Results for the three months ended 30 June 2012

25 July 2012

Yell Group Plc

Results for the three months ended 30 June 2012

Financial headlines(1)

·; Group revenue of £331m decreased by 15%

- Digital services revenues grew by 40% to £38m

- Digital directories revenue fell by 16% to £68m

- Print and other directory revenues fell by 21% to £225m

·; EBITDA(2) of £71m was down £40m

·; Free cash flow of £39m decreased £34m

·; Net debt of £2,181m decreased by £19m from March

Operational headlines

·; Total digital revenue declined by 2%, and represents 32% of revenue

- Total digital customers decreased by 0.2% to 925,000

- Annual digital revenue per advertiser fell by 10% to £478

- Live customer websites increased by 17% to 408,000(3)

- Digital directories visitors increased 13% to 44m in June

- Mobile directories visitors increased 71% to 4.8m in June

·; Print advertisers reduced by 9% to 253,000

·; Print revenue per advertiser decreased by 7% to £780

Mike Pocock, Chief Executive Officer, said:

"During the last quarter, we continued to transform the Group, capitalising on our unique position in the SME community. We continued our trials of new digital products, progressed new partnerships, introduced our new corporate brand and enhanced our digital capability through the acquisition of Moonfruit. Whilst we continue to deliver cost savings through our global operating model, the decline in our legacy product revenue continues to negatively affect EBITDA. The Group continued to generate significant amounts of cash and pay down debt. Looking ahead, we remain confident in our four year strategy to transform Yell."

Outlook

As previously announced, the Company is reviewing its capital structure. The Group intends to consult with its key stakeholders, including lenders and shareholders, over the coming months in order to put in place an appropriate Group capital structure within the current financial year. A number of options are being considered and, while no decision has been made yet, certain options may result in a dilution of existing shareholders' interests. Until this new capital structure is in place, the Group is unable to give a clear forecast of results for the current year, however, the adverse revenue and margin trends reported in May continue to impact our current and expected financial performance.

Forward looking statements

This news release contains forward-looking statements regarding Yell's intentions, beliefs or current expectations concerning, among other things, Yell's results of operations, revenue, financial condition, liquidity, prospects, growth, strategies, new products, the level of new directory launches and the markets in which Yell operates. Readers are cautioned that any such forward-looking statement is not a guarantee of future performance and involves risks and uncertainties, and that actual results may differ materially from those in the forward-looking statement as a result of various factors. These factors include any adverse change in regulations, unforeseen operational or technical problems, the nature of the competition that Yell will encounter, wider economic conditions including economic downturns and changes in financial and equity markets. Readers are advised to read pages 22 to 29 and notes 1 and 16 to the financial statements included in Yell Group plc's 2012 annual report. Yell undertakes no obligation publicly to update or revise any forward-looking statements, except as may be required by law.

Risk Statement

Yell's risks and uncertainties include strategic and operational risks faced by Yell's businesses; debt and financing risks faced in funding Group operations and the financial reporting and related risks faced in reporting Yell's results. The Group net assets of £303m include goodwill and other intangible assets totalling £2,562m which is supported by the Group's strategic plans. It is clear that the Group faces challenges and material uncertainties which may affect the carrying value of these intangible assets. The new strategic direction for the Group may also have a positive influence on the other uncertainties reported in the annual report.

The financial information contained herein has been prepared on a going concern basis. The Group is in full compliance with the financial covenants and undertakings contained in all its borrowing agreements, and in December 2011 Yell's lenders agreed to provide more headroom in its Net Debt to EBITDA covenants. The financial covenants as revised for debt purchases through 31 March 2012 are disclosed on page 86 of the 2012 annual report. The base Net Debt to EBITDA covenants are disclosed on page 7 of the Lenders' Memorandum relating to the December facility amendment. Copies of both documents are available on Yell's website at http://www.yellgroup.com.

The Group is cash generative. The Board, in considering going concern, looked at various factors including Yell's ability to meet debt repayments and satisfy debt covenants. The Group has some ability to reduce the risk of any potential covenant breach by reducing costs. The majority of Yell's debt also matures in April 2014. The Group therefore intends to consult with its lenders and shareholders over the coming months in order to put in place an appropriate new capital structure within the current financial year.

The Board concluded that adoption of the going concern basis in preparing the financial information is appropriate. However, there is a risk that in the future the Group would need to reset again its financial covenants with, or obtain a waiver from, its lenders, either of which would require a two thirds majority vote. As a consequence of increasingly difficult trading conditions and a greater proportion of future income expected to come from as yet unproven new strategies, there is a higher risk in the current year than in the previous year that the Group would not be able to meet its financial covenants with its lenders. Under certain circumstances, considered by the Board, the Group will not be able to meet its financial covenants.

If undertakings to the Group's lenders were breached without remedy or waiver, the lenders' facility agent may, and must if directed by two-thirds of lenders (by reference to debt held) demand immediate repayment of all amounts due to them. Whilst this eventuality would, if it arose, cast doubt on the future capital funding of the Group, the Group's cash flow forecasts show that in the twelve months ending 30 June 2013 interest payments will be fully met, with further cash generated to repay debt. The Board considers that such action by the lenders is either unlikely or will be unnecessary once an appropriate capital structure has been determined, but clearly, this is a material uncertainty.

A discussion of the risks associated with the debt covenants is presented in note 16 to the financial statements in Yell's annual report for the financial year ended 31 March 2012. Discussions of the Group's risks are presented on pages 22 to 29 and in notes 1 and 16 to the financial statements in Yell's annual report for the financial year ended 31 March 2012, a copy of which is available on Yell's website at http://www.yellgroup.com. 

The financial information does not include the adjustments that would result if the Group were unable to continue as a going concern.

Notes to Editors

Yell Group is a leading provider of digital services within the emerging local eMarketplace for consumers and SMEs across its operations in the UK, US, Spain and some countries in Latin America.

Building on its strong presence in the local market through its current digital and print portfolio, Yell is developing a broad range of digital services tailored to the converging needs of SMEs and consumers.

These address both the SMEs' need to grow, transact and be efficient in the digital world, and the consumers' need to connect locally to the goods and services they want, in a way which saves them time and money, and moves their lives forward.

In the year ended 31 March 2012, Yell Group had 1.2m SME customers.

Enquiries:

Yell - Investors Yell - Media

Rob Hall Jon Salmon

Tel +44 (0)118 358 2838 Tel +44 (0)118 358 2656

RLM Finsbury

Andrew Dowler or Charles Chichester

Tel: + 44 (0) 207 251 3801

www.yellgroup.com

(1) Results are for the three months, unaudited and compared with the same period in the prior year. The changes in revenue, revenue per advertiser and EBITDA are at constant currency. Revenue percentage changes are also adjusted for rescheduling, changes in bundled revenue allocation in the US and acquisitions.

(2) EBITDA is profit before interest, tax, depreciation, amortisation and exceptional items.

(3)  Live websites include 72,000 of revenue generating Moonfruit website customers, excluded from % increase calculation.