LONDON (Thomson Financial) - Yell Group Plc,. the publisher of the Yellow
Pages directories, moved to dispel City fears over it debt and banking
covenants, and strongly refuted talk of a behind-the-scenes campaign to oust
group Chief Executive John Condron.
The group, which publishes a range of directories in the United Kingdom,
United States, Spain and Latin America, said there was "absolutely no truth" in
the rumours that major shareholders had been putting pressure on the board over
the group's financial performance and that headhunters had been engaged to seek
a possible replacement for Condron.
"The answer to both of those questions is, 'No' and 'No'", Condron told
Thomson Financial News in a telephone interview this morning. "The story is
complete rubbish."
Like most companies in the advertising and publishing sector, Yell has been
finding the going tough as customers have cut or revised their advertising
budgets. The group's shares have fallen sharply over the past year -- down from
a high of 645 pence in February 2007 -- and with debt of around 3.8 billion
pounds at end-March 2008 some concerns had been raised over the group's banking
covenants.
However, a better-than-expected set of first-quarter figures released
Thursday, and a reduction in borrowings to about 3.6 billion pounds at end-June,
helped alleviate any lingering concerns over debt and banking covenants, while a
very strong free cash flow performance - up by 120 percent to 85.4 million
pounds in the quarter - also aided sentiment towards the group. In the stock
market, the group's shares were trading 11-1/2 pence higher at 82-1/2 at 10:45
a.m.
The group's strong cash performance helped to bring its net debt to adjusted
EBITDA cover down to 4.9 times, compared to 5.1 times at the end of March 2008,
and to bring the headroom on its covenant to 13 percent. The group's headroom on
its net EBITDA to net cash interest covenant also improved to 18 percent.
"These are levels that I am extremely comfortable with," group Finance
Director John Davis told Thomson Financial News. "To get borrowings down by this
amount in one quarter is a very significant achievement. We're throwing off
serious amounts of cash and we're targeting around 330 million pounds of free
cash flow for the full year to end-March 2009."
He pointed out the group's current banking facilities are committed until
2011 and the company expects to meet its repayment and dividend requirements for
the next nine months from cash generation.
"Our covenant headroom will tighten over time, but we're managing that.
There have been no concerns or calls from our bankers expressing any fears over
our debt levels," Davis said.
The group's strong cash performance was the main highlight of a resilient
first-quarter performance.
Revenues for the three months to the end of June were up by 6.2 percent to
468.4 million pounds, while adjusted EBITDA was 11.7 percent ahead at 160.8
million pounds -- about 12 million pounds higher than analysts' expectations. On
a constant exchange basis, revenues were up 2.9 percent, while EBITDA was 8.1
percent higher.
While the group expects some slowdown in second-quarter revenues, it
reiterated its full-year EBITDA guidance of about 750 million pounds at constant
exchange rates.
"We expect reported revenues for the three months to end-September to be
broadly flat in what is a traditionally quieter period for the group," Davis
said.
However, organic revenues are expected to be around 3.0 percent lower,
compared to growth of 1.7 percent in the first three months of 2008-09, with the
UK and Spain down by 5.0 percent. In the U.S., the group expects a 2.0 percent
decline.
"The more difficult economic environment is putting pressure on the level of
advertising spend, but given the circumstances we're holding up pretty well,"
said Davis.
The group also revealed that it would be taking further costs out the
business, with 50 million pounds coming through in 2008-09 and the full
annualised benefit in 2009-10.
By Malcolm Locke:malcolm.locke@thomsonreuters.com
ml/kf1
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