before exceptional costs of £2.0 millionarising from post acquisition restructuring of Yell Publicidad operations. (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 5 to the financial information. Group operating performance Group revenue for the nine months ended 31 December 2007 increased 7.9% to£1,546.9 million, or 10.9% at constant exchange rates. We estimate that proforma Group organic growth was 2.7% at constant exchange rates. Group adjusted EBITDA increased by 10.3% to £522.0 million, or 12.8% at constantexchange rates. The Group adjusted EBITDA margin of 33.7% is up from 33.0% inthe same period last year. Operating cash flow increased 16.5% to £450.9 million, or 18.7% at constantexchange rates, resulting in conversion of 86.4% of adjusted EBITDA to cash.Free cash flow before payment of exceptional items was £203.7 million. Looking forward to the next quarter, we are confident that we will meet year endGroup expectations for both adjusted EBITDA and operating cash flow. However,we expect revenue to be just short of expectations, reflecting the toughening ofmarket conditions experienced in recently closed sales canvasses in the UK. We will give further guidance for the 2009 financial year as usual at thepreliminary results in May. At this time, based on current macro economicforecasts, we expect organic revenue growth in the US to be at a similar levelto that in the 2008 financial year and both the UK and Spain to achieve higherrevenue growth driven by the more lenient regulation in the UK and the newapproach to sales in Spain. Yell UK operations UK revenue increased 3.3% to £527.0 million driven entirely by a 49.0% increasein revenue by Yell.com, which more than offset the expected 4.4% decline inprint. Total unique UK customers live at 31 December declined by 0.6% to486,000, reflecting a decrease in print-only advertisers partly offset byYell.com-only advertisers. Revenue from UK printed directories was 4.4% lower at £405.5 million, as thenumber of unique print advertisers during the nine months declined by 4.0% to316,000, largely as a result of competition. Retention, at 75%, was stable.Average revenue per unique print advertiser was 0.5% lower than the same periodin the prior year at £1,283. The effect of our regulatory undertaking of RPI-6%was to reduce Yellow Pages rate card prices by an average of 3.3% during thenine months. The benefits of the new rate cap of RPI-0% will begin to be feltin the first quarter of the 2009 financial year. Yell.com's revenue grew 49.0% to £101.5 million, driven by a 34.8% increase inrecognised revenue per average searchable advertiser achieved mainly throughup-sell to higher value products. Searchable advertisers grew 8.9% to 207,000at 31 December. Unique users grew 5.1% to 6.2 million in the month of Decembercompared with the same period last year. Overall adjusted EBITDA grew 6.1% to £191.8 million, reflecting a margin of36.4%, slightly higher than 35.5% in the same period last year. We believe full year EBITDA will be in line with expectations with marginsslightly higher than guidance of around 35%. Sales canvasses closed sinceDecember lead us to expect that fourth quarter revenue will be around £8 millionlower than expected, reflecting rising economic uncertainties. Customer numbersremain in line with our expectations, but we believe that there will be somepressure on yield in print, as we have recently seen some larger customerscutting back their budgets. We expect full year revenue growth of around 2%. Despite the current pressure on yield, we remain confident that the positiveeffect of the pricing and marketing measures under the new regulatory settlementwill benefit revenue growth in the 2009 financial year, based on current macroeconomic forecasts. We will give further guidance when we present the year endresults. Yellow Book USA operations US revenue grew 3.9% at a constant exchange rate but fell 3.1% in sterling to£682.5million. The average exchange rate was approximately $2.01: £1.00 against$1.87: £1.00 in the same period last year. The 3.9% growth comprised a 2.2% contribution from net organic growth and a 2.1%contribution from acquired directories publishing for the first time ($27.7million), partially offset by a drag of 0.4% from rescheduling. The 2.2% contribution from net organic growth was made up of 2.4% from internetrevenue and 1.3% growth from directory launches, reduced by 0.4% from print samemarket and 1.1% primarily from acquired directories that were published lastyear but discontinued this year because they overlapped existing Yellow Bookdirectories. Organic revenue growth in the third quarter was 2.7%, and was, asguided, well ahead of the second quarter, which at 0.4% has proven to be thequarter of lowest growth. Yellow Book unique advertisers in printed directories declined 2.5% to 507,000due to competition and discontinued directories. Retention was stable at 70%.Average revenue per unique print advertiser was up 4.1% at $2,561. Internet revenue grew 67.6% to $79.8 million driven by a 72.4% increase inrevenue per average searchable advertiser to $212 on the back of increasedusage. The 2.9% decline in advertisers was expected as we priced more fully toreflect usage. Unique visitor numbers grew 136.4% from 4.4 million in December2006 to 10.4 million in December 2007. Adjusted EBITDA grew 5.3% at a constant exchange rate but declined by 1.7% insterling to £200.3 million. The adjusted EBITDA margin in the nine months wasin line with expectations at 29.3%, compared with 28.9% last year. Looking forward to the year end; we are on track to meet guidance for bothorganic revenue growth of around 3% and EBTIDA margins of around 29%. We are deferring publication of fourth quarter San Diego directories, as aresult of disruption to the sales cycle caused by last year's extensive fires inthat region. This will reschedule approximately $20 million of revenue into the2009 financial year. We currently believe organic revenue growth in the 2009 financial year will bearound a similar level to that of the 2008 financial year, based on currentmacro economic forecasts. We will give further guidance at the year endresults. Yell Publicidad operations Yell Publicidad revenue for the nine months was £337.4 million in line withexpectations. We rescheduled several books to other quarters in order to smoothproduction. The average exchange rate for the operations in Spain wasapproximately €1.45: £1.00 during the nine months ended 31 December 2007 against€1.48: £1.00 during the five months ended 31 December 2006. As previously discussed, revenue in Spain is still to benefit from the transferof best sales practices, which we have been introducing since September.Printed directory revenue grew 0.5% on a like-for-like basis compared with 0.4%for the comparable period last year. Adjusted EBITDA was £129.9 million and the margin was 38.5%. Looking forward to the year end, we are on track to meet expectations for localcurrency revenues with organic revenue growth of around 3%. In addition, weexpect a further €10m from non-core operations and €20m from the Argentineacquisition of Publicom. Reported revenue will reflect the effect of LatinAmerican exchange rates, which are currently weaker than both the euro andsterling. We expect to achieve EBITDA margins ahead of the 37% guidance. We are confident that the roll-out of our new sales approach should generate anuplift in organic revenue growth during the 2009 financial year based on currentmacro economic forecasts. We will give further guidance at the year endresults. Cash flow and net debt Operating cash flow increased 16.5% to £450.9 million, or 18.7% at constantexchange rates. The Group converted 86.4% of adjusted EBITDA to cash, ascompared with 81.8% last year. Nine months ended 31 December 2006 2007Unaudited £m £m Adjusted EBITDA 473.1 522.0 Exceptional net (costs) gain in EBITDA (2.0) 9.5 Working capital movements and non-cash charges (50.5) (54.4) Cash generated from operations (see page 14) 420.6 477.1 Add back payments of exceptional costs included above 1.4 4.8 Purchase of software, property, plant and equipment (35.0) (31.0) Operating cash flow 387.0 450.9 Adjusted EBITDA 473.1 522.0 Cash conversion 81.8% 86.4% Free cash flow before payment of exceptional items was £203.7 million, comparedto an underlying £177.2 million in the same period last year. Net debt at 31 December 2007 of £3,770.7 million was 5.2 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 nine months ended 31 December 2007arose as follows: Net debtUnaudited £m At 31 March 2007 3,662.6Operating cash flow (450.9)Cash payments of exceptional costs 4.8Interest and tax payments 247.2Purchase of subsidiary undertakings and minority interests, net of cash acquired 99.4Net cash inflow on disposal of subsidiary (0.5)Purchase of own shares 10.6Proceeds of shares issued (3.6)Dividends paid to company shareholders 136.7Amortisation of financing fees paid in previous periods 8.8Currency movements 55.6At 31 December 2007 3,770.7 Taxation Adjusted taxation of £90.2 million represents an effective rate of 30.8% onadjusted profit before tax of £293.1 million, in line with guidance. Thiscompared with 33.4% in the same period last year. Taxes paid were, as expected,around 20% of adjusted profit before tax. Net results and exceptional items Adjusted profit after tax of £202.4 million was up 6.2%. This is after £0.5million attributable to minority interests in Yell Publicidad before they werebought out on 30 September 2007. Adjusted diluted earnings per share were up 5.3% to 25.8 pence (see note 5 tothe financial information on page 19 for a reconciliation between statutory andadjusted figures). Underlying adjusted diluted earnings per share grew 9.8% atconstant exchange rates if we adjust last year's earnings to reflect ourownership of Yell Publicidad on a nine month pro forma basis and adjust thecurrent nine month period's earnings for phasing of investment. 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 ($45.0 million) costs we accrued in March2005 for a class action settlement in the US; and exceptional charges totalling£3.1 million before tax, or £2.1 million after tax, which arose fromrestructuring and disposals within the Yell Publicidad operations. Anadditional exceptional tax charge of £0.4 million relates to the change in theUK tax rate. Minority interests On 26 September 2007, we reached agreement with minority shareholders to acquirethe remaining 1.28% of the share capital of Yell Publicidad held by minorityshareholders (see note 17 to the financial information on page 25). All profitssince that date are attributable to equity shareholders of the Group. Risks and uncertainties The principal risks and uncertainties affecting the business activities of theGroup for the remaining three months of the financial year remain those detailedin the section entitled "Risk Management" on pages 34-39 of Yell Group plc'sannual report for the financial year ended 31 March 2007, a copy of which isavailable on our website www.yellgroup.com. Key performance indicatorsUnaudited Full year ended 31 March Nine months ended 31 December Change 2007 2006 2007 %Yell UKTotal live advertisers at period end (thousands) (a) 492 489 486 (0.6) Printed directoriesRevenue (£million) 600.5 424.2 405.5 (4.4)Unique advertisers (thousands) (b) 450 329 316 (4.0)Directory editions published 113 76 76Unique advertiser retention rate (%) (c) 75 75 75Revenue per unique advertiser (£) 1,335 1,289 1,283 (0.5) InternetRevenue (£million) 95.9 68.1 101.5 49.0Searchable advertisers at period end (thousands) (d) 196 190 207 8.9Searches for the month of period end (millions) 33 24 23 (4.2)Unique users for the month of period end (millions) (e) 7.6 5.9 6.2 5.1Revenue per average searchable advertiser (£) (f) 518 374 504 34.8 Yellow Book USAPrinted directoriesRevenue ($million) 1,862.9 1,278.7 1,298.3 1.5Unique advertisers (thousands) (b)(g) 692 520 507 (2.5)Directory editions published 969 658 669Unique advertiser retention rate (%) (c) (h) 69 70 70Revenue per unique advertiser ($) 2,694 2,459 2,561 4.1 InternetRevenue ($million) 68.7 47.6 79.8 67.6Searchable advertisers at period end (thousands)(d)(g) 380 385 374 (2.9)Unique visitors for month of period end (millions) (i) 6.1 4.4 10.4 136.4Revenue per average searchable advertiser ($) (f) 178 123 212 72.4 Yell Publicidad (Spain) Paginas Amarillas classified directoriesRevenue (•million) 214.2Unique advertisers (thousands) (b) 242Directory editions published 72Unique advertiser retention rate (%) (c) 85Revenue per unique advertiser (•) 885 Explanations of significant period to period changes are given in the analysisof operations on pages 1 through 6. See notes to the above table below. (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 nine month period by theaverage number of searchable advertisers in that period. From the period endedDecember 2007 revenue per average searchable advertiser for Yellow Book iscalculated using revenue that includes our WebReach product, whereas previouslyit was excluded. Figures from previous periods have been restated forcomparative purposes. Yell.com year ended 31 March 2007 - 185,000; nine monthsended 31 December 2006 - 182,000; nine months ended 31 December 2007 - 201,000.Yellowbook.com year ended 31 March 2007 - 386,000; nine months ended 31 December2006 - 388,000; nine months ended 31 December 2007 - 377,000. (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 nine months ended 31December 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 ninemonths ended 31 December 2006. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED CONSOLIDATED INCOME STATEMENT Nine months ended 31 December Notes 2006 2007 £m £mRevenue 2 1,433.9 1,546.9Cost of sales (632.4) (653.5)Gross profit 801.5 893.4Distribution costs (48.7) (59.0)Administrative expenses (386.0) (422.5)Operating profit 3 366.8 411.9Finance costs (198.3) (197.5)Finance income 6.8 2.7Net finance costs (191.5) (194.8) 175.3 217.1Loss on disposal of subsidiary - (0.8)Profit before taxation 175.3 216.3Taxation 4 (11.9) (65.6)Profit for the financial period 163.4 150.7Attributable to:Minority interests 3.6 0.1Equity shareholders of the group 159.8 150.6 163.4 150.7 (pence) (pence)Basic earnings per share 5 20.8 19.3Diluted earnings per share 5 20.6 19.2 £m £mDeclared and paid interim ordinary dividend of 6.3pence per share (2006 - 5.7 pence) 6 43.9 48.6 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Nine months ended 31 December Notes 2006 2007 £m £m Profit for the financial period 163.4 150.7 Exchange (loss) gain on translation of foreign operations (75.8) 110.0Actuarial gains on defined benefit pension schemes 14 7.5 15.3Change in fair value of financial instruments used as hedges 3.3 (21.6)Tax effect of net losses not recognised in the incomestatement 3.7 2.2Net increase (decrease) in tax benefit on share basedpayments 4.3 (11.7)Net (expense) income not recognised in the income statement (57.0) 94.2Total recognised income for the period 106.4 244.9 Attributable to: Minority interests 3.8 0.4Equity shareholders of the group 102.6 244.5 106.4 244.9 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED CONSOLIDATED BALANCE SHEET Audited Unaudited At At 31 March 31 December Notes 2007 2007 £m £m Non-current assets Goodwill 7 3,645.3 3,792.6 Other intangible assets 8 1,229.5 1,248.3 Property, plant and equipment 9 94.5 89.8 Deferred tax assets 10 143.2 114.3 Investment and other assets 8.2 7.7 Total non-current assets 5,120.7 5,252.7 Current assets Inventories 12.0 21.6 Directories in development 257.2 300.5 Trade and other receivables 11 947.4 950.8 Cash and cash equivalents 66.7 50.0 Total current assets 1,283.3 1,322.9 Current liabilities Loans and other borrowings 12 (224.3) (286.0) UK corporation and foreign income tax (54.4) (35.1) Trade and other payables 13 (633.8) (638.1) Total current liabilities (912.5) (959.2) Net current assets 370.8 363.7 Non-current liabilities Loans and other borrowings 12 (3,505.0) (3,534.7) Deferred tax liabilities 10 (497.7) (523.0) Retirement benefit obligations 14 (27.2) (12.7) Trade and other payables 13 (13.0) (12.4) Total non-current liabilities (4,042.9) (4,082.8) Net assets 1,448.6 1,533.6 Capital and reserves attributable to equity shareholders Share capital 15 1,201.7 1,194.7 Other reserves 15 (218.0) (129.8) Retained earnings 15 454.8 468.7 1,438.5 1,533.6 Minority interests 15 10.1 - Total equity 1,448.6 1,533.6 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED CONSOLIDATED CASH FLOW STATEMENT Nine months ended 31 December Notes 2006 2007 £m £mNet cash inflow from operating activitiesCash generated from operations 420.6 477.1Interest paid (204.0) (190.4)Interest received 6.8 2.7Redemption premium paid (22.1) -Net income tax paid (59.3) (59.5)Net cash inflow from operating activities 142.0 229.9 Cash flows from investing activitiesPurchase of software, property, plant and equipment 16 (35.0) (31.0)Purchase of subsidiary undertakings and minority interestshares, net of cash acquired 17 (2,025.5) (99.4)Net cash inflow on disposal of subsidiary 17 - 0.5Net cash outflow from investing activities (2,060.5) (129.9) Cash flows from financing activitiesProceeds from issuance of ordinary shares 350.2 3.6Purchase of own shares (11.5) (10.6)Net (paid) borrowed on revolving credit facilities (211.1) 19.8Acquisition of new loans 3,841.5 75.2Repayment of borrowings (1,827.8) (68.2)Financing fees paid (64.8) -Dividends paid to Company's shareholders 6 (122.4) (136.7)Net cash inflow (outflow) from financing activities 1,954.1 (116.9)Net increase (decrease) in cash and cash equivalents 35.6 (16.9) Cash and cash equivalents at beginning of the period 28.5 66.7Exchange (losses) gains on cash and cash equivalents (2.8) 0.2Cash and cash equivalents at period end 61.3 50.0 Profit for the period 163.4 150.7Adjustments for:Tax 11.9 65.6Loss on disposal of subsidiary - 0.8Finance income (6.8) (2.7)Finance costs 198.3 197.5Depreciation of property, plant andequipment and amortisation of software 27.0 34.1Amortisation of other acquired intangibles 77.3 85.5Changes in working capital:Inventories and directories in development (51.6) (49.6)Trade and other receivables (22.9) 17.6Trade and other payables 12.7 (33.8)Share based payments and other 11.3 11.4Cash generated from operations 420.6 477.1 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED 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 for the nine months ended 31 December2007 has been prepared in accordance with International Financial ReportingStandards as adopted by the European Union ("IFRSs") as set out in our annualreport for the year ended 31 March 2007 and in accordance with the Listing Rulesof the Financial Services Authority. The financial 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, which were approved by the Board of directors on 5 June 2007, wasunqualified. 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 herein should be read in conjunction with Yell's 2007annual report published in June 2007, which included the audited consolidatedfinancial statements of Yell Group plc and its subsidiaries for the year ended31 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. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 2. Revenue Nine months ended 31 December Change 2006 2007 % £m £m Yell UK printed directories 424.2 405.5 (4.4) Other products and services 85.8 121.5 41.6 Total Yell UK revenue 510.0 527.0 3.3 Yellow Book USA revenue at constant exchange rate (a) 704.5 732.0 3.9 Exchange impact (a) - (49.5) Total Yellow Book USA revenue 704.5 682.5 (3.1) Yell Publicidad revenue at constant exchange rate (a) 219.4 331.0 50.9 Exchange impact (a) - 6.4 Total Yell Publicidad revenue 219.4 337.4 53.8 Group revenue 1,433.9 1,546.9 7.9 (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 the current period exchange rate. 3. Operating profit and EBITDA information Adjusted EBITDA by segment Nine months Change ended 31 December 2006 2007 % £m £m Yell UK printed directories 149.0 139.4 (6.4) Other products and services 31.8 52.4 64.8 Total Yell UK 180.8 191.8 6.1 Yellow Book USA at constant exchange rate (a) 203.7 214.4 5.3 Exchange impact (a) - (14.1) Total Yellow Book USA 203.7 200.3 (1.7) Yell Publicidad at constant exchange rate (a) 88.6 127.3 43.7 Exchange impact (a) - 2.6 Total Yell Publicidad 88.6 129.9 46.6 Group adjusted EBITDA 473.1 522.0 10.3 (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 the current period exchange rate. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 3. Operating profit and EBITDA information (continued) Reconciliation of group operating profit to EBITDA (a) Nine months ended 31 December 2006 2007 ChangeYell UK operations £m £m %Operating profit 170.6 179.4Depreciation and amortisation in admin expenses 10.2 12.4Yell UK operations EBITDA 180.8 191.8 6.1Yell UK operations EBITDA margin 35.5% 36.4% Yellow Book USAOperating profit 167.3 177.4Depreciation and amortisation in admin expenses 36.4 34.7Yellow Book USA EBITDA 203.7 212.1 4.1Exceptional items - (11.8)Exchange impact (b) - 14.1Yellow Book USA adjusted EBITDA at constant exchange rate (b) 203.7 214.4 5.3Exchange impact (b) - (14.1)Yellow Book USA adjusted EBITDA 203.7 200.3 (1.7)Yellow Book USA adjusted EBITDA margin 28.9% 29.3% Yell PublicidadOperating profit 28.9 55.1Depreciation and amortisation in admin expenses 57.7 72.5Yell Publicidad EBITDA 86.6 127.6 47.3Exceptional items 2.0 2.3Exchange impact (b) - (2.6)Yell Publicidad EBITDA at constant exchange rate (b) 88.6 127.3 43.7Exchange impact (b) - 2.6Yell Publicidad EBITDA 88.6 129.9 46.6Yell Publicidad EBITDA margin 40.4% 38.5% GroupOperating profit 366.8 411.9Depreciation and amortisation in admin expenses 104.3 119.6Group EBITDA 471.1 531.5 12.8Exceptional items 2.0 (9.5)Exchange impact (b) - 11.5Group adjusted EBITDA at constant exchange rates(b) 473.1 533.5 12.8Exchange impact (b) - (11.5)Group adjusted EBITDA 473.1 522.0 10.3Group adjusted EBITDA margin 33.0% 33.7% (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 constantexchange rates 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 SUBSIDIARIESUNAUDITED 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: Nine months ended 31 December 2006 2007 £m £mProfit before tax multiplied by the standard rate ofcorporation tax in the United Kingdom (30%) 52.6 64.9Effects of:Differing tax rates on overseas earnings 6.1 6.9Changes in statutory tax rates (45.5) 0.4Other (1.3) (6.6)Tax charge on profit before tax 11.9 65.6 Current tax 56.7 50.4Deferred tax (44.8) 15.2Tax charge on profit before tax 11.9 65.6 YELL GROUP PLC AND SUBSIDIARIESUNAUDITED 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. Amortisation of Exceptional acquired Actual items intangibles Adjusted Nine months ended 31 December 2007EBITDA (£m) 531.5 (9.5) - 522.0Depreciation and amortisation (£m) (119.6) - 85.5 (34.1)Net finance costs (£m) (194.8) - - (194.8)Net loss on disposals of non-core operations (£m) (0.8) 0.8 - - Group profit before tax (£m) 216.3 (8.7) 85.5 293.1Taxation (£m) (65.6) 3.8 (28.4) (90.2)Group profit after tax (£m) 150.7 (4.9) 57.1 202.9Minority interests (£m) (0.1) - (0.4) (0.5)Group profit after tax and minority interests (£m) 150.6 (4.9) 56.7 202.4 Weighted average number of issued ordinary shares (millions) 779.8 779.8 Basic earnings per share (pence) 19.3 26.0Effect of share options (pence) (0.1) (0.2)Diluted earnings per share (pence) 19.2 25.8 Nine months ended 31 December 2006EBITDA (£m) 471.1 2.0 - 473.1Depreciation and amortisation (£m) (104.3) - 77.3 (27.0)Net finance costs (£m) (191.5) 36.3 - (155.2)Group profit before tax (£m) 175.3 38.3 77.3 290.9Taxation (£m) (11.9) (57.6) (27.8) (97.3)Group profit after tax (£m) 163.4 (19.3) 49.5 193.6Minority interests (£m) (3.6) 2.6 (2.0) (3.0)Group profit after tax and minority interests (£m) 159.8 (16.7) 47.5 190.6 Weighted average number of issued ordinary shares (millions) 768.9 768.9Basic earnings per share (pence) 20.8 24.8Effect of share options (pence) (0.2) (0.3)Diluted earnings per share (pence) 20.6 24.5 The net exceptional credit of £9.5 million in EBITDA during the nine monthsended 31 December 2007 comprised £11.8 million related to the release of aportion of the accrued settlement obligation accrued in 2005, but no longerrequired, for the class action suit in the US net of £2.3 million ofpost-acquisition restructuring costs at Yell Publicidad. Exceptional tax of£3.8 million represents a net of £3.6 million tax charge on the £9.5 million netexceptional credit and an additional charge of £0.4 million related to changesin the UK tax rate, net of a £0.2 million tax credit on disposal losses.Exceptional costs of £2.0 million in EBITDA for the nine months ended 31December 2006 are post-acquisition restructuring costs relating to the YellPublicidad acquisition. The exceptional interest costs for the nine monthsended 31 December 2006 comprised £13.8 million for accelerated amortisation ofdeferred financing fees and £22.5 million premium on the redemption of ourNotes, which were refinanced prior to the Yell Publicidad acquisition. Theexceptional taxation benefit comprises £0.7 million related to post-acquisitionrestructuring costs, £11.4 million related to exceptional finance costs and a£45.5 million exceptional tax credit from re-measuring deferred taxes in Spainat the lower tax rates enacted in November 2006. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 6. Dividends paid The final dividend for the 2007 financial year of 11.4 pence per share (2006 -10.2 pence per share) was paid on 27 July 2007 and amounted to £88.1 million(2006 - £78.5 million). The interim dividend of 6.3 pence per share (2006 - 5.7pence per share) was paid on 14 December 2007 and amounted to £48.6 million(2006 - £43.9 million). 7. Goodwill Nine months ended 31 December 2006 2007 £m £m Opening net book value at 1 April 2006 and 2007, respectively 2,486.0 3,645.3Acquisitions 1,329.4 50.5Currency movements (184.5) 96.8Net book value at period end 3,630.9 3,792.6 8. Other non-current intangible assets Nine months ended 31 December 2006 2007 £m £m Opening net book value at 1 April 2006 and 2007, respectively 200.3 1,229.5Acquisitions 1,141.3 22.1Additions 10.6 13.3Disposals and write-offs - (0.4)Amortisation (64.1) (96.4)Currency movements (40.1) 80.2Net book value at period end 1,248.0 1,248.3 9. Property, plant and equipment Nine months ended 31 December 2006 2007 £m £m Opening net book value at 1 April 2006 and 2007, respectively 53.8 94.5Acquisitions 39.5 0.3Additions 21.7 14.6Disposals and write-offs (1.3) (1.8)Depreciation (16.9) (20.1)Currency movements (4.2) 2.3Net book value at period end 92.6 89.8 YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 10. Deferred tax assets and liabilities The elements of deferred tax assets recognised in the accounts were as follows: At At 31 March 31 December 2007 2007 £m £mTax effect of timing differences due to:Bad debt provisions 44.8 38.1Defined benefit pension scheme 17.9 9.1Other allowances and accrued expenses 20.1 18.1Recognised tax net operating losses 18.7 14.7Share options 16.4 6.6Depreciation 7.3 8.9Financial instruments 4.9 12.4Other 13.1 6.4Recognised deferred tax assets 143.2 114.3 The elements of deferred tax liabilities recognised in the accounts were asfollows: At At 31 March 31 December 2007 2007 £m £mTax effect of timing differences due to:Intangible assets 415.8 442.0Deferred directory costs 45.5 46.8Unremitted earnings 10.8 12.6Financial instruments 9.1 9.8Other 16.5 11.8Recognised deferred tax liabilities 497.7 523.0 YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 11. Trade and other receivables At At 31 March 31 December 2007 2007 £m £m Net trade receivables (a) 830.7 837.0Other receivables 62.0 60.4Accrued income (a) 42.0 38.1Prepayments 12.7 15.3Total trade and other receivables 947.4 950.8 (a) The Group's trade receivables and accrued income are statedafter deducting a provision of £184.6 million at 31 December 2007 (31 March 2007- £208.6 million). 12. Loans and other borrowings and net debt At At 31 March 31 December 2007 (a) 2007 (a) £m £mAmounts falling due within one yearTerm loans under senior credit facilities 121.7 161.7Revolving loan under credit facilities 97.2 95.0Net obligations under finance leases and other shortterm borrowings 5.4 29.3 Total amounts falling due within one year 224.3 286.0Amounts falling due after more than one yearTerm loans under senior credit facilities 3,505.0 3,534.7Net loans and other borrowings 3,729.3 3,820.7Cash and cash equivalents (66.7) (50.0)Net debt at end of year 3,662.6 3,770.7 (a) Balances are shown net of deferred financing fees of £38.6million at 31 December 2007 (31 March 2007 - £46.8 million). YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 13. Trade and other payables At At 31 March 31 December 2007 2007Due within one year £m £mTrade payables 88.4 74.6Other taxation and social security 18.2 17.9Accruals and other payables 237.5 225.5Deferred income 289.7 320.1Trade and other payables falling due within one year 633.8 638.1 Amounts falling due after more than one yearTrade payables 11.1 12.4Accruals and other payables 1.1 -Deferred income 0.8 -Trade and other payables falling due after more than one year 13.0 12.4 Total trade and other payables 646.8 650.5 14. Retirement benefit obligations Nine months ended 31 December 2006 2007 £m £m Obligations at 1 April 2006 and 2007, respectively 39.9 27.2Net actuarial gain ondefined benefit pension schemes (7.5) (15.3)Charges in excess of contributions 1.4 0.8Net decrease in retirement benefit obligations (6.1) (14.5)Retirement benefit obligation at period end 33.8 12.7 (a) The gains in the periods ended 31 December 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 SUBSIDIARIESUNAUDITED 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 £m Balance at 31 March 2007 1,201.7 (218.0) 454.8 10.1 1,448.6Profit on ordinary activities after taxation - - 150.6 0.1 150.7Net gain recognised directly in equity - 93.9 - 0.3 94.2Total recognised income for the period - 93.9 150.6 0.4 244.9Value of services provided in returnfor share based payments - 11.4 - - 11.4Ordinary share capital issued to employees 3.6 - - - 3.6Own shares purchased by ESOP trust (a) (10.6) - - - (10.6)Purchase of minority interest shares - (17.1) - (10.5) (27.6)Dividends paid - - (136.7) - (136.7) (7.0) 88.2 13.9 (10.1) 85.0Balance at 31 December 2007 1,194.7 (129.8) 468.7 - 1,533.6 (a) Purchase of shares held in an ESOP trust for employees. Cumulative foreign currency losses attributable to equity shareholders at 31December 2007 are £29.7 million (31 March 2007 - £139.4 million). 16. Capital Expenditure Capital expenditure on software, property, plant and equipment in the ninemonths ended 31 December 2006 and 2007 was £35.0 million and £31.0 million,respectively. Proceeds on the sale of property, plant and equipment were £nilin the same periods. Capital expenditure committed at 31 December 2006 and 2007 was £4.0 million and£7.4 million, respectively. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 17. Acquisitions and disposals Nine months ended 31 December 2007 In the nine months to 31 December 2007, the Yell Group paid £71.9 million for anumber of acquisitions, the most significant of which were Publicom in Argentinaand McGregor in the US. The purchase prices were provisionally allocated to theacquired assets and liabilities as follows: Acquiree's Provisional Provisional carrying amount fair value fair value adjustments £m £m £m Non current assetsOther intangible assets 0.4 21.7 22.1Property, plant and equipment 0.3 - 0.3Deferred tax assets 1.3 - 1.3Total non current assets 2.0 21.7 23.7Current assetsDirectories in development 2.1 1.1 3.2Trade and other receivables 5.5 - 5.5Cash and cash equivalents 0.2 - 0.2Total current assets 7.8 1.1 8.9Current liabilitiesCorporation tax (0.6) - (0.6)Trade and other payables (7.6) 1.4 (6.2)Total current liabilities (8.2) 1.4 (6.8)Total assets less current liabilities 1.6 24.2 25.8Non-current liabilitiesDeferred tax liabilities - (4.4) (4.4)Identifiable net assets 1.6 19.8 21.4Goodwill 50.5Total cost 71.9 Goodwill of £50.5 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 €40.4 million (£27.8 million), including expenses of€1.0 million (£0.7 million), of which we paid €40.2 million (£27.7 million) by31 December 2007. The Group disposed of non-core operations and incurred extra costs on a prioryear disposal during the period for a net loss of £0.8 million with net cashproceeds of £0.5 million. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 17. Acquisitions and disposals (continued) Nine months ended 31 December 2006 In the nine months to 31 December 2006, the Yell Group paid £2,025.5 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 $19.8million (£12.8 million). Cash flow 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 14 is as follows: Nine months ended 31 December 2006 2007 £m £m Costs of acquisitions in the period 2,023.1 71.9 Less cash acquired (16.8) (0.2) Purchase of minority interest shares - 27.7 Deferred payment for TWP 6.2 - Capital duties paid 13.0 - Net cash outflow in period 2,025.5 99.4 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 31December 2007, 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 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