Yell Group Confirm £660m Fund Raising as H1 Revenues and Earnings Slide

The Yell Group (LSE: YELL) announced their interim results for the half year ended 30th September 2009 and also proposed a £660 million equity based fund raising.

During the first half, Yell’s 3.9% decrease in group revenue was said to be ahead of previous guidance, while the online business has experienced considerable growth with revenues increasing by 17%. Yell Group says the ‘rate of decline is stabilising’ despite the challenging environment. Shares in Yell group have fallen 1% on the London Stock Exchange (LSE) in a fairly sideways market.

The proposed fully underwritten share issue will raise gross proceeds of approximately £660 million. Yell will place approximately 1.5 billion shares at 42 pence per share.

Half the money will be raised through a Firm Placing of 785.9 million New Ordinary Shares while the other half will be raised through a 1 for 1 Placing and Open Offer resulting in the issue of 785.9 million New Ordinary Shares.  The Issue Price of 42 pence per New Ordinary Share represents a 12.5% discount to the closing price on the London Stock Exchange of 48 pence per Ordinary Share on 9 November 2009.

Yell Group conducted lengthy discussions with its lenders with a view to securing New Facilities Agreement to revise its financial covenants and extend a significant proportion of the Group's senior debt. Other the past couple of weeks Yell reached the required agreements, representing 95% of its outstanding debt.

The agreements are subject to the successful completion of the proposed capital raising to a minimum of £500 million. According to Yell upon completion of the fund raising, the net proceeds are required to be used to accelerate the prepayment of amounts outstanding under its New Facilities Agreement.

Yell Chief Executive, John Condron commented on the company’s intentions regarding the fund raising:

“Our refinancing will strengthen our capital structure, immediately reducing debt and supporting our strategic and operational focus. The extension of maturities of our debt out to 2014 provides a meaningful window for economic recovery while we also pursue our goal of deleveraging.”

The company’s first half results showed a 13.2% decrease in revenues at constant exchange rates and similarly adjusted earnings were down 21.0%. The group made cost savings and limited the earnings margin decrease to 3.4%.  The release of working capital from the reduction in revenue coupled with strong cash management has resulted in a 6.3% increase in operating cash flow.

According to Yell, the results have benefitted from the weakening of the pound compared to the first six months of last year. The internet businesses continued to grow and now accounts for a fifth of total revenues, internet derived revenues were up 17% at constant exchange rates for the six months.

In term of the outlook going forward Yell group has re-affirmed its previous stance, stating that trading conditions continue to be challenging and that its ‘too early to declare that confidence has definitively returned’ to its client base. As such the Yell Group is not assuming any significant improvement in the rate of year-on-year revenue decline for the remainder of the fiscal year.

John Condron also commented on the group’s market position and operational performance:
"While today's results continue to reflect the effects of the economic recession and reduction in confidence among businesses across all sectors ... We are seeing the rate of decline stabilising ... the actions we have taken to reshape our business to take advantage of the opportunities of changing consumer behaviour are standing us in good stead.”