26th Jul 2005 07:00
Yell Group plc26 July 2005 26 July 2005 news release news release news release news release news release Yell Group plc financial results for the three months ended 30 June 2005 A strong first quarter. Yell on track to meet full year expectations • Group turnover up 11.6% to £313.6 million; 12.7% at a constant exchange rate • Group adjusted EBITDA up 14.5% to £100.1 million; 15.3% at a constant exchange rate • Group adjusted profit after tax up 22.9% to £47.8 million • Group operating cash flow less capital expenditure up 18.8% to £84.0 million; 19.7% at a constant exchange rate • Diluted earnings per share before exceptional items up 21.8% to 6.7 pence Note: Adjusted EBITDA for the three months ended 30 June 2005 is statedbefore an exceptional credit of £5.0 million from releasing a provision for IPOcosts. Adjusted profit after tax is stated before the exceptional credit (£3.5million net of tax charge) and an additional charge of £6.7 million (£4.5million net of tax credit) from accelerated amortisation of finance fees relatedto the bank debt refinanced on 15 July 2005. Results previously reported for the three months ended 30 June 2004 werereported under UK GAAP. All figures reported here are reported underInternational Financial Reporting Standards. A detailed reconciliation betweenUK GAAP and IFRS can be obtained in the IFRS conversion statements published onour website on 13 June 2005. John Condron, Chief Executive Officer, said: "Yell's strategy and execution continue to deliver strong performance and ourfirst quarter results maintain the growth momentum across the Group. Theacquisition of TransWestern, which we have now completed, significantly expandsour US footprint. We welcome into the Yell Group the TransWestern people withwhom we are already working very closely as we integrate the business intoYellow Book. We look forward to realising the benefits of the acquisition overtime. "In the UK, the Competition Commission is following the timetable it set out inMay. This is an iterative process and we have made our first submission." John Davis, Chief Financial Officer, said: "Our strong revenue growth benefited in the UK from the profile of first quarterdirectories and, in the US, from the heavy new launch programme. We reiterateour guidance for the year end and are on track to meet expectations. "We have successfully syndicated our refinanced senior debt with a bank facilityof £2 billion which also funded our $1,575 million acquisition of TransWestern." 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, turnover, 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 Factors" in Yell Finance B.V.'s 31 March2005 annual report on Form 20-F filed with the US Securities and ExchangeCommission (the "SEC") on 13 June 2005, for a discussion of some of thesefactors. 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 Our subsidiary, Yell Finance B.V., will furnish its results for the three months ended 30 June 2005 to the SEC on Form 6-K on 26 July 2005. A copy of this submission can also be accessed on the Yell Group website. YELL GROUP PLC SUMMARY FINANCIAL RESULTS Three months Change at ended 30 June constant exchangeUnaudited 2004 (a) 2005 Change rate (b) £m £mTurnover (c) 280.9 313.6 11.6% 12.7%Adjusted EBITDA (c) (d) 87.4 100.1 14.5% 15.3%Operating cash flow (c) (e) 70.7 84.0 18.8% 19.7% Adjusted diluted earnings per share (pence) (d) 5.5 6.7 21.8% Cash conversion (c) (f) 80.9% 83.9% Profit on ordinary activities after tax 38.9 46.8 20.3% (a) Results previously reported for the three months ended 30 June 2004were reported under UK GAAP. Figures reported here are reported underInternational Financial Reporting Standards. A detailed explanation of thesechanges can be obtained in the IFRS conversion statements published on ourwebsite on 13 June 2005. (b) Change at constant exchange rate states the change in current periodresults compared to the same period in the previous year as if the currentperiod results were translated at the same exchange rate as that used totranslate the results for the same period in the previous year. (c) Turnover, EBITDA, operating cash flow and cash conversion are the keyfinancial measures that we use to assess the growth in the business andoperational efficiencies. (d) Adjusted EBITDA for the three months ended 30 June 2005 is statedbefore an exceptional credit of £5.0 million from releasing a provision for IPOcosts. Adjusted diluted earnings per share are stated before the exceptionalcredit (£3.5 million net of tax charge) and an additional charge of £6.7 million(£4.5 million net of tax credit) from accelerated amortisation of finance feesrelated to the bank debt refinanced on 15 July 2005. (e) Cash generated from operations before payments of exceptional costs,less capital expenditure. (f) Operating cash flow as a percentage of adjusted EBITDA. REVIEW OF OPERATING PERFORMANCE Turnover Group turnover increased 11.6% to £313.6 million, or 12.7% at a constantexchange rate, from £280.9 million for the same period last year. UK operations UK turnover increased 6.5% to £160.4 million. The strong turnover growth fromprinted directories of 3.6% to £143.9 million in part reflects the mix ofrelatively higher growth directories during the period. The effect of RPI-6%was to reduce Yellow Pages prices by an average of 2.9%. The total number of unique print advertisers dropped slightly to 135,000. Thisreflects increased competition and the decline in retention to 74%, down from75% at the year end and 76% for the same period last year, as advertisers havemore products and channels from which to choose. However, we offset thisdecline with a 6.2% growth in average turnover per unique advertiser to £1,066. Yell.com continued to grow rapidly with an increase in turnover of 49.4% to£11.8 million. This reflected the growth in searchable advertisers of 37.3% to151,000. While we expect the slower-growing directories of the second quarter to affectrevenue growth in the first half, we are confident that UK turnover is on trackto meet full year expectations. US operations US turnover grew 17.6% to £153.2 million. At a constant exchange rate, theincrease was 19.9%. The average exchange rate was approximately $1.86: £1.00against $1.81: £1.00 in the same period last year. Unique advertisers increased 6.5% to 132,000 with average turnover per uniqueadvertiser up 12.7% to $2,144 and retention up from 70% to 71%. Organic turnover grew 18.7%. Same-market growth was 8.4%, contributing 7.7% tothe organic growth, with the significant new launch programme of 12 directoriesalso contributing 15.2%, offset by a decrease of 4.2% primarily fromrescheduling production to later periods as we continue to rebalance production.Acquisitions added a further 1.2% to growth. While the rate of turnover growth in the first half will be affected by thesmaller new launch programme during the second quarter, we are confident that USturnover is on track to meet full year expectations. We completed the acquisition of TransWestern on 15 July 2005, whichsignificantly expands our US footprint. Integration planning is well advancedand the first steps to integrate TransWestern into Yellow Book are alreadyunderway. Adjusted EBITDA Group adjusted EBITDA increased by 14.5% to £100.1 million, or 15.3% at aconstant exchange rate. The Group adjusted EBITDA margin increased 0.8percentage points to 31.9%, driven by the strong US performance. AdjustedEBITDA for the three months ended 30 June 2005 is stated before an exceptionalcredit of £5.0 million from releasing a provision for IPO costs. UK adjusted EBITDA rose 4.4% to £57.1 million, reflecting the sustainedexcellent progress of Yell.com, partially offset by our continued investment tosupport the continuing turnover growth of the printed directories. Yell.comincreased its EBITDA to £4.4 million from £2.3 million in the same period lastyear. The overall UK adjusted EBITDA margin was 35.6%, compared with 36.3% inthe same period last year. In the US, strong turnover growth and operational leverage resulted in 31.5%growth in EBITDA to £43.0 million, a 33.6% increase at a constant exchange rate.The US EBITDA margin increased from 25.1% to 28.1% despite the heavy launchprogramme during the first quarter. With the continuation of investment inturnover growth planned for the rest of the year, we have not changed ourexpectations for the full year. Cash flow and net debt The Group converted 83.9% of adjusted EBITDA to cash, as compared to 80.9% lastyear. Group operating cash flow increased 18.8% to £84.0 million, or 19.7% at aconstant exchange rate. Excluding the effect of the additional pensioncontribution totalling £8.8 million in the quarter, we would have converted92.7% of adjusted EBITDA to cash. This is our second additional annual pensioncontribution paid toward alleviating the level of the pension deficit and, whileit reduces free cash flow, it has no effect on the Group's profit and loss. Three months Three months ended 30 June ended 30 June 2004 2005 £m £m Cash generated from operations 74.1 88.1Cash payments of exceptional items 0.3 0.6Purchase of tangible fixed assets, net of sale (3.7) (4.7)proceedsCash generated from operations before payments of 70.7 84.0exceptional costs and after capital expenditure Free cash flow (net cash inflow from operating activities (£70.3 million) lesspurchase of fixed assets (£4.7 million)) generated during the three months was£65.6 million. Net debt at £1,076.9 million, which was down £29.2 million from 31 March 2005,represented a multiple of 2.6 times adjusted EBITDA for the last 12 months. Themovement in net debt for the three months ended 30 June 2005 arose as follows: Net debt £m At 31 March 2005 1,106.1Free cash flow (65.6)Purchase of subsidiary undertakings 4.8Net cash used in financing activities 0.1Non-cash finance charges increasing debt 11.0Currency movements 20.5At 30 June 2005 1,076.9 Since 30 June we have successfully syndicated a new £2 billion credit facilityto fund the acquisition of TransWestern and to refinance the entire £876.7million of bank debt that existed at 30 June. Our senior notes remainunaffected. Based on Yell's and TransWestern's strong cash generation, weexpect our net debt to reach four times our pro forma EBITDA by 31 March 2006. NET RESULTS After tax results Profit after tax for the three months to 30 June 2005 was £46.8 million,compared with a profit after tax of £38.9 million for the same period last year.This reflects the strong EBITDA growth. The tax charge before exceptionalitems was £24.6 million, which represents 34.0% of profit before tax adjustedfor exceptional costs. Adjusted profit after tax of £47.8 million is statedbefore exceptional items relating to a credit of £5.0 million (£3.5 million netof tax charge) from releasing a provision for IPO costs, and an additionalcharge of £6.7 million (£4.5 million net of tax credit) from acceleratedamortisation of finance fees related to bank debt refinanced on 15 July 2005. Earnings per share Diluted earnings per share were 6.7 pence before exceptional items; an increaseof 21.8% from last year. Basic earnings per share before exceptional items were6.8 pence, as compared to 5.6 pence last year. UK REGULATION Following the referral by the Office of Fair Trading of the supply of "classified directories advertising services" to the Competition Commission inApril 2005, we have submitted our initial evidence. The Commission is followingthe administrative timetable for its investigation set out in May 2005. Thistimetable, initial submissions from all parties and other related informationcan be found on the Commission's website at www.competition-commission.org.uk. KEY OPERATIONAL INFORMATION Three months ended 30 June 2004 2005 ChangeUK printed directoriesUnique advertisers (thousands) (1) 138 135 (2.2)%Directory editions published 28 29Unique advertiser retention rate (%) (2) 76 74Turnover per unique advertiser (£) 1,004 1,066 6.2% US printed directoriesUnique advertisers (thousands) (1) (3) 124 132 6.5%Directory editions published 126 128Unique advertiser retention rate (%) (3) 70 71Turnover per unique advertiser ($) 1,902 2,144 12.7% Other UK products and servicesYell.com searchable advertisers at 30 June (thousands)(4) 110 151 37.3%Yell.com searches for June (millions) 18 24 33.3% (1) Number of unique advertisers in printed directories that wererecognised for turnover 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. (2) The proportion of unique advertisers that have renewed theiradvertising from the preceding publication. (3) 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 a significant overall elimination of duplicate records of uniqueadvertisers. We have not adjusted the previously reported figure for the threemonths ended 30 June 2004 for any duplicated records in that period. Thereremains some overlap in reporting unique advertisers between Yellow Book andacquired businesses that we expect to be removed. These improvements to oursystems have not affected the reporting of our financial results. Retention inthe US is based on unique directory advertisers. (4) Unique customers with a live contract at month end. Thesefigures refer to searchable advertisers only, i.e. advertisers for whom userscan search on Yell.com. They exclude advertisers who purchase products such asbanners and domain names. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED INCOME STATEMENT Three months ended 30 June Notes 2004 2005 £m £m Turnover 2 280.9 313.6 Cost of sales (127.8) (143.0) Gross profit 153.1 170.6 Distribution costs (8.3) (9.4) Administrative expenses Ongoing activities (64.6) (67.1) Exceptional items 4 - 5.0 Operating profit 3 80.2 99.1 Net interest payable Ongoing activities (24.3) (21.7) Exceptional items 4 - (6.7) Profit on ordinary activities before taxation 55.9 70.7 Taxation Ongoing activities 5 (17.0) (24.6) Exceptional items 4,5 - 0.7 Profit for the financial period 38.9 46.8 (in pence) (in pence) Basic earnings per share 6 5.6 6.6 Diluted earnings per share 6 5.5 6.6 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 2004 2005 £m £m Profit for the financial period 38.9 46.8 Exchange differences on translation of foreign 7.0 28.5 operations Estimated effect of significant changes in - (20.0) securities markets on retirement benefit obligations Change in recorded value of financial instruments - (1.8) used as hedges Tax effect of items in other comprehensive income - 6.4 Tax benefit arising (reversing) on unexercised 1.5 (1.1) stock options Other comprehensive income - net gains not 8.5 12.0 recognised in income statement Total recognised income for the period 47.4 58.8 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED CASH FLOW STATEMENT Three months ended 30 June 2004 2005 £m £m Net cash inflow from operating activities Cash generated from operations 74.1 88.1 Interest paid (15.4) (12.2) Interest received 0.3 0.6 Income tax paid (5.3) (6.2) Net cash inflow from operating 53.7 70.3 activities Cash flows from investing activities Purchase of tangible fixed assets (3.7) (4.7) Purchase of subsidiary undertakings - (4.8) Net cash used in investing activities (3.7) (9.5) Cash flows from financing activities Proceeds from issuance of ordinary shares - 0.1 Purchase of own shares - (0.2) Repayment of borrowings (22.5) - Net cash used in financing activities (22.5) (0.1) Net increase in cash and bank overdrafts 27.5 60.7 Cash and bank overdrafts at beginning of the period 18.7 55.5 Exchange gains on cash and bank overdrafts 1.8 4.9 Cash and bank overdrafts at end of the period 48.0 121.1 Cash generated from operations Profit for the period 38.9 46.8 Adjustments for: Tax 17.0 23.9 Depreciation of tangible fixed assets 4.0 5.0 Amortisation of software costs 1.7 1.0 Goodwill adjustment arising from previously unrecognised tax benefits acquired 1.5 - Interest income (0.3) (0.6) Interest expense 24.6 29.0 Exceptional administrative items - (5.0) Changes in working capital: Inventories and directories in development (15.4) (6.3) Trade and other receivables 25.1 19.2 Trade and other payables (24.3) (25.8) Other 1.3 0.9 Cash generated from operations 74.1 88.1 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET At At 31 March 30 June Notes 2005 2005 £m £m Non current assets Intangible fixed assets 1,706.0 1,748.0 Tangible fixed assets 40.1 37.3 Investment 2.0 2.5 Deferred tax assets 7 97.1 97.1 Total non current assets 1,845.2 1,884.9 Current assets Inventories 7.5 9.7 Directories in development 165.1 175.0 Debtors 8 451.3 453.8 Cash at bank and in hand 55.5 121.1 Total current assets 679.4 759.6 Creditors: amounts falling due within one year Loans and other borrowings 10 (91.3) (876.7) Corporation tax (28.2) (34.3) Other creditors 11 (258.8) (253.8) Total creditors: amounts falling due within one year (378.3) (1,164.8) Net current assets (liabilities) 301.1 (405.2) Total assets less current liabilities 2,146.3 1,479.7 Creditors: amounts falling due after more than one year Loans and other borrowings 10 (1,070.3) (321.3) Deferred tax creditor 12 (51.3) (57.7) Retirement benefit obligations 13 (99.7) (113.5) Net assets 925.0 987.2 Capital and reserves Called up share capital 14 7.0 7.1 Share premium account 14 1,191.0 1,192.2 Foreign currency reserve 14 (116.2) (87.7) Profit and loss account deficit 14 (156.8) (124.4) Equity shareholders' funds 925.0 987.2 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 and the United States. This unaudited financial information for the three months to 30 June 2005 hasbeen prepared in accordance with the Group's International Financial ReportingStandards ("IFRS") accounting policies as set out in our conversion statementsfor the periods ended 31 March 2005. These accounting policies are the policieswe expect to apply in our financial statements for the year ended 31 March 2006,which will be prepared in accordance with IFRS. In preparing the financial information we used our best knowledge of theexpected standards and interpretations, facts and circumstances and accountingpolicies that will be applicable at 31 March 2006. These may change before 31March 2006. The expected standards and interpretations are subject to ongoingreview by the European Union, and the International Accounting Standards Boardmay issue amended or additional standards or interpretations. Therefore, untilwe prepare our first full IFRS financial statements, the possibility cannot beexcluded that the accompanying financial information may have to be adjusted. The amounts presented for the three months ended 30 June 2004 and at 30 June2004 and 31 March 2005 have been restated from the amounts previously presentedunder UK GAAP. Details can be obtained from the IFRS conversion statementspublished on 13 June 2005 on our website. Subsequent to publishing the IFRS conversion statements we have improved ouranalysis of deferred taxes and other items, which has given rise to adjustmentsto amounts presented on the face of the balance sheet at 31 March 2005. Theseadjustments have increased our deferred tax assets and deferred tax creditors by£4.5 million and increased the share premium account and profit and loss deficitby £0.3 million. These changes are presentational in nature and do not affectthe previously reported results or cash flows. The information contained herein does not constitute statutory financialstatements within the meaning of section 240 of the Companies Act 1985. 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 consolidated results for interim periods are not necessarily indicative ofresults for the full year. This financial information should be read inconjunction with Yell's 2005 annual report published in June 2005, whichincludes the audited consolidated financial statements of Yell Group PLC and itssubsidiaries for the year ended 31 March 2005. 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. Turnover Three months ended 30 June Change 2004 2005 % £m £m UK printed directories 138.9 143.9 3.6% Other products and services 11.7 16.5 41.0% Total UK turnover 150.6 160.4 6.5% US printed directories: US printed directories at constant exchange rate (a) 130.3 156.2 19.9% Exchange impact (a) - (3.0) Total US turnover 130.3 153.2 17.6% Group turnover 280.9 313.6 11.6% (a) Constant exchange rate states current period results at the sameexchange rate as that used to translate the results for the same period in theprevious year. Exchange impact is the difference between the results reportedat a constant exchange rate and the actual results using current period exchangerates. 3. Operating profit and EBITDA information EBITDA by segment Three months Change ended 30 June 2004 2005 % £m £m UK printed directories 51.1 50.6 (1.0)% Other products and services 3.6 6.5 80.6% Total UK operations 54.7 57.1 4.4% US operations: US printed directories at constant exchange rate (a) 32.7 43.7 33.6% Exchange impact (a) - (0.7) Total US operations 32.7 43.0 31.5% Group adjusted EBITDA 87.4 100.1 14.5% (a) Constant exchange rate states current period results at the same exchangerate as that used to translate the results for the same period in the previousyear. Exchange impact is the difference between the results reported at aconstant exchange rate and the actual results using current period exchangerates. (b) 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 Change ended 30 June 2004 2005 % £m £mUK operationsOperating profit 51.8 59.2Depreciation and amortisation of fixedassets 2.9 2.9UK operations EBITDA 54.7 62.1 13.5%Exceptional items - (5.0)UK operations adjusted EBITDA 54.7 57.1 4.4%UK operations adjusted EBITDA margin 36.3% 35.6% US operationsOperating profit 28.4 39.9Depreciation and amortisation of fixedassets 4.3 3.1US operations EBITDA 32.7 43.0Exchange impact (b) - 0.7US operations EBITDA at constant 32.7 43.7 33.6%exchange rate (b)Exchange impact (b) - (0.7)US operations EBITDA 32.7 43.0 31.5%US operations EBITDA margin 25.1% 28.1% Group Operating profit 80.2 99.1Depreciation and amortisation of fixedassets 7.2 6.0Group EBITDA 87.4 105.1 20.3%Exceptional items - (5.0)Exchange impact (b) - 0.7Group adjusted EBITDA at constant 87.4 100.8 15.3%exchange rate (b)Exchange impact (b) - (0.7)Group adjusted EBITDA 87.4 100.1 14.5% Group adjusted EBITDA margin 31.1% 31.9% (a) EBITDA is one of the key financial measures that we use to assess thegrowth in the business and operational efficiencies. (b) Constant exchange rate states current period results at the sameexchange rate as that used to translate the results for the same period in theprevious year. Exchange impact is the difference between the results reportedat a constant exchange rate and the actual results reported using current periodexchange 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. Results before and after exceptional items Three months ended 30 June 2004 2005 Ordinary Exceptional Total Ordinary Exceptional Total items items items items £m £m £m £m £m £m Gross profit 153.1 - 153.1 170.6 - 170.6Distribution costs (8.3) - (8.3) (9.4) - (9.4)Administrative expenses (64.6) - (64.6) (67.1) 5.0 (62.1) Operating profit 80.2 - 80.2 94.1 5.0 99.1Net interest payable (24.3) - (24.3) (21.7) (6.7) (28.4) Profit (loss) beforetaxation 55.9 - 55.9 72.4 (1.7) 70.7 Taxation (17.0) - (17.0) (24.6) 0.7 (23.9)Profit (loss) for theperiod 38.9 - 38.9 47.8 (1.0) 46.8 There were no exceptional items in the three months ended 30 June 2004 Theexceptional administrative credit for the three months ended 30 June 2005relates to the release of a provision for IPO costs. Exceptional interest costsrelate to the accelerated amortisation of deferred financing fees on our seniordebt, which was redeemed at the date of the TransWestern acquisition. 5. 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 2004 2005 £m £mProfit on ordinary activities before taxation multiplied by thestandard rate of corporation tax in the United Kingdom (30%) 16.8 21.7 Effects of:Higher tax rates in US 1.6 2.9Previously unrecognised US tax losses recognised in period (1.4) - Tax charge on ordinary profit before tax 17.0 24.6Net tax benefit on exceptional items - (0.7)Net charge on profit before tax 17.0 23.9 YELL GROUP PLC AND SUBSIDIARIESUNAUDITED 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 Exceptional Adjusted items Three months ended 30 June 2005Group profit for the financial period (£m) 46.8 1.0 47.8Weighted average number of issued ordinary shares 704.3 704.3(millions)Basic earnings per share (pence) 6.6 6.8Effect of share options (pence) - (0.1)Diluted earnings per share (pence) 6.6 6.7 Three months ended 30 June 2004Group profit for the financial period (£m) 38.9 - 38.9Weighted average number of issued ordinary shares 697.8 697.8(millions)Basic earnings per share (pence) 5.6 5.6Effect of share options (pence) (0.1) (0.1)Diluted earnings per share (pence) 5.5 5.5 7. Deferred tax assets The elements of deferred tax assets recognised in the accounts were as follows: At At 31 March 30 June 2005 2005 £m £mTax effect of timing differences due to:Retirement benefit obligations 29.9 34.1Bad debt provisions 25.1 26.7Net operating losses 20.9 17.1Depreciation 9.2 9.2Unrealised benefit on unexercised stock options 6.5 5.3Accrued expenses and other items 5.5 4.7Recognised deferred tax assets 97.1 97.1 YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 8. Debtors At At 31 March 30 June 2005 2005 £m £mTrade debtors 429.3 419.0Other debtors 8.1 9.0Accrued income 4.7 8.0Prepayments 9.2 17.8Total debtors 451.3 453.8 9. Net debt Analysis of net debt At At 31 March 2005 30 June 2005 £m £m Long-term loans and other borrowings falling due after more than one year 1,070.3 321.3Short-term borrowings and long-term loans and other borrowings falling due 91.3 876.7 within one year Total debt 1,161.6 1,198.0Cash at bank and in hand (55.5) (121.1)Net debt at end of period 1,106.1 1,076.9 10. Loans and other borrowings At At 31 March 2005 30 June (a) 2005 (a) £m £mAmounts falling due within one yearSenior credit facilities 90.0 875.3Net obligations under finance leases 1.3 1.4Total amounts falling due within one year 91.3 876.7Amounts falling due after more than one year Senior credit facilities 761.0 -Senior notes:Senior sterling notes 159.8 160.3Senior dollar notes 67.4 71.3Senior discount dollar notes 82.1 89.7Total amounts falling due after more than one year 1,070.3 321.3 Net loans and other borrowings 1,161.6 1,198.0 (a) Balances are shown net of deferred financing fees of £5.8 million at30 June 2005 and £14.0 million at 31 March 2005. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 11. Other creditors At At 31 March 30 June 2005 2005 £m £mTrade creditors 22.9 12.3Other taxation and social security 23.1 28.3Other creditors 4.3 6.0Accruals 117.0 114.7Deferred income 91.5 92.5Total creditors falling due within one year 258.8 253.8 12. Deferred taxation creditor The elements of deferred tax creditors recognised in the accounts were asfollows: At At 31 March 30 June 2005 2005 £m £mThe effect of timing differences due to:Amortisation of fixed assets 25.5 30.5Stocks valuation 25.8 27.2Recognised deferred tax creditors 51.3 57.7 13. Retirement benefit obligations The £13.8 million increase in retirement benefit obligations is the net resultof total charges of £5.8 million in the Income Statement and the estimateddeficit increase of £20.0 million in the Statement of Recognised Income andExpense offset by total cash contributions of £12.0 million. The £20.0 millionincrease in deficit reflects a decrease from 5.4% to 4.9% in the referencemarket rate to which the discount rate is tied and takes into account changes inasset values by reference to relevant market indices. 14. Changes in equity shareholders' funds Share Share Foreign Profit and currency loss capital premium reserve account Total £m £m £m £m £mBalance at 31 March 2005 7.0 1,191.0 (116.2) (156.8) 925.0Profit on ordinary - - - 46.8 46.8activities after taxationOrdinary share issue 0.1 1.2 - - 1.3Capital Accumulation Plan - - 1.9 1.9 and other share schemes (a)Currency movements - - 28.5 - 28.5Other comprehensive income - - - (16.3) (16.3)Balance at 30 June 2005 7.1 1,192.2 (87.7) (124.4) 987.2 (a) Amortisation of the costs incurred in buying shares held in an ESOPtrust for employees. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 15. United States Generally Accepted Accounting Principles Our consolidated financial information is prepared in accordance with theGroup's International Financial Reporting Standards ("IFRS") accounting policiesas set out in our conversion statements for the periods ended 31 March 2005,which differ in certain respects from those applicable in the United States ("USGAAP"). Differences result primarily from acquisition accounting foracquisitions before 1 April 2004, which affects the accounting for directoriesin development, goodwill and other intangibles and taxation. Timing differencesalso arise when recognising certain costs associated with directories indevelopment, interest that is fixed by derivative financial instruments, anddeferred tax assets associated with net operating losses in the United States.Differences in accounting for pensions arise from the use of different actuarialmethods and from a difference in the timing of when actuarial gains and lossesare recognised. Dividends are recorded, under IFRS, in the period in which theyare approved by the board of directors or shareholders. Under US GAAP,dividends are recorded in the period in which they are declared. The following information summarises estimated adjustments, gross of their taxeffect, which reconcile net profit and shareholders' funds from that reportedunder IFRS to that which would have been recorded had US GAAP been applied. Net profit Three months ended 30 June 2004 2005 £m £m Profit on ordinary activities after taxation under IFRS 38.9 46.8 Adjustment for: Directories in development -Deferred costs (6.2) (5.5) -Acquisition accounting(a) (4.0) - Pensions (1.0) (3.2) Other intangible assets (20.2) (18.2) Derivative financial instruments 6.0 (4.6) Deferred taxation 13.5 8.7 Deferred finance fees - 6.7 Other - (1.5) Net profit as adjusted for US GAAP 27.0 29.2 (a) Represents adjustments that arose as a result of acquisitions before1 April 2004. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 15. United States Generally Accepted Accounting Principles (continued) Equity shareholders' funds At At 31 March 30 June 2005 2005 £m £m Equity shareholders' funds under IFRS 925.0 987.2 Adjustment for: Directories in progress (115.6) (125.2) Pensions 94.9 111.7 Additional minimum pension liability (59.0) (59.0) Goodwill (542.9) (547.4) Other intangible assets 671.9 663.5 Derivative financial instruments 2.9 - Deferred taxation (164.0) (163.8) Dividends declared - (58.9) Deferred finance fees - 6.7 Other 1.7 -Equity shareholders' funds as adjusted for US GAAP 814.9 814.8 16. Litigation The lawsuit filed by Verizon was settled in October 2004. In subsequent months,Yellow Book USA was served with complaints filed as class actions in five USstates and the District of Columbia. In these actions, the plaintiffs allegeviolations of consumer protection legislation and are placing reliance onfindings of the New York Court in the now settled suit brought against YellowBook USA by Verizon. On 13 May 2005, the court in New Jersey gave itspreliminary approval to a comprehensive national settlement, with no admissionof liability. Notice of the terms of settlement was published to class membersand the final approval hearing is expected before we publish our half yearresults. The Yell Group fully provided for the estimated costs in the year ended31 March 2005 arising from this class action. 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 2005, Yell published 111 directories in the UnitedKingdom and 565 in the United States; in the United Kingdom, where it is aleading player in the classified advertising market, it served 478,000 uniqueadvertisers. In the United States, where it is the leading independentdirectories business, it served 455,000 unique advertisers. Yell's brands in the United Kingdom are Yellow Pages, Business Pages, Yell.comand Yellow Pages 118 24 7, and in the United States are Yellow Book andYellowbook.com, all of which are trademarks. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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