7th Nov 2006 07:02
Yell Group plc07 November 2006 Yell Group plc financial results for the six months ended 30 September 2006 Strong organic revenue and underlying profit growth. Rapid increase in online contribution. Reiterating full year guidance. Dividend up 12%. • Revenue up 19.4% to £848.8 million; up 7.8% excluding acquisitions • Adjusted EBITDA up 15.6% to £269.2 million • Adjusted profit after tax down 2.2% to £106.9 million • Adjusted diluted earnings per share down 1.6 pence to 13.8 pence • Operating cash flow up £32.8 million to £245.5 million. Cash conversion 91.2% (2005 - 91.3%) • Interim dividend up 11.8% to 5.7 pence per share Six months ended 30 SeptemberStatutory results (unaudited) 2005 2006 Change £m £m %Revenue 711.1 848.8 19.4EBITDA * 235.5 269.2 14.3Profit after tax and minority interests 103.4 58.1 (43.8)Cash generated from operations 219.5 262.6 19.6Diluted earnings per share (pence) 14.5 7.5 (48.3)* EBITDA is reconciled to operating profit in note 3 to the financial information on page16 John Condron, Chief Executive Officer, said: "Yell continues to deliver strong organic growth, including the rapiddevelopment of our online businesses. This reflects our consistent "Win, Keepand Grow" customer strategy and our investment in usage and content in all ourproducts across all our markets. "Our acquisition of TPI has now expanded our growth platform into Spain andLatin America. Integration has started very well and our "back to basics"approach is being widely embraced by the business. "These results underpin our confidence in the future outlook for Yell." John Davis, Chief Financial Officer, said: "In the first half of this year, Yell has delivered almost 8% organic revenuegrowth with strong underlying growth in profit and cash flows. "The strength of profit growth is masked by several factors relating to TPIincluding the seasonally normal low number of TPI directories distributed in thetwo summer months since the acquisition and the equity issue to finance TPI inadvance of the acquisition. "The second half will not be affected by these factors and we reiterate our fullyear guidance and increase our interim dividend by 12%." 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" in Yell Group plc's 31 March 2006 annualreport for a discussion of some of these factors. We undertake no obligationpublicly to update or revise any forward-looking statements, except as may berequired by law. A copy of this release can be accessed at: www.yellgroup.com/announcements YELL GROUP PLC SUMMARY FINANCIAL RESULTS Six months Change at ended 30 September constant exchangeUnaudited 2005 2006 Change rate (a) £m £m % % Revenue (b) 711.1 848.8 19.4 21.2Adjusted EBITDA (b) (c) 232.9 269.2 15.6 17.3 Operating cash flow (b) (d) 212.7 245.5 15.4 16.7Cash conversion (b) (e) 91.3% 91.2% Adjusted profit after tax and minority interests(f) 109.3 106.9 (2.2) Adjusted diluted earnings per share (pence)(f) 15.4 13.8 (10.4) (a) Change at constant exchange rate states the change in current periodresults compared with the same period in the previous year as if the current period results were translated at the same exchange rate as that used to translate the results for the same period in the previous year. (b) Revenue, EBITDA, operating cash flow and cash conversion are the keyfinancial measures that we use to assess the growth in the business andoperational efficiencies. (c) EBITDA was not adjusted in the six months ended 30 September 2006. AdjustedEBITDA for the six months ended 30 September 2005 is stated before exceptional costs of £2.4 million arising from the TransWestern acquisition, and an exceptional credit of £5.0 million from releasing a provision for IPO costs. (d) Cash generated from operations before payments of exceptional costs,less capital expenditure. (e) Operating cash flow as a percentage of adjusted EBITDA. (f) Adjusted profit after tax and adjusted diluted earnings per share are stated before exceptional items and amortisation of acquired intangibles,all net of related tax. A reconciliation to the related statutory figuresis presented in note 6 to the financial information. REVIEW OF OPERATING PERFORMANCE Revenue Group revenue increased 19.4% to £848.8 million, or 21.2% at a constant exchangerate, from £711.1 million for the same period last year. Growth beforeacquisitions, mainly TransWestern and TPI, was 7.8% at a constant exchange rate. UK operations UK revenue increased 3.0% to £351.6 million driven entirely by a 66.9% increasein revenue by Yell.com. Revenue from UK printed directories was 2.9% lower at £297.1 million, as thetotal number of unique print advertisers declined by 3.7% to 235,000 due tocompetition. This was partly offset by the 0.6% increase in average revenue perunique advertiser to £1,264. Retention was stable at 74%. The effect of ourregulatory undertaking of RPI-6% was to reduce Yellow Pages rate card prices byan average of 2.7%. Yell.com's revenue grew 66.9% to £42.9 million with growth of 14.5% insearchable advertisers at 30 September to 182,000 and a 40.9% increase inrecognised revenue per average searchable advertiser, reflecting up-sell ofhigher value products as we monetise usage. Underpinning this, unique users forSeptember grew 34.8%. The slower rate of growth in searches of 16.0% indicatesthe effectiveness of our site as users require fewer searches to achieveresults. We reiterate our guidance of full year UK revenue growth of 3% driven entirelyby Yell.com. US operations Total US revenue grew 23.0% to £455.0 million, or 26.4% at a constant exchangerate. The effective exchange rate was approximately $1.86: £1.00 against $1.81:£1.00 in the same period last year. Organic revenue growth contributed 12.2% to the total revenue growth of 26.4%and comprised growth in both print and online products. Same market growth of printed directories was 8.4% on a like-for-like basis andcontributed 7.5% to organic growth. In addition, launches contributed 2.9% toorganic growth. Yellowbook.com revenue grew 68.8% to $29.7 million and contributed 1.8% toorganic growth. We grew usage very significantly to 5.2 million unique visitorsin September from 1.9 million in the previous September. At 30 September 2006,Yellowbook.com had 390,000 searchable advertisers online. As expected, revenue from directories publishing for the first time, mainlyTransWestern, contributed $105.8 million or 15.8% to the total revenue growth. Revenue growth was reduced by 1.6% from the planned rescheduling of directoriesinto later months resulting from the integration of TransWestern. Yellow Book increased unique advertisers by 42.7% to 364,000, the majorityarising from the acquisition of TransWestern. Also reflecting the acquisition,average revenue per unique advertiser decreased by 1.8% to $2,245 and retentionwas slightly down at 70%. Looking forward, we expect some slowing of organic growth in the second half ofthe year as TransWestern titles enter organic growth for the first time.However, we reiterate our guidance for the full year of organic growth of 10%. Spanish and Latin American operations We have consolidated the results of Telefonica Publicidad e Informacion, S.A. ("TPI") since 31 July 2006. In the two months since acquisition we haveconsolidated less than 10% of the annual revenue owing to the low number ofdirectories distributed, as usual, in the summer months. TPI revenue from all products during the two months was £42.2 million, themajority of which came from printed directories in Spain including just 13yellow pages directories. Revenue from yellow pages directories grew 0.5% on alike for like basis in the nine month period since 31 December 2005, the TPIyear-end. Adjusted EBITDA Group adjusted EBITDA increased by 15.6% to £269.2 million, or 17.3% at aconstant exchange rate. There were no exceptional items affecting EBITDA in the six months ended 30September 2006. However, adjusted EBITDA for the same period last year isstated before an exceptional credit of £5.0 million from releasing anover-provision for IPO costs and exceptional costs of £2.4 million relating tothe TransWestern acquisition. The UK adjusted EBITDA growth of 0.7% to £133.3 million was slightly diluted bythe planned, higher proportion of annual investment in the first half. Theoverall UK adjusted EBITDA margin was 37.9%, compared with 38.8% in the sameperiod last year. We reiterate full year guidance of flat margins for the UK. Yell.com grew adjusted EBITDA to £15.8 million from £10.9 million with lowermargins of 36.9% compared with 42.4% last year, reflecting phasing ofinvestment. UK printed directories' adjusted EBITDA declined from £117.2million to £112.5 million, with margins declining to 37.9% from 38.3% in thesame period last year, reflecting the investment required to grow revenue underthe regulatory price cap. In the US, adjusted EBITDA grew 27.2% to £127.8 million, a 31.1% increase at aconstant exchange rate. The US adjusted EBITDA margin increased from 27.2% to28.1% in line with guidance for the year end of margin growth of one percentagepoint. TPI EBITDA was £8.1 million in the period since acquisition and the margin was19.2% reflecting the low number of directories distributed during the two summermonths. CASH FLOW AND NET DEBT The Group converted 91.2% of adjusted EBITDA to cash, as compared with 91.3%last year. Operating cash flow increased 15.4% to £245.5 million, or 16.7% at aconstant exchange rate. This apparent out-performance against the 75% to 80%cash conversion in our full year guidance arises from favourable timing ofpayments and receipts, particularly at TPI. Six months ended 30 September 2005 2006Unaudited £m £m Adjusted EBITDA 232.9 269.2 Exceptional items 2.6 -Working capital movements and non-cash charges (16.0) (6.6) Cash generated from operations (see page 13) 219.5 262.6Cash payments of exceptional items 3.0 -Purchase of property, plant and equipment (9.8) (17.1) Operating cash flow 212.7 245.5Adjusted EBITDA 232.9 269.2 Cash conversion 91.3% 91.2% The increase in net debt at 30 September 2006 to £3,723.8 million reflects thenew debt acquired for the TPI purchase. Net debt was 5.4 times pro formaadjusted EBITDA over the last twelve months. The movement in net debt for thesix months ended 30 September 2006 arose as follows: Net debtUnaudited £m At 31 March 2006 1,994.0Operating cash flow (245.5)Interest and tax payments, net of £46.7 million accreted interest settled byrefinancing 124.7Redemption premiums paid 22.1Purchase of subsidiary undertakings, net of cash and debt acquired 2,179.5Purchase of own shares 0.3Proceeds of shares issued (346.3)Dividends paid 78.5Finance costs increasing debt 24.8Currency movements (108.3) At 30 September 2006 3,723.8 NET RESULTS Adjusted profit after tax, and after minority interests in TPI earnings, wasdown 2.2% to £106.9 million, dampened by the low number of TPI directoriesdistributed over the summer months since the acquisition and a slightdeterioration in US dollar exchange rates. The effects described above, as well as the timing of the equity issue tofinance the acquisition of TPI in advance of the acquisition dampened adjusted,diluted earnings per share, which was down by 1.6 pence to 13.8 pence. On an unadjusted basis, diluted earnings per share were down 7.0 pence to 7.5pence. This reduction resulted from, in addition to the effects describedabove, the increase in amortisation from the acquisitions of TransWestern andTPI and the writing off of costs arising on the refinancing of our debt.Statutory profit attributable to the equity shareholders of the group was alsodown 43.8% to £58.1 million for the same reasons. These adjustments above are described in note 6 to the financial information onpage 18. The effective tax rate in the six month period ended 30 September 2006 was34.1%, compared with 33.7% last year. See note 4 to the financial informationon page 17. INTERIM DIVIDEND The Board has declared an 11.8% increase in the interim dividend to 5.7 penceper share, and this is expected to account for one third of the full yeardividend. The ex-dividend date will be 15 November 2006 and the interim dividend will bepaid on 15 December 2006 to shareholders registered on 17 November 2006. UK REGULATION The Competition Commission published its proposed remedies for ClassifiedDirectory Advertising Services on 7 September 2006 and its revised remediesproposals on 3 November 2006. It has invited comments on these by 10 November2006. According to the Commission's timetable, the publication of the finalreport is still expected in November 2006. While we obviously welcome the proposed reduction in the level of advertisingprice regulation envisaged in the Commission's provisional remedies, wenevertheless believe that market forces, rather than regulation, should alwaysbe the preferred route. We have said many times we do not think the rapidlyevolving and highly competitive classified directories market requiresregulation and we will continue to press this point. All published information relating to the investigation can be found on theCommission's website at www.competition-commission.org.uk. KEY PERFORMANCE INDICATORSUnaudited Six months ended 30 September 2005 2006 Change %UK Printed directoriesUnique advertisers (thousands) (a) 244 235 (3.7)Directory editions published 57 57Unique advertiser retention rate (%) (b) 74 74Revenue per unique advertiser (£) 1,256 1,264 0.6 InternetSearchable advertisers at 30 September (thousands) (c) 159 182 14.5Searches for September (millions) 25 29 16.0Unique users for September (millions) (d) 4.6 6.2 34.8Revenue per average searchable advertiser (£) (e) 171 241 40.9 US Printed directoriesUnique advertisers (thousands) (a) (f) (g) 255 364 42.7Directory editions published (g) 271 431Unique advertiser retention rate (%) (b) (f) (g) 71 70Revenue per unique advertiser ($) (g) (h) 2,286 2,245 (1.8) InternetSearchable advertisers at 30 September (thousands)(i) 348 390 12.1Unique visitors for September (millions) (j) 1.9 5.2 173.7Revenue per average searchable advertiser ($) (e) (i) 55 76 38.2 Spain (k) Yellow pages directoriesUnique advertisers (thousands) (a) 27Directory editions published 13Unique advertiser retention rate (%) (b) 83Revenue per unique advertiser (•) 773 (a) 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. (b) The proportion of unique advertisers that have renewed theiradvertising from the preceding publication. (c) 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 only productssuch as banners and domain names. (d) 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. (e) Yell.com revenue per average searchable advertiser is calculatedby dividing the recognised revenue in the six month period by the average numberof searchable advertisers in that period. (Yell.com September 2005 - 150,000;September 2006 - 178,000.) Yellowbook.com revenue per average searchableadvertiser is calculated by dividing the recognised revenue in the six monthperiod by the average number of searchable advertisers in that period.(Yellowbook.com September 2006 - 391,000.) (f) As a result of the progress in the United States towardsintegrating our customer databases, we have been able to make improvements inthe ways in which we capture, record and analyse customer information. This hasled to an overall elimination of duplicate records of unique advertisers. Wehave not adjusted the previously reported figure for the six months ended 30September 2005 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. Retention in the US isbased on unique directory advertisers. (g) The 2005 figures relate only to Yellow Book and do not includeTransWestern. The 2006 combined figures are presented after eliminatingduplicate advertisers. Results for TransWestern for the same period in 2005were: unique advertisers - 39,000; directories published - 58; revenue perunique advertiser - $1,827; retention - 70%. (h) The figure for the prior year has been restated to excludeinternet revenues previously included in the calculation. (i) Searchable advertisers appearing on the Yellowbook.com websiteand advertisers appearing on Worldpages.com, acquired with TransWestern. As aresult of improvements to our systems, we are better able to eliminate duplicateonline accounts. Using the new systems, Yellowbook.com searchable advertisersat 30 June 2006 would have been 385,000 and revenue per average searchableadvertiser would have been $36. (j) The number of individuals who have visited Yellowbook.com atleast once in the month shown. Includes visitors to Worldpages.com, acquiredwith TransWestern. In the six months ended 30 September 2006 we changed ourdata provider; we have not adjusted the previously reported figure for the sixmonths ended 30 September 2005. (k) Figures given for TPI in Spain refer only to the period sinceacquisition, i.e. 1 August 2006 to 30 September 2006. They are not comparable tofigures previously reported by Telefonica Publicidad e Informacion S.A. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED CONSOLIDATED INCOME STATEMENT Six months ended 30 September Notes 2005 2006 £m £m Revenue 2 711.1 848.8 Cost of sales (324.4) (380.4) Gross profit 386.7 468.4 Distribution costs (21.8) (28.0) Administrative expenses (147.9) (226.6) Operating profit 3 217.0 213.8 Finance costs (62.4) (131.8) Finance income 1.3 5.2 Net finance costs (61.1) (126.6) Profit before taxation 155.9 87.2 Taxation 4 (52.5) (29.7) Profit for the financial period 103.4 57.5 Attributable to: Minority interests - (0.6) Equity shareholders of the group 103.4 58.1 12 103.4 57.5 (in pence) (in pence) Basic earnings per share 6 14.7 7.6 Diluted earnings per share 6 14.5 7.5 £m £m Declared interim ordinary dividend of 5.7 pence per share (2005 - 5.1 pence) 5 35.9 44.2 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months ended 30 September 2005 2006 £m £m Profit for the financial period 103.4 57.5 Exchange differences on translation of foreign operations 35.0 (50.6) Actuarial (losses) gains on defined benefit pension schemes (5.0) 4.6 Change in fair value of financial instruments used as hedges 4.7 (13.7) Tax effect of net expenses not recognised in the income statement 0.6 4.5 Deferred tax on share based payments 1.0 3.8 Net income (expense) not recognised in the income statement 36.3 (51.4) Total recognised income for the period 139.7 6.1 Adoption of IAS32/39 - Initial recognition of financial instruments used as hedges (2.9) - Adoption of IAS32/39 - Tax effect of initial recognition of financial instruments used as hedges 1.0 - 137.8 6.1 Attributable to: Minority interests - (1.1) Equity shareholders of the group 137.8 7.2 137.8 6.1 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET At At 31 March 30 September Notes 2006 2006 £m £m Non-current assets Goodwill 2,486.0 3,691.6 Other intangible assets 200.3 1,286.6 Property, plant and equipment 53.8 88.8 Deferred tax assets 7 139.6 173.7 Investment and other assets 5.0 10.6 Total non-current assets 2,884.7 5,251.3 Current assets Inventories 6.7 16.9 Directories in development 226.0 329.6 Trade and other receivables 8 586.3 878.8 Cash and cash equivalents 28.5 66.0 Total current assets 847.5 1,291.3 Current liabilities Loans and other borrowings 9 (292.9) (159.2) UK corporation and foreign income tax (58.5) (69.7) Trade and other payables 10 (374.7) (683.6) Total current liabilities (726.1) (912.5) Net current assets 121.4 378.8 Non-current liabilities Loans and other borrowings 9 (1,729.6) (3,630.6) Deferred tax liabilities 7 (130.8) (549.4) Retirement benefit obligations 11 (39.9) (35.4) Total non-current liabilities (1,900.3) (4,215.4) Net assets 1,105.8 1,414.7 Capital and reserves attributable to equity shareholders Share capital 12 1,192.3 1,194.2 Other reserves 12 (103.7) (161.6) Retained earnings 12 17.2 340.9 1,105.8 1,373.5 Minority interests 12 - 41.2 Total equity 1,105.8 1,414.7 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED CONSOLIDATED CASH FLOW STATEMENT Six months ended Notes 30 September 2005 2006 £m £m Net cash inflow from operating activities Cash generated from operations 219.5 262.6 Interest paid (46.2) (142.1) Interest received 1.3 5.2 Redemption premium paid - (22.1) Net income tax refunded (paid) 0.9 (34.5) Net cash inflow from operating activities 175.5 69.1 Cash flows from investing activities Purchase of property, plant and equipment 13 (9.8) (17.1) Purchase of subsidiary undertakings 14 (910.0) (2,019.3) Net cash outflow from investing activities (919.8) (2,036.4) Cash flows from financing activities Proceeds from issuance of ordinary shares 0.2 346.3 Purchase of own shares (0.2) (0.3) Net payments on revolving credit facility - (222.6) Acquisition of new loans 1,676.0 3,841.4 Repayment of borrowings (883.9) (1,815.7) Financing fees paid (13.3) (64.6) Dividends paid (58.9) (78.5) Net cash inflow from financing activities 719.9 2,006.0 Net (decrease) increase in cash and cash equivalents (24.4) 38.7 Cash and cash equivalents at beginning of the period 55.5 28.5 Exchange gains (losses) on cash and cash equivalents 4.0 (1.2) Cash and cash equivalents at end of the period 35.1 66.0 Cash generated from operations Profit for the period 103.4 57.5 Adjustments for: Tax 52.5 29.7 Finance income (1.3) (5.2) Finance costs 62.4 131.8 Depreciation of property, plant and equipment and 11.6 16.7 amortisation of software costs Amortisation of other non-current intangible assets 6.9 38.7 Changes in working capital: Inventories and directories in (19.5) (54.9) development Trade and other receivables 8.9 (28.0) Trade and other payables (7.2) 70.3 Share based payments and other 1.8 6.0 Cash generated from operations 219.5 262.6 See notes to the financial information for additional details. YELL GROUP PLC AND SUBSIDIARIES UNAUDITED NOTES TO THE FINANCIAL INFORMATION 1. Basis of preparation and consolidation The principal activity of Yell Group plc and its subsidiaries is publishingclassified advertising directories in the United Kingdom, the United States,Spain, and certain countries in Latin America. This unaudited financial information for the six months to 30 September 2006 hasbeen prepared in accordance with International Financial Reporting Standards asadopted by the European Union ("IFRS") as set out in our annual report for theyear ended 31 March 2006, and in accordance with the Listing Rules of theFinancial Services Authority. 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 2006 annual report published in June 2006, whichincludes the audited consolidated financial statements of Yell Group plc and itssubsidiaries for the year ended 31 March 2006. 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 2. Revenue Six months ended 30 September Change 2005 2006 % £m £m UK printed directories 305.9 297.1 (2.9) Other products and services 35.3 54.5 54.4 Total UK revenue 341.2 351.6 3.0 US revenue at constant exchange rate (a) 369.9 467.7 26.4 Exchange impact (a) - (12.7) Total US revenue 369.9 455.0 23.0 Spanish and Latin American revenue - 42.2 Group revenue 711.1 848.8 19.4 (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 results using current period exchange rates. 3. Operating profit and EBITDA information Adjusted EBITDA by geographic segment Six months Change ended 30 September 2005 2006 % £m £m UK printed directories 117.2 112.5 (4.0) Other products and services 15.2 20.8 36.8 Total UK operations 132.4 133.3 0.7 US operations at constant exchange rate (a) 100.5 131.8 31.1 Exchange impact (a) - (4.0) Total US operations 100.5 127.8 27.2 Spanish and Latin American operations - 8.1 Group adjusted EBITDA 232.9 269.2 15.6 Reconciliation of group operating profit to EBITDA (a) Six months ended 30 September 2005 2006 ChangeUK operations £m £m % Operating profit 131.8 126.8Depreciation and amortisation of non-current assets 5.6 6.5 UK operations EBITDA 137.4 133.3 (3.0)Exceptional items (5.0) - UK operations adjusted EBITDA 132.4 133.3 0.7 UK operations adjusted EBITDA margin 38.8% 37.9% US operationsOperating profit 85.2 101.8Depreciation and amortisation of non-current assets 12.9 26.0 US operations EBITDA 98.1 127.8 30.3Exceptional items 2.4 -Exchange impact (b) - 4.0 US operations adjusted EBITDA at constant exchange rate (b) 100.5 131.8 31.1Exchange impact (b) - (4.0) US operations adjusted EBITDA 100.5 127.8 27.2 US operations adjusted EBITDA margin 27.2% 28.1% Spanish and LatAm operationsOperating loss (14.8)Depreciation and amortisation of non-current assets 22.9 Spanish and LatAm operations EBITDA 8.1 Spanish and LatAm operations EBITDA margin 19.2% GroupOperating profit 217.0 213.8Depreciation and amortisation of non-current assets 18.5 55.4 Group EBITDA 235.5 269.2 14.3Exceptional items (2.6) -Exchange impact (b) - 4.0Group adjusted EBITDA at constant exchange rate(b) 232.9 273.2 17.3Exchange impact (b) - (4.0) Group adjusted EBITDA 232.9 269.2 15.6 Group adjusted EBITDA margin 32.8% 31.7% (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 results reported using current periodexchange rates. We do not allocate interest or taxation charges by product or geographicsegment. 4. Taxation The tax charge is based on the estimated effective tax rate for the year. Theeffective tax rate for the six month period is different from the standard rateof corporation tax in the United Kingdom (30%) as explained below: Six months ended 30 September 2005 2006 £m £mProfit before tax multiplied by the standard rate ofcorporation tax in the United Kingdom (30%) 46.8 26.2Effects of:Differing tax rates on overseas earnings 3.3 4.0Other 2.4 (0.5) Tax charge on profit before tax 52.5 29.7 Current tax 29.4 25.2Deferred tax 23.1 4.5 Tax charge on profit before tax 52.5 29.7 5. Interim dividend The interim dividend of 5.7 pence per share (2005 - 5.1 pence per share) ispayable on 15 December 2006 to shareholders registered at the close of businesson 17 November 2006 and will amount to £44.2 million (2005 - £35.9 million). 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. Amortisation of Exceptional acquired Actual items intangibles Adjusted Six months ended 30 September 2006 EBITDA (£m) 269.2 - - 269.2Depreciation and amortisation (£m) (55.4) - 38.7 (16.7)Net finance costs (£m) (126.6) 36.3 - (90.3) Group profit before tax (£m) 87.2 36.3 38.7 162.2Taxation (£m) (29.7) (11.4) (14.0) (55.1) Group profit after tax (£m) 57.5 24.9 24.7 107.1Minority interests (£m) 0.6 - (0.8) (0.2) Group profit after tax and minority interests (£m) 58.1 24.9 23.9 106.9 Weighted average number of issued ordinary shares (millions) 763.7 763.7 Basic earnings per share (pence) 7.6 14.0Effect of share options (pence) (0.1) (0.2) Diluted earnings per share (pence) 7.5 13.8 Six months ended 30 September 2005EBITDA (£m) 235.5 (2.6) - 232.9Depreciation and amortisation (£m) (18.5) - 6.9 (11.6)Net finance costs (£m) (61.1) 7.8 - (53.3) Group profit before tax (£m) 155.9 5.2 6.9 168.0 Taxation (£m) (52.5) (3.5) (2.7) (58.7) Group profit after tax (£m) 103.4 1.7 4.2 109.3 Weighted average number of issued ordinary shares (millions) 704.4 704.4 Basic earnings per share (pence) 14.7 15.5Effect of share options (pence) (0.2) (0.1) Diluted earnings per share (pence) 14.5 15.4 The exceptional finance costs for the six months ended 30 September 2006comprise £13.8 million for accelerated amortisation of deferred financing feesand £22.5 million premium on the redemption of our Notes, which were refinancedprior to the TPI acquisition. Exceptional items of £2.6 million in the prioryear include restructuring and other costs of £2.4 million arising from theTransWestern acquisition, and a credit of £5.0 million arising from the releaseof a provision for IPO costs in the UK. Exceptional finance costs in the prioryear relate to the accelerated amortisation of deferred financing fees on oursenior debt, which was redeemed at the date of the TransWestern acquisition. 7. Deferred tax assets and liabilities The elements of deferred tax assets recognised in the accounts were as follows: At At 31 March 30 September 2006 2006 £m £mTax effect of timing differences due to:Depreciation 6.9 7.5Bad debt provisions 38.3 45.8Other allowances and accrued expenses 20.4 21.2Defined benefit pension scheme 26.6 23.4Share options 15.9 20.4Recognised tax net operating losses 20.5 5.2Financial instruments - 4.0Revenue recognition - 17.2Other 11.0 29.0 Recognised deferred tax assets 139.6 173.7 The elements of deferred tax liabilities recognised in the accounts were asfollows: At At 31 March 30 September 2006 2006 £m £mTax effect of timing differences due to:Intangible assets - 393.1Amortisation 76.1 79.8Goodwill - 4.6Directories in development 32.9 32.3Recognition of revenues and expenses - 4.5Foreign investments - 6.2Financial instruments 3.3 -Other and deferred costs 18.5 28.9 Recognised deferred tax liabilities 130.8 549.4 8. Trade and other receivables At At 31 March 30 September 2006 2006 £m £m Net trade receivables (a) 555.5 782.0Other receivables 19.0 42.4Accrued income (a) 1.4 41.4Prepayments 10.4 13.0 Total trade and other receivables 586.3 878.8 (a) The Group's trade receivables and accrued income are statedafter deducting a provision of £232.2 million at 30 September 2006 (31 March2006 - £157.8 million). 9. Loans and other borrowings and net debt At At 31 March 30 September 2006 (a) 2006 (a) £m £mAmounts falling due within one yearTerm loans under senior credit facilities 50.1 139.9Revolving loan under senior credit facilities 242.2 18.5Net obligations under finance leases 0.6 0.8 Total amounts falling due within one year 292.9 159.2 Amounts falling due after more than one year Senior credit facilities 1,390.6 3,630.6Senior notes:Senior sterling notes 161.8 -Senior dollar notes 74.4 -Senior discount dollar notes 102.8 - Total amounts falling due after more than one year 1,729.6 3,630.6 Net loans and other borrowings 2,022.5 3,789.8Cash and cash equivalents (28.5) (66.0) Net debt at end of period 1,994.0 3,723.8 (a) Balances are shown net of deferred financing fees of £54.1million at 30 September 2006 (31 March 2006 - £10.8 million). 10. Trade and other payables At At 31 March 30 September 2006 2006 £m £mTrade payables 32.9 61.6Other taxation and social security 17.3 19.8Accruals and other payables 163.3 237.0Deferred income 161.2 365.2 Total trade and other payables falling due within one year 374.7 683.6 11. Retirement benefit obligations The £4.5 million decrease in retirement benefit obligations from £39.9 millionat the year end to £35.4 million at 30 September 2006 is largely the result ofactuarial gains of £4.6 million that arose in the six months due to an increasein real interest rates. 12. Statement of changes in equity Attributable to equity shareholders Share Other reserves Retained Minority capital earnings interest Total £m £m £m £m £m Balance at 31 March 2006 1,192.3 (103.7) 17.2 - 1,105.8Profit on ordinary activities after taxation - - 58.1 57.5 (0.6)Net (expense) income recognised directly in equity - (50.9) - (0.5) (51.4) Total recognised (expense) income for the period - (50.9) 58.1 (1.1) 6.1Share placement and capital restructuring 0.7 - 344.1 - 344.8Value of services provided in return for share based payments - 6.0 - 6.0Ordinary share capital issued to employees 1.5 - - - 1.5Own shares purchased by ESOP trust (a) (0.3) - - - (0.3)Capital duty paid on TPI acquisition - (13.0) - - (13.0)Minority interest arising on purchase of subsidiary - - - 42.3 42.3 Dividends paid - - (78.5) - (78.5) 1.9 (57.9) 323.7 41.2 308.9 Balance at 30 September 2006 1,194.2 (161.6) 340.9 41.2 1,414.7 (a) Purchase of shares held in an ESOP trust for employees. Cumulative foreign currency losses at 30 September 2006 are £119.0 million (31March 2006 - £68.4 million). 13. Capital Expenditure Capital expenditure on property, plant and equipment in the six months to 30September 2006 and 2005 was £17.1 million and £9.8 million, respectively.Proceeds on the sale of property, plant and equipment were £nil in the sameperiods. Capital expenditure committed at 30 September 2006 and 2005 was £5.4 million and£5.9 million, respectively. 14. Acquisitions Six months ended 30 September 2006 In the six months to 30 September 2006, the Yell Group paid £2,016.9 million foracquisitions. The largest acquisition was that of 94.25% of the share capitalof Telefonica Publicidad e Informacion, S.A. ("TPI") on 31 July 2006, for€2,939.8 million (£2,010.3 million). The purchase price of TPI wasprovisionally allocated to the acquired assets and liabilities as follows: Acquiree's Fair value Provisional carrying amount adjustments fair value £m £m £m Non current assetsIntangible assets 109.4 1,028.7 1,138.1Property, plant and equipment 24.7 14.8 39.5Deferred tax assets 30.8 - 30.8 Total non current assets 164.9 1043.5 1,208.4 Current assetsDirectories in development 48.0 34.9 82.9Trade and other receivables 292.2 - 292.2Cash and cash equivalents 16.8 - 16.8 Total current assets 357.0 34.9 391.9 Current liabilitiesLoans and other borrowings (90.0) - (90.0)Corporation tax (12.8) - (12.8)Trade and other payables (251.9) - (251.9) Total current liabilities (354.7) - (354.7) Total assets less current liabilities 167.2 1,078.4 1,245.6 Non-current liabilitiesLoans and other borrowings (70.2) - (70.2)Deferred tax liabilities (29.1) (403.7) (432.8)Other non current liabilities (6.4) - (6.4) Identifiable net assets 61.5 674.7 736.2 Minority interests (42.3) Share of net assets acquired 693.9Goodwill 1,316.4 Total cost 2,010.3 Non-current intangible assets totalling €1,664.4 million (£1,138.1 million)comprise €1,130.7 million (£773.2 million) of brand names, €408.4 million(£279.3 million) of customer lists, and €125.3 million (£85.6 million) allocatedbetween software, contracts, and non-compete agreements. Directories indevelopment comprise all current intangible assets, including customercommitments and a customer database. Goodwill of €1,925.0 million (£1,316.4million) is attributable to the future synergies expected, the workforceacquired and future growth of the business. The acquisition of TPI was financed by debt acquired of £1,634.0 million,proceeds from the share placement of £344.8 million, and operating cash of £31.5million. The consolidated financial information of the Yell Group consolidates thefinancial results of TPI for the 62 days ended 30 September 2006. If theacquisition of TPI had occurred on 1 April 2006, we estimate that the pro formagroup revenue to 30 September 2006 would have been £980.5 million and groupEBITDA would have been £300.4 million. We also made other acquisitions in the half year that are not consideredmaterial for separate presentation. We paid cash of $12.2 million (£6.6million) to acquire operations with net liabilities of $0.2 million before thefair value adjustments to record goodwill of $9.5 million (£5.1 million) andother intangible assets of $2.9 million (£1.6 million). These acquisitions havecontributed $16.8 million of revenue in the period from the dates of acquisitionto 30 September 2006. A reconciliation of cash paid on acquisitions, including a deferred payment of$11.9 million (£6.2 million) for the acquisition of TransWestern Publishing, tothe cash flow on page 13 is as follows: Six months ended 30 September 2006 £m Total cost of acquisitions 2,016.9Less cash acquired (16.8)Capital duties paid (a) 13.0Deferred payment for TWP 6.2 Net cash outflow in period 2,019.3 (a) Capital duties paid on the acquisition of TPI and recordedin equity; see note 12 to the financial information. Six months ended 30 September 2005 In the six months to 30 September 2005, the Yell Group acquired a number ofdirectories businesses in the US for consideration totalling $1,611.1 million(£918.6 million). The purchases were accounted for as acquisitions. Thelargest acquisition was that of TransWestern Publishing on 15 July 2005 for apurchase price of $1,573.8 million (£897.6 million) plus expenses of $21.5million (£12.3 million). The purchase price of TransWestern was allocated tothe acquired assets and liabilities as follows: Debt and Acquiree's other carrying Fair value liabilities Provisional amount adjustments extinguished fair value £m £m £m £mNon current assetsIntangible assets 84.9 111.8 - 196.7Property, plant and equipment 2.7 (0.1) - 2.6Deferred tax assets 31.8 0.2 - 32.0 Total non current assets 119.4 111.9 - 231.3 Current assetsDirectories in development 26.2 - - 26.2Trade and other receivables 53.6 (0.6) - 53.0Cash and cash equivalents 1.1 - - 1.1 Total current assets 80.9 (0.6) - 80.3Current liabilitiesLoans and other borrowings (3.6) - 3.6 -Corporation Tax (0.7) - - (0.7)Trade and other payables (88.6) - 27.7 (60.9) Total current liabilities (92.9) - 31.3 (61.6) Total assets less current liabilities 107.4 111.3 31.3 250.0 Non-current liabilitiesLoans and other borrowings (386.3) - 386.3 -Deferred tax liabilities (4.0) (17.3) - (21.3) Identifiable net (liabilities) assets (282.9) 94.0 417.6 228.7Goodwill 681.2 Total cost 909.9 Goodwill of £681.2 million is attributable to the workforce acquired and futuregrowth of the business. We also made other acquisitions in the half year ended 30 September 2005 thatwere not considered material for presentation in the above table. We paid cashof $15.8 million (£8.7 million) to acquire net liabilities with a fair valuetotalling $0.4 million (£0.2 million) giving rise to additional goodwill of$12.8 million (£7.0 million) and other intangible assets of $3.4 million (£1.9million). 15. 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 allegedviolations of consumer protection legislation and placed reliance on findings ofthe New York Court in the now settled suit. On 26 August 2005, the court in NewJersey approved a comprehensive national settlement, with no admission ofliability. The Yell Group fully accrued for the estimated costs arising fromthis class action in the year ended 31 March 2005. 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 2006, Yell published 113 directories in the UnitedKingdom and 835 in the United States; in the United Kingdom, where it is aleading player in the classified advertising market, it served 462,000 uniqueadvertisers. In the United States, where it is the leading independentdirectories business, it served 622,000 unique 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 trademarks. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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