15th Feb 2005 07:00
Yell Group plc15 February 2005 15 February 2005 news release news release news release news release news release Yell Group plc financial results for the nine months ended 31 December 2004 Strong growth continues. Firmly on track to meet full year expectations. • Group turnover up 6.7% to £897.9 million; 12.5% at a constant exchange rate • Group adjusted EBITDA up 10.0% to £286.0 million; 14.8% at a constant exchange rate • Group adjusted profit after tax £78.0 million, excluding exceptional legal costs (£31.1 million last year, excluding exceptional IPO costs) • Group operating cash flow less capital expenditure up 9.8% to £261.2 million; up 13.7% at a constant exchange rate • Diluted earnings per share before amortisation and exceptional costs up 20.8% to 21.5 pence (17.8 pence last year on a pro forma basis) Note: Earnings, profit after tax and cash flow figures stated beforeexceptional legal costs in our US operation of £12.8 million (£8.0 million netof tax credit) in the 2005 financial year, and exceptional IPO costs of £148.5million (£111.3 million net of tax credit) in the 2004 financial year.Including these costs the Group made a profit after tax of £70.0 million (a lossof £80.2 million last year). John Condron, Chief Executive Officer, said: "Yell's consistent strategy and focused execution continue to deliver goodperformance across our operations both in the UK and the US and we continue toinvest in them for future growth. We are confident of meeting expectations forthe full year, as well as seeing a positive outlook beyond this." John Davis, Chief Financial Officer, said: "The Group's strong operational performance continues to drive high levels ofcash generation and profitability, with over 91% of adjusted EBITDA converted tocash. Consequently net debt now stands at 2.9 times adjusted EBITDA for thelast 12 months, compared with 3.3 times for the same period last year." 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 March2004 annual report on Form 20-F filed with the US Securities and ExchangeCommission (the "SEC") on 8 June 2004, 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 nine months ended 31 December 2004 to the SEC on Form 6-K on 15 February 2005. A copy of this filing can also be accessed on the Yell Group website. YELL GROUP PLC SUMMARY FINANCIAL RESULTS Nine months ended 31December 2003 2004 Change at constant exchange rate (f) £m £m ChangeTurnover (a) 841.3 897.9 6.7% 12.5%Adjusted EBITDA (a) (b) 260.1 286.0 10.0% 14.8%Operating cash flow (a) (c) 237.8 261.2 9.8% 13.7% Adjusted diluted earnings per share 17.8p 21.5p 20.8%(pence) (d) Cash conversion (a) (e) 91.4% 91.3% Adjusted profit after tax (b) 31.1 78.0Exceptional items after tax (111.3) (8.0)(Loss) profit on ordinary activities after (80.2) 70.0tax (a) Turnover, adjusted EBITDA, operating cash flow and cash conversion are thekey financial measures that we use to assess the growth in the business andoperational efficiencies. (b) Adjusted items in the period ended 31 December 2003 are stated beforeexceptional costs arising on IPO. Adjusted items in the period ended 31 December2004 are stated before exceptional legal costs. (c) Cash inflow from operations before payments of exceptional items, lesscapital expenditure. (d) Diluted earnings per share before amortisation and exceptional items. (e) Operating cash flow as a percentage of adjusted EBITDA. (f) 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. REVIEW OF OPERATING PERFORMANCE Turnover Group turnover increased 6.7% to £897.9 million; or 12.5% at a constant exchangerate, from £841.3 million last year. UK operations UK turnover increased 4.3% to £466.6 million. Turnover from printed directoriesgrew 2.6% to £428.8 million. The effect of RPI-6% was to reduce Yellow Pagesprices by an average of 3.4%. Yell.com turnover increased by 41.0% to £25.8million. The total number of unique print advertisers increased slightly to 354,000. TheUK retention rate was in line with the first half of the year at 75% (or 74%excluding national and key accounts). The decline from 78% last year primarilyreflects the substantial growth in our advertiser base over the last four yearsas new customers typically dilute retention. During the nine months, we grew average turnover per unique advertiser by 2.1%to £1,210 from £1,185 last year. In order to reflect changes in demographic, shopping and trading patterns, werescoped seven directories into thirteen during the first nine months. We planto rescope a further six directories in the last quarter. Yell.com continued to grow rapidly. This reflected the growth in searchableadvertisers of 41.5% to 133,000. Overall, we are confident that UK turnover remains firmly on track to meet fullyear expectations. US operations US turnover grew 9.5% to £431.3 million. At a constant exchange rate, theincrease was 21.8%; the average exchange rate was approximately $1.83: £1.00against $1.65: £1.00 in the same period last year. Unique advertisers increased 10.9% to 346,000 with average turnover per uniqueadvertiser up 9.7% to $2,285 and retention up from 69% to 71%. Organic turnover grew 15.4%. This comprised strong same-market growth of 12.3%,which benefited from the successful relaunch last year of several major formerMcLeod directories, and growth of 3.1% from ten new launches. The contributionto growth from acquisitions was 9.3%, mainly from Feist which we acquired inMarch 2004. Feist's contribution in the final quarter is expected to be arelatively smaller proportion of overall turnover growth. Growth was slowed by2.9% owing to changes in operating practices including the intentional run downof the CCD partnership as well as production rescheduled to the final quarter. We are confident that US turnover remains firmly on track to meet full yearexpectations. Adjusted EBITDA Group adjusted EBITDA increased by 10.0% to £286.0 million, or 14.8% at aconstant exchange rate. The Group adjusted EBITDA margin increased onepercentage point to 31.9%, driven by the strong US performance. UK adjusted EBITDA rose 2.0% to £172.2 million, reflecting the continuedexcellent progress of Yell.com, which partially offset significant investment tosupport the continuing revenue growth of printed directories. Yell.comincreased its EBITDA to £7.2 million from £3.7 million last year. The overallUK adjusted EBITDA margin was 36.9%, compared with 37.7% last year. In the US, strong revenue growth and operational leverage resulted in 24.8%growth in adjusted EBITDA to £113.8 million - a 38.7% increase at a constantexchange rate. The US adjusted EBITDA margin increased from 23.2% to 26.4%, asa result of the high conversion of revenue outperformance into profit. Operating cash flow and net debt The Group converted 91.3% of adjusted EBITDA to cash, as compared to 91.4% lastyear. Cash generation is expected to slow in the final quarter owing to plannedinvestment in next year's US launches. Group operating cash flow increased 9.8%to £261.2 million, or 13.7% at a constant exchange rate. Free cash flow (net cash inflow from operating activities (£263.2 million) lessinterest (£49.4 million) and taxation paid (£24.3 million) and purchase of fixedassets (£15.6 million)) generated during the nine months was £173.9 million. Weintend to make special pensions contributions totalling £17 million, payingapproximately half before the financial year end. These contributions are thefirst step in alleviating the level of the pension deficit and, while reducingfree cash flow, will have no effect on the Group's profit and loss. Net debt at £1,122 million, down £102 million from 31 March 2004, represents amultiple of 2.9 times adjusted EBITDA for the last 12 months. NET RESULTS After tax results Profit after tax before exceptional items for the nine months to 31 December2004 was £78.0 million, compared with an adjusted profit after tax of £31.1million for the same period last year. This reflects the strong EBITDA growth,as well as the lower interest charges arising from the new capital structure putin place at the time of our IPO on 15 July 2003. The tax charge beforeexceptional items was £47.5 million, which represents 23.8% of profit before taxadjusted for goodwill amortisation and exceptional costs. The profit after tax for the nine months ended 31 December 2004, includingexceptional items, was £70.0 million. Including the exceptional costs detailedbelow, the loss after tax for the nine months ended 31 December 2003 was £80.2million. Exceptional costs As previously reported, exceptional costs of £12.8 million (£8.0 million aftertax) are the total costs after tax relating to the nine-month long litigationbrought against Yellow Book, our US operation, which was settled on 7 October2004. In the equivalent period last year exceptional costs arose entirely onour IPO and amounted to £148.5 million before tax, and £111.3 million after atax credit of £37.2 million. Since the half year results were announced, Yellow Book USA has been served withcomplaints filed as class actions in four US states by customers allegingviolations of consumer protection legislation. We believe that the plaintiffsare relying on findings of the New York court in the now-settled suit broughtagainst Yellow Book USA by Verizon. We are in consultation with our legaladvisers and those of the plaintiffs as regards the merits and possiblefinancial effect of these actions. We are unable to reliably estimate anypotential cost arising from these actions at this time; therefore, we have notprovided for any costs in connection with these actions. Earnings and dividend per share Diluted earnings per share were 21.5 pence before amortisation and exceptionalcosts; an increase of 20.8%. Basic earnings per share before amortisation andexceptional costs were 21.7 pence. This compares with pro forma (beforeamortisation and as if the IPO had occurred before the start of last year) basicearnings per share of 18.1 pence last year. CURRENT UK REGULATORY REVIEW The current regulatory regime is being reviewed by the Office of Fair Trading(OFT). In August last year, the OFT stated that they expected the review to becompleted in the spring of this year. In November, they announced that this review would now take the form of a MarketStudy under the terms of the Enterprise Act - still keeping to the springcompletion date. As we have consistently stated, a Market Study can have anumber of outcomes such as the withdrawal of undertakings, the acceptance by theOFT of new undertakings or a referral to the Competition Commission. The OFT has carried out its initial information gathering exercise and is nowconsulting with us and other industry participants. This is a confidentialdialogue and no further information can be given at this stage. KEY OPERATIONAL INFORMATION Nine months ended 31 December 2003 2004 Change UK printed directoriesUnique advertisers (thousands) (a) 353 354 0.3%Directory editions published 68 74Unique advertiser retention rate (%) (b) 78 75Turnover per unique advertiser (£) 1,185 1,210 2.1% US printed directoriesUnique advertisers (thousands) (a) (c) 312 346 10.9%Directory editions published 390 401Unique advertiser retention rate (%) (c) 69 71Turnover per unique advertiser ($) 2,083 2,285 9.7% Other UK products and servicesYell.com page impressions for December (millions) (d) 46 50 8.7%Yell.com searchable advertisers at 31 December (thousands)(e) 94 133 41.5% (a) 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. (b) The proportion of unique advertisers that have renewed theiradvertising from the preceding publication. As a result of improvements to oursystems, we are now able to include national and key accounts in our measurementof retention. If we had continued to exclude these accounts, the retention ratefor the nine months ended 31 December 2004 would have been 74%. We have notadjusted previously reported figures for the nine months ended 31 December2003. These improvements to our systems have not affected the reporting of ourfinancial results. (c) 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 ninemonths ended 31 December 2003 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. (d) Growth in page impressions is lower than in previous periods asa result of a site redesign that has reduced the number of pages a user has toaccess when searching Yell.com. (e) 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 PROFIT AND LOSS ACCOUNT Nine months ended 31 December 2003 2004 Notes £m £m Turnover 2 841.3 897.9 Cost of sales (384.5) (410.6) Gross profit 456.8 487.3 Distribution costs (24.9) (26.1) Administrative expenses Ongoing activities (262.3) (266.4) Exceptional items 4 (90.1) (12.8) (352.4) (279.2) Operating profit 3 79.5 182.0 Net interest payable Ongoing activities (112.6) (69.3) Exceptional items 4 (58.4) - (171.0) (69.3) (Loss) profit on ordinary activities before taxation (91.5) 112.7 Taxation On ongoing activities 5 (25.9) (47.5) On exceptional items 4,5 37.2 4.8 11.3 (42.7) (Loss) profit for the financial period (80.2) 70.0 Interim dividend 6 (20.8) (29.5) Retained (loss) profit for the financial period (101.0) 40.5 (in pence) (in pence) Basic (loss) earnings per share 7 (15.1) 10.0 Diluted (loss) earnings per share 7 (15.1) 9.9 Earnings per share before exceptional items and goodwill amortisation (a) Basic 7 18.1 21.7 Diluted 7 17.8 21.5 (a) Earnings per share before exceptional items and goodwill amortisationfor the nine months ended 31 December 2003 are calculated on a pro forma basisas though our IPO and debt refinancing had occurred before 1 April 2003. With the exception of the profit for the financial period detailed above and thecurrency movements detailed in note 10, there have been no other recognisedgains or losses. See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED CASH FLOW STATEMENT Nine months ended 31 December Notes 2003 2004 £m £m Net cash inflow from operating activities 223.7 263.2 Returns on investments and servicing of finance Interest paid (94.8) (49.4) Redemption premium paid (19.7) - Finance fees paid (16.4) - Net cash outflow for returns on investments (130.9) (49.4) and servicing of finance Taxation (10.2) (24.3) Capital expenditure and financial investment Purchase of tangible fixed assets, (17.9) (15.6) net of sales proceeds Net cash outflow for capital expenditure (17.9) (15.6) and financial investment Acquisitions Purchase of subsidiary undertakings, net of (5.8) - cash acquired Net cash outflow for acquisitions (5.8) - Dividends paid 8 (20.8) (71.3) Net cash inflow before financing 38.1 102.6 Financing Issue of ordinary share capital 8 433.6 1.4 Expenses paid in connection with share (23.7) issue - Purchase of own shares 8 - (6.6) New loans issued 1,031.0 - Borrowings repaid 8 (1,378.4) (45.0) Net cash inflow (outflow) from financing 62.5 (50.2) Increase in net cash in the period 100.6 52.4 Reconciliation of operating profit to net cash inflow from operating activities Total operating profit 79.5 182.0 Depreciation 17.2 17.1 Goodwill amortisation 73.3 74.1 Exceptional employee costs settled in 49.1 shares - Increase in stocks (29.1) (40.2) Decrease in debtors 30.6 18.2 Increase in creditors 1.1 7.6 Other non-cash items 2.0 4.4 Net cash inflow from operating activities 223.7 263.2 Net cash inflow from operating activities 223.7 263.2 Cash payments of accrued exceptional items 32.0 13.6 Purchase of tangible fixed assets, net of (17.9) (15.6) sale proceeds Net cash inflow from operating activities before payments 237.8 261.2 of exceptional items and after capital expenditure See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET At At 31 March 31 December Notes 2004 2004 £m £m Fixed assets Intangible assets 1,725.3 1,623.7 Tangible assets 45.9 42.3 Investment 1.8 2.2 Total fixed assets 1,773.0 1,668.2 Current assets Stocks 151.9 187.0 Debtors 460.6 418.8 Cash at bank and in hand 8 18.7 68.9 Total current assets 631.2 674.7 Creditors: amounts falling due within one year Loans and other borrowings 8,9 (85.8) (86.4) Other creditors (273.0) (244.5) Total creditors: amounts falling due within one year (358.8) (330.9) Net current assets 272.4 343.8 Total assets less current liabilities 2,045.4 2,012.0 Creditors: amounts falling due after more than one year Loans and other borrowings 8,9 (1,155.9) (1,104.0) Net assets 889.5 908.0 Capital and reserves Called up share capital 10 7.0 7.0 Share premium account 10 1,184.7 1,188.6 Profit and loss account 10 (302.2) (287.6) Equity shareholders' funds 889.5 908.0 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 and the United States. The unaudited financial information has been prepared in accordance withgenerally accepted accounting principles in the UK ("UK GAAP") and on the basisof the accounting policies that were set out in the audited consolidatedfinancial information of Yell Group plc for the year ended 31 March 2004. 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 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, employeepension costs and taxes. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 2. Turnover Nine months ended 31 December Change 2003 2004 % £m £m UK printed directories 417.8 428.8 2.6% Other products and services 29.7 37.8 27.3% Total UK turnover 447.5 466.6 4.3% US printed directories: US printed directories at constant exchange 479.6 21.8% rate (a) 393.8 Exchange impact (a) - (48.3) Total US turnover 393.8 431.3 9.5% Group turnover 841.3 897.9 6.7% (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 Adjusted EBITDA by segment Nine months Change ended 31 December 2003 2004 % £m £m UK printed directories 167.4 160.8 (3.9)% Other products and services 1.5 11.4 Total UK operations 168.9 172.2 2.0% US operations: US printed directories at constant exchange 126.5 38.7% rate (a) 91.2 Exchange impact (a) - (12.7) Total US operations 91.2 113.8 24.8% Group adjusted EBITDA 260.1 286.0 10.0% (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. 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 adjusted EBITDA (a) Nine months Change ended 31 December 2003 2004 % £m £m UK operations Operating profit 81.7 119.6Depreciation and amortisation 51.9 52.6UK operations EBITDA 133.6 172.2Exceptional items 35.3 -UK operations adjusted EBITDA 168.9 172.2 2.0%UK operations adjusted EBITDA margin 37.7% 36.9% US operations Operating (loss) profit (2.2) 62.4Depreciation and amortisation 38.6 38.6US operations EBITDA 36.4 101.0Exceptional items 54.8 12.8Exchange impact (b) - 12.7US operations adjusted EBITDA at 91.2 126.5 38.7%constant exchange rate (b)Exchange impact (b) - (12.7)US operations adjusted EBITDA 91.2 113.8 24.8%US operations adjusted EBITDA margin 23.2% 26.4%(c) Group Operating profit 79.5 182.0Depreciation and amortisation 90.5 91.2Group EBITDA 170.0 273.2 60.7%Exceptional items 90.1 12.8Exchange impact (b) - 12.7Group adjusted EBITDA at constant 260.1 298.7 14.8%exchange rate (b)Exchange impact (b) - (12.7)Group adjusted EBITDA 260.1 286.0 10.0% Group adjusted EBITDA margin 30.9% 31.9% (a) Adjusted EBITDA is one of the key financial measures that we use toassess the growth 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. (c) US operations EBITDA margin including exceptional items is 23.4% inthe nine months ended 31 December 2004 (2003 - 9.2%). 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. Results before and after exceptional items Nine months ended 31 December 2003 2004 Ordinary Exceptional Total Ordinary Exceptional Total items items items items £m £m £m £m £m £m Gross profit 456.8 - 456.8 487.3 - 487.3Distribution costs (24.9) - (24.9) (26.1) - (26.1)Administrative expenses (262.3) (90.1) (352.4) (266.4) (12.8) (279.2)Operating profit (loss) 169.6 (90.1) 79.5 194.8 (12.8) 182.0Net interest payable (112.6) (58.4) (171.0) (69.3) - (69.3)Profit (loss) before 57.0 (148.5) (91.5) 125.5 (12.8) 112.7taxationTaxation (25.9) 37.2 11.3 (47.5) 4.8 (42.7)Profit (loss) for the 31.1 (111.3) (80.2) 78.0 (8.0) 70.0period Exceptional costs for the nine months to 31 December 2004 are the total costsrelating to litigation brought against our US operations (see note 12).Exceptional administrative costs in the nine months ended 31 December 2003relate to costs incurred in connection with our IPO. 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: Nine months ended 31 December 2003 2004 £m £m Profit on ordinary activities before exceptional items and taxation 17.1 37.6multiplied by the standard rate of corporation tax in the UnitedKingdom (30%)Effects of:Non-allowable goodwill amortization 15.7 15.6US tax losses (5.1) (4.2)Other permanent differences (1.8) (1.5)Tax charge on ongoing activities 25.9 47.5Exceptional items multiplied by the standard rate of corporation tax (44.6) (3.8)in the United Kingdom (30%)Effects of: - -Higher rate for overseas tax - (1.0)Items not allowed for tax purposes 7.4 -Taxation credit on exceptional items (37.2) (4.8)Total tax (credit) charge (11.3) 42.7 6. Interim Dividend The interim dividend of 4.2 pence per share (2003 - 3.0 pence per share) waspaid on 17 December 2004 to shareholders registered at the close of business on19 November 2004 and amounted to £29.5 million (2003 - £20.8 million). YELL GROUP PLC AND SUBSIDIARIESUNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 7. Earnings (loss) per share Actual Pro forma Exceptional Amortisation (c) Adjusted interest costs net adjust- of tax (b) ments net of tax (a)Nine months ended 31 December 2004 Group profit for the financial period 70.0 - 8.0 74.1 152.1(£m)Weighted average number of issued 700.4 - 700.4ordinary shares (millions) (d) Basic earnings per share (pence) 10.0 21.7Effect of share options (pence) (0.1) (0.2) Diluted earnings per share (pence) 9.9 21.5 Nine months ended 31 December 2003 Group (loss) profit for the financial (80.2) 21.1 111.3 73.3 125.5period (£m)Weighted average number of issued 529.9 165.0 694.9ordinary shares (millions) (d)Basic (loss) earnings (15.1) 18.1 per share (pence)Effect of share options (pence) - (0.3) Diluted (loss) earnings (15.1) 17.8per share (pence) (a) Group losses for the nine months ended 31 December 2003have been adjusted to exclude interest charges on the long-term debt we repaidas a result of the IPO. Interest has been added back by referring to theeffective interest rates applied to the borrowings repaid from the proceeds ofthe IPO over the period. All interest adjustments have been tax effected at theUK corporation tax rate of 30%. The weighted average number of shares for thenine months ended 31 December 2003 has been adjusted as though the IPO happenedbefore 1 April 2003. (b) Exceptional items are explained in note 4. (c) Amortisation charges presented are not adjusted for tax.The adjustment would have been £66.4 million, as opposed to £74.1 million, and£64.9 million, as opposed to £73.3 million, in 2004 and 2003, respectively, ifthe tax effect from tax allowable amortisation in the United States had beentaken into account. Accordingly, the diluted earnings per share would have been20.4 pence, as opposed to 21.5 pence, in the nine months ended 31 December2004 and 16.6 pence, as opposed to 17.8 pence in the nine months ended 31December 2003. (d) The calculation of the basic and diluted earnings (loss)per ordinary share has been based on the profit (loss) for the relevantfinancial period and on 694.9 million shares for the nine months ended 31December 2003, being the weighted average share capital during the period aftertaking into account the restructuring of the existing share capital on the IPO.For the nine months ended 31 December 2004, the calculation was based on 700.4million shares, the weighted average share capital during the period. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 8. Net debt Analysis of net debt At At 31 March 2004 31 December 2004 £m £m Long-term loans and other borrowings falling due after more than one year 1,155.9 1,104.0Short-term borrowings and long-term loans and other borrowings falling due within 85.8 one year 86.4Total debt 1,241.7 1,190.4Cash at bank and in hand (18.7) (68.9)Net debt at end of period 1,223.0 1,121.5 Reconciliation of movement in net debt Debt due within one Total year Cash excluding Debt due less bank bank after overdraft overdraft one year Net debt £m £m £m £m At 31 March 2004 18.7 (85.8) (1,155.9) (1,223.0)Net cash inflow before financing and 173.9 - - 173.9dividends paidDividend paid (71.3) - - (71.3)Long term debt becoming due within one - (45.0) 45.0 -yearBorrowings repaid (45.0) 45.0 - -Issue of ordinary share capital 1.4 - - 1.4Purchase of own shares (6.6) - - (6.6)Non-cash charges - (0.6) (11.9) (12.5)Currency movements (2.2) - 18.8 16.6At 31 December 2004 68.9 (86.4) (1,104.0) (1,121.5) YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 9. Loans and other borrowings At At 31 March 2004 31 December 2004 (a) (a) £m £m Amounts falling due within one yearSenior credit facilities (b) 80.0 85.0Revolver loan (b) 5.0 -Net obligations under finance leases 0.8 1.4Total amounts falling due within one year 85.8 86.4Amounts falling due after more than one year Senior credit facilities (b) 856.6 800.9Senior notes:Senior sterling notes 158.1 159.1Senior dollar notes 68.1 66.0Senior discount dollar notes 73.1 78.0Total amounts falling due after more than one year 1,155.9 1,104.0 Net loans and other borrowings 1,241.7 1,190.4 (a) Balances are shown net of deferred financing fees of £16.9 million at31 December 2004 and £20.1 million at 31 March 2004. (b) Yell made payments of £40.0 million in the nine months ended 31December 2004 on amounts owed under the senior facility as required by thesenior facility agreement and also repaid £5.0 million that had been drawn downagainst the senior revolving credit facility at 31 March 2004. 10. Changes in equity shareholders' funds Share capital Share premium Profit and loss account Total £m £m £m £m Balance at 31 March 2004 7.0 1,184.7 (302.2) 889.5Profit on ordinary activities after - - 70.0 70.0taxationInterim dividend - - (29.5) (29.5)Ordinary share issue - 3.9 - 3.9Capital Accumulation Plan (a) - - (4.7) (4.7)Currency movements (b) - - (21.2) (21.2)Balance at 31 December 2004 7.0 1,188.6 (287.6) 908.0 (a) Purchase of shares (£6.6 million) and amortisation of the costsincurred in buying shares held in an ESOP trust for employees. (b) The cumulative currency translation adjustment was a £123.9 millionloss at 31 December 2004 (31 March 2004 - £102.7 million loss). YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 11. United States Generally Accepted Accounting Principles Our consolidated financial information is prepared in accordance with accountingprinciples generally accepted in the United Kingdom which differ in certainrespects from those applicable in the United States ("US GAAP"). Differencesresult primarily from acquisition accounting, which affects the accounting fordirectories in progress, goodwill and other intangibles and taxation. Timingdifferences also arise when recognising certain costs associated withdirectories in progress, interest that is fixed by derivative financialinstruments, and deferred tax assets associated with net operating losses in theUnited States. Differences in accounting for pensions arise from therequirements to use different actuarial methods and assumptions. Differences inaccounting for our share options arise from the adoption of option pricingmodels to value options under US GAAP in circumstances where the options arevalued at £nil value under UK GAAP. Dividends are recorded, under UK GAAP, inthe period in respect of which they are proposed by the board of directors tothe shareholders. Under US GAAP, dividends are recorded in the period in whichthey are declared. The following information summarises estimated adjustments, gross of their taxeffect, which reconcile net (loss) profit and shareholders' funds from thatreported under UK GAAP to that which would have been recorded had US GAAP beenapplied. Net (loss) profit Nine months ended 31 December 2003 2004 £m £m (Loss) profit on ordinary activities after taxation under UK GAAP (80.2) 70.0 Adjustment for: Directories in progress -Deferred costs (28.7) (19.5) -Acquisition accounting(a) - (4.0) Pensions (6.9) (10.3) Goodwill 73.3 74.1 Other intangible assets (70.2) (54.4) Derivative financial instruments 21.2 3.4 Employee incentive plans (0.6) (2.3) Amortisation of deferred financing costs - (0.4) Deferred taxation 13.2 25.5 Other (1.9) (0.3) Net (loss) profit as adjusted for US GAAP (80.8) 81.8 (a) Represents adjustments that arose as a result of acquisitions. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION (continued) 11. United States Generally Accepted Accounting Principles (continued) Equity shareholders' funds At At 31 March 31 December 2004 2004 £m £m Equity shareholders' funds under UK GAAP 889.5 908.0 Adjustment for: Directories in progress (103.2) (123.6) Pensions (0.3) (10.6) Additional minimum pension liability (37.9) (37.9) Goodwill (562.3) (483.6) Other intangible assets 746.6 684.8 Derivative financial instruments (3.2) 0.2 Deferred taxation (182.9) (153.0) Dividends proposed 41.9 - Other 2.3 1.6Equity shareholders' funds as adjusted for US GAAP 790.5 785.9 12. Litigation Since the half year results were announced, Yellow Book USA has been served withcomplaints filed as class actions in four US states by customers allegingviolations of consumer protection legislation. We believe that the plaintiffsare relying on findings of the New York court in the now-settled suit broughtagainst Yellow Book USA by Verizon. We are in consultation with our legaladvisers and those of the plaintiffs as regards the merits and possiblefinancial effect of these actions. We are unable to reliably estimate anypotential cost arising from these actions at this time; therefore, we have notprovided for any costs in connection with these actions. 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 2004, Yell published 99 directories in the UnitedKingdom and 536 in the United States; in the United Kingdom, where it is a clearmarket leader, it served 480,000 unique advertisers. In the United States,where it is the leading independent directories business, it served 386,000unique 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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