Operating and Financial Discussion for the Year Ended 31 March 2018 (1)

Transcription

1 Annual Report for the Year Ended 31 March 2018 Delivered under the Indenture Dated as of 2 May 2018 Governing the Terms of the 8½% Senior Secured Notes Issued by Yell Bondco plc (the Indenture ) Operating and Financial Discussion for the Year Ended 31 March 2018 (1) Financial condition and results of operations The Trading Update in the following paragraphs under this heading was published on 15 May 2018 as a summary of Yell UK s financial condition and results of operations. More detailed analysis of the Yell Limited and Sitemaker Software Limited ( SSL ) financial condition and results of operations is provided in the 2018 Strategic Report of Yell Limited and the Report of the Directors of SSL included from page F 1 in this document. Total digital revenue grew by 3% (2) to 199m, of which digital marketing services grew 6% to 91m and Yell.com grew 2% to 108m Average revenue per customer grew 9% to 1,485 (3) while total digital customers decreased 1% to 131,900 (4) as the business continues to focus on acquiring higher value customers Average monthly visits to Yell.com in the last twelve months were 11m (5) Adjusted Digital EBITDA (6) was 62m at a margin of 31% Print revenue declined 37% (7) to 27m as part of the announced exit of print 225m public bond issued in May (post period end) (8) Yell UK comprises the trading operations of Yell Limited and its subsidiaries, all of which are fully owned subsidiaries of Hibu Group Limited David Sharman, Hibu Group Chief Executive Officer, said: I am pleased to report another successful year in the development of Hibu Group, and of our Yell UK operations in particular. Yell s trading performance was strong, and it has nearly completed its transition to a purely digital marketing services business one of the leading in the UK. In early May Yell Bondco Plc issued a 225 million public bond, underpinning the value of the business. Yell is now essentially standalone within the Hibu group, with its own operations and capital structure, providing us with significant strategic flexibility. Richard Hanscott, Yell Chief Executive Officer, said: We have had another successful year, helping small and medium sized businesses get found online. Total digital revenue grew 3% to 199m, driven by higher spend per customer as part of our focus on higher value customers, with overall customer numbers remaining broadly flat. Both Yell.com and digital marketing services revenue grew in the year, up 2% and 6% respectively. Adjusted Digital EBITDA, at 62m, a margin of 31%, grew over 3m on the prior year driven by the higher revenue and after additional investment in Yell.com. We are continuing to focus on our Yell.com consumer offering by enhancing the user proposition and exploring traffic partnerships. During the year, we announced that we would begin to deliver our final printed directories, with the last ones due in the quarter ending 31 March This signals the final transition of our business to digital only. Printed 1

2 directories revenue declined 37% with almost all the decline dropping through to Adjusted Print EBITDA of 11m, as there are now few indirect costs associated with the print product. There has also been good progress on reducing the pension deficit. The technical provision deficit is now estimated at 26m based on the latest estimate as at the end of December and following recent payments. Our expectation is for the deficit to reduce further by the next valuation, which we expect to agree in September, due to changed longevity assumptions and contractual contributions. Liquidity and capital resources Owl Finance Limited and its restricted subsidiaries (the Owl Finance Limited Group or the Group ) actively maintain a mixture of long term and short term debt finance that is designed to ensure sufficient available funds for operations. The combined operating cashflow of Yell Limited and SSL was 26.3m for the year ended 31 March 2018 after 17.9m was used to settle a long term management incentive plan. The operating cashflow was 57.7m for the year ended 31 March Combined cash and cash equivalents was 14.2m at 31 March The primary role of the treasury function is to ensure that adequate liquidity is available to meet funding requirements as they arise and that financial risk arising from our underlying operations is effectively identified and managed by or on behalf of the directors. The treasury function is not a profit centre and its objective is to manage risk at optimum cost. The treasury function conducts its operations as directed by the board of directors of Hibu Group Limited, the ultimate parent company of the Owl Finance Limited Group. Material commitments and contingencies The material commitments and contingencies of Yell Limited are disclosed in note 19 of the 2018 Yell Limited financial statements and of SSL are disclosed in note 14 of the 2018 SSL financial statements included from page F 1 in this document. Critical accounting policies The critical accounting policies of Yell Limited are disclosed in note 1 of the 2018 Yell Limited financial statements included from page F 1 in this document. Audited financial statements The audited financial statements of Yell Limited and SSL are included from page F 1 in this document. Unaudited pro forma financial information There are no material acquisitions, disposals or recapitalisations of Yell Limited that require the presentation of pro forma financial information in this document. 2

3 Other required disclosures The Chief Executive Officer of Yell Limited and SSL and the Chief Financial Officer of Yell Limited and SSL are Mr. Richard Hanscott and Mr. Oliver Wilson, respectively. There is no separate senior management of Owl Finance Limited. The directors of Owl Finance Limited at 31 March 2018 were Mr. David Sharman and Mr. Rob Hall. The ultimate parent company of the companies in the Owl Finance Limited Group is Hibu Group Limited. The following table sets forth certain information regarding shareholders of Hibu Group Limited holding more than 5% of share capital at 30 June Percentage of Share Shareholder (1)(2) Capital (3) Strategic Value Partners, LLC (4) 21.9 QB funds (5) 21.1 Empyrean Capital Partners L.P JP Morgan Securities PLC 11.1 GoldenTree Asset Management Lux S.à r.l. 8.1 (1) Each group of entities and/or affiliated funds is treated as one shareholder for the purposes of this table, and the names set out in certain cases reflect the name of the relevant parent entity or investment advisor (as applicable). The listed percentages do not include investment funds where a shareholder serves as an investment manager, but over which there is not common control with the funds controlled by the shareholder. (2) Members of the Hibu Group Limited board of directors and certain members of senior management of Hibu Group entities will hold 9.3% of the share capital of Hibu Midco Limited, a subsidiary of Hibu Group Limited upon the completion of vesting of restricted share awards granted under the management incentive plan. (3) Percentages are based on the issued ordinary share capital at 30 June (4) The shares are directly held by Ringsend S.à r.l., Field Point Acquisitions S.à r.l., Queens Gate S.à r.l. and Kings Forest S.à r.l., which are managed by Strategic Value Partners, LLC. (5) The shares are directly held by QPB Holdings Ltd, QP SFM Capital Holdings Limited and Quantum Strategic Partners Ltd. We believe these funds are ultimately controlled by Soros Fund Management LLC or its affiliate(s). Interest costs and liabilities owed to affiliated enterprises of SSL are disclosed in notes 7 and 12, respectively, of the 2018 SSL financial statements. Interest costs owed to and material transactions with affiliated enterprises of Yell Limited are disclosed in note 6 of the 2018 Yell Limited financial statements. Material affiliate transactions are disclosed in notes 14, 15 and 18 of the 2018 Yell Limited financial statements. The material debt instruments of Yell Limited at 31 March 2018 are disclosed in note 15 of the 2018 Yell Limited financial statements. Material operational risk factors of Yell Limited are discussed in the 2018 Strategic Report of Yell Limited. Material subsequent events of Yell Limited are disclosed in notes 1 and 21 of the 2018 Yell Limited financial statements and of SSL are disclosed in notes 1 and 16 of the 2018 SSL financial statements. Subsequent to 31 March 2018 the Owl Finance Limited Group replaced cash pay debt and an element of PIK debt with 225m of high yield bonds, equitised the remaining PIK debt, made a one off 10m payment to the pension trustees and entered into an undrawn 25m revolving credit facility. Digital EBITDA and condensed combined financial information as defined in the Indenture is included from page B 1 in this document. A copy of this document published on 26 July 2018 can be found at 3

4 DISCLAIMER This report is for information purposes only and does not constitute a prospectus or any offer to sell or the solicitation of an offer to buy any security in the United States of America, the United Kingdom or in any other jurisdiction. Securities may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act of 1933, as amended. The information contained in this report does not comprise statutory accounts within the meaning of Section 434 of the Companies Act Statutory accounts for the year ended 31 March 2017 have been filed with the Registrar of Companies. The auditor has reported on those accounts and its report was unqualified and did not contain a statement under Section 498(2) or 498(3) of the Companies Act Statutory accounts for the year ended 31 March 2018 will be filed with the Registrar of Companies. This report may include forward looking statements within the meaning of the securities laws of certain applicable jurisdictions. These forward looking statements include, but are not limited to, all statements other than statements of historical facts, including, without limitation, those regarding our intentions, beliefs or current expectations concerning, among other things, our future financial conditions and performance, results of operations and liquidity, our strategy, plans, objectives, prospects, growth, goals and targets, future developments in the markets in which we participate or are seeking to participate, and anticipated regulatory changes in the industry in which we operate. These forward looking statements can be identified by the use of forward looking terminology, including, but not limited to, terms such as aim, anticipate, assume, believe, continue, could, estimate, expect, forecast, guidance, intend, may, outlook, plan, predict, project, should, will or would or, in each case, their negative, or other variations or comparable terminology. By their nature, forward looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward looking statements are not guarantees of future performance and are based on numerous assumptions. Our actual financial condition, results of operations and cash flows, and the development of the industry in which we operate, may differ materially from (and be more negative than) those made in, or suggested by, the forward looking statements contained in this report. In addition, even if our financial condition, results of operations and cash flows, and the development of the industry in which we operate, are consistent with the forward looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods. We undertake no obligation publicly to update or revise any forward looking statements, except as may be required by law. End notes to information above: (1) Figures are for Yell Limited and SSL and are unaudited and compared with the same period in the prior year. (2) Growth versus prior year normalised total digital revenue of 193m. Normalised digital revenue is the combined total revenue of Yell Limited and SSL, less a one off non cash valuation adjustment in the year ended 31 March (3) Average revenue in the last 12 months. Growth versus prior year. Excludes SSL customers and revenue. (4) Customers with a live digital product at the end of the period. Growth versus prior year. (5) Usage is sourced and audited by Omniture and includes desktop and mobile visits. Due to the growing diversity of usage sources, we are continually reviewing the methodology for calculating usage data for presentation in the most representative way possible. (6) Adjusted Digital EBITDA is Adjusted EBITDA relating to digital products. Adjusted EBITDA is defined as Yell Limited and SSL combined operating profit adjusted to add back amortisation, depreciation, restructuring costs and Hibu Group management costs relating to Yell UK, including share based payments. Restructuring costs are costs associated with programmes that reduced headcount in Yell Limited. Hibu Group management costs are primarily an estimate of management costs of Hibu Group Limited and its subsidiaries (the Hibu Group ) to be charged to Yell UK operations in accordance with the Hibu Group s arm s length transfer pricing methodologies. (7) Changes in revenue are adjusted for rescheduling of printed directories. (8) 225m bond issued by Yell Bondco plc, a special purpose entity fully owned by Hibu Group Limited and affiliated with Yell Limited. 4

5 Condensed Combined (1) Operating Performance m Year ended 31 March 2018 Year ended 31 March 2017 Change Digital Yell.com Revenue % Digital Marketing Services Revenue % Normalised Digital Revenue (2) % Total Digital Product Contribution (%) (3) 79.3% 78.7% 0.6% Digital EBITDA (4) % Digital EBITDA Margin (%) 31.2% 30.5% 0.7% Printed Directories Print Revenue (5) (37.1%) Adjusted Print EBITDA (4) (56.8%) Total Revenue (5) (4.0%) Combined Adjusted EBITDA (4) (13.7%) Exceptional costs (5.7) (5.6) (1.8%) Working Capital Movement (6) (20.5) (7.6) Pension Contributions (11.2) (10.1) (10.9%) Capital Expenditure (5.7) (8.7) 34.5% Hibu Group management costs (4.3) (4.4) 2.3% Operating cash flow (7) (46.3%) Operating Metrics Digital customers at period end (thousands) (8)(9) (1.1%) Digital customers acquired (thousands) (9)(10)(11) % Digital customers lost (thousands) (9)(10)(11) % Average revenue per digital customer ( ) (9) (12) 1,485 1, % Average monthly visits to Yell.com (m) (13) (20.4%) Footnotes to table above: (1) The table presents the condensed combined historical financial information and other data for Yell Limited and SSL. Figures are unaudited, compared with the same period in the prior year and derived by adding the audited historical financial information of Yell Limited and SSL. See Other Condensed Combined Financial Data from page B 7 in this document and the audited financial statements are included from page F 1. (2) Normalised digital revenue is the combined total revenue of Yell Limited and SSL, less a one off non cash valuation adjustment in the year ended 31 March (3) FY 18 Contribution: Yell.com 99.5% (FY 17: 99.2%) Digital Marketing Services 55.3% (FY 17: 53.3%) Print 50.5% (FY 17: 66.4%) (4) Digital EBITDA is Adjusted EBITDA relating to digital products. Print EBITDA is EBITDA relating to Print Products. Adjusted EBITDA is defined as Yell Limited and SSL combined operating profit adjusted to add back amortisation, depreciation, restructuring costs, non cash valuation adjustments and Hibu Group management costs relating to Yell UK, including share based payments. Restructuring costs are costs associated with programmes that reduced headcount in Yell Limited. Hibu Group management costs are primarily an estimate of Hibu Group management costs to be charged to Yell UK operations in accordance with the Hibu Group s arm s length transfer pricing methodologies. (5) Changes in revenue are adjusted for rescheduling of printed directories. (6) Includes all working capital movements including the elements related to exceptional costs and Hibu group management costs, which includes the one off legacy incentive payment of 17.9m. (7) Operating cash flow is Adjusted EBITDA less exceptional operating costs, changes in working capital, pension contributions, capital expenditure and Group management costs. Prior year operating cashflow has been restated to conform to current year presentation. (8) Customers with a live digital product at the end of the period. (9) Excludes SSL customers. (10) In the three months from 1 January 2018 to 31 March 2018, 9.9k digital customers were acquired and 10.4k customers were lost equating to a loss rate in the quarter of 7.9%. (11) Customers acquired and lost are an aggregation of monthly changes in the customer base. Whilst net movements accurately reflect the changes in the customer base, individual customers who take advantage of the ability to switch in and out of our digital products could be counted as both an addition and a loss more than once. (12) Average in the last twelve months (LTM). LTM average digital customers FY 18: 132.3k and FY 17: 139.2k. (13) Usage is sourced and audited by Omniture and includes desktop and mobile visits. Due to the growing diversity of usage sources, we are continually reviewing the methodology for calculating usage data for presentation in the most representative way possible. 5

6 YELL UK CONDENSED COMBINED FINANCIAL INFORMATION The tables in the B pages and the accompanying notes set out the unaudited condensed combined financial information of Yell s UK operations and is followed by the historical condensed financial information of Yell Limited and SSL for the years ended and at the dates indicated below. The information is provided in accordance with the Indenture dated 2 May The information is not the consolidated financial information for the Owl Finance Limited Group. Yell Limited and SSL together accounted for substantially all of the total revenue, total assets and Adjusted EBITDA of the Group at and for the year ended 31 March Whilst the bond was issued by and the financing costs are recorded by Yell Bondco plc, that entity and other entities in the consolidated Group account for nil revenue and de minimis levels of costs within the Adjusted EBITDA of the Group and hold de minimis assets other than the investments in their respective subsidiaries. Unaudited Condensed Combined Financial Information When the term condensed combined is used in this discussion or in the tables below, it means that certain specified financial information of Yell Limited has been combined together with the corresponding financial information of SSL for the corresponding historical periods under discussion. There is no material intercompany trading that requires elimination. This information has been prepared solely for this report, is not prepared in the ordinary course of Yell Limited s or SSL s financial reporting, is for illustrative purposes only, has not been audited or reviewed and is not necessarily representative of Yell Limited or SSL s results of operations for any future period. The condensed combined historical financial information of Yell Limited and SSL contained in footnote 1 to the tables described above is derived by adding together the corresponding (i) historical financial information of Yell Limited as described below and (ii) historical financial information of SSL as described below: each of the Yell Audited Financial Statements and the SSL Audited Financial Statements for year ended 31 March 2018 prepared in accordance with FRS 101; each of the Yell Audited Financial Statements and the SSL Audited Financial Statements for year ended 31 March 2017 prepared in accordance with FRS 101; in each case, included from page F 1 in this document. Historical Financial Information of Yell Limited and SSL The financial information contained in the following tables labelled as condensed statements is derived from the Audited Financial Statements of Yell Limited and SSL for each of the years ended 31 March 2017 and 2018 prepared in accordance with FRS 101, included from page F 1 in this document. B 1

7 Non GAAP Financial Measures Presented below and elsewhere in this report are certain non GAAP financial measures of the combined Yell Limited and SSL entities ( Non GAAP Financial Measures ) that are not required by or presented in accordance with IFRS EU or FRS 101, including EBITDA among others. The Non GAAP Financial Measures are not measurements of financial performance under IFRS EU or FRS 101 and have not been audited or reviewed. Accordingly, they should not be considered as alternatives to other indicators of operating performance, cash flows or any other measure of performance derived in accordance with IFRS EU or FRS 101. The Non GAAP Financial Measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies. The calculations for the Non GAAP Financial Measures are based on various assumptions. There can be no assurance that items the Issuer, Yell Limited or SSL has identified for adjustment as non recurring will not recur in the future or that similar items will not be incurred in the future. This information is inherently subject to risks and uncertainties. It may not give an accurate or complete picture of the financial condition or results of operations for the periods presented and should not be relied upon when making an investment decision. The information in the tables below is presented in millions of pounds sterling ( m), unless otherwise specified, and excludes financial information of Yell Bondco plc. Unaudited Condensed Combined Financial Information Unaudited Condensed Combined Income Statement of Yell Limited and SSL m Year ended 31 March Digital revenue Print and other revenue Revenue Cost of sales... (106.8) (106.5) Gross profit Distribution costs... (7.0) (7.1) Administrative expenses... (49.4) (44.6) Depreciation and amortisation... (7.0) (5.8) Operating profit Income from shares in group undertakings. 1.4 Net finance costs... (23.7) (46.0) Profit before taxation Tax charge... (7.0) (11.7) Profit for the period B 2

8 Unaudited Condensed Combined Operating Cash Flow (1) m Year ended 31 March Digital EBITDA Capital expenditure... (5.7) (8.7) Pension payments... (11.2) (10.1) Exceptional costs... (5.7) (5.6) Digital Operating Cash Flow Print EBITDA Change in working capital... (4.0) (7.6) Settlement of management incentive plan (2)... (17.9) Hibu Group management costs and other (3)... (2.9) (4.4) Operating Cash Flow m Year ended 31 March Operating Cash Flow (as stated above Operating cash flows from Sitemaker Software Limited.. (0.7) (1.4) Interest paid. (26.6) (45.9) Corporation tax paid.. (0.9) FX on non EBITDA recharges 0.2 Capex Net cash flows from operating activities for Yell Limited (1) The table above provides a reconciliation between (i) Digital EBITDA and Digital Operating Cash Flow and (ii) Digital Operating Cash Flow and Operating Cash Flow for the years ended 31 March 2018 and Digital Operating Cash Flow is Digital EBITDA minus combined Yell Limited and SSL capital expenditure, pension payments and exceptional costs. Digital Operating Cash Flow excludes changes in working capital and Hibu Group management costs, due to limitations in allocating these items between digital and print. Operating Cash Flow is Combined Adjusted EBITDA minus combined Yell Limited and SSL capital expenditure, pension payments, exceptional costs, changes in working capital and Hibu Group management costs. (2) Costs attributed to the cash settlement of a management long term incentive plan during the year ended 31 March (3) Hibu Group management costs are primarily an estimate of management costs occurring above the Group that are charged to Group operations in accordance with the Hibu Group s arm s length transfer pricing methodologies. Share based payments and other small rounding adjustments have been included with the Hibu Group management costs and are described as other. B 3

9 Unaudited Condensed Combined Balance Sheet of Yell Limited and SSL m At 31 March 2018 (1) Non current assets Intangible assets and goodwill Property, plant and equipment Retirement benefit surplus Deferred tax assets Intercompany receivables Other receivables Total non current assets Current assets Trade receivables Intercompany receivables Other receivables Cash and cash equivalents Total current assets Current liabilities... (73.6) Net current (liabilities)/assets... (10.8) Total assets less current liabilities Non current liabilities Deferred tax liabilities... (22.0) Intercompany payables... (286.8) Trade and other payables... (5.9) Net liabilities... (97.6) Total capital less accumulated deficit... (97.6) (1) The Unaudited Condensed Combined Balance Sheet at 31 March 2018 has been derived by adding together the corresponding historical financial information from (i) the Condensed Statement of Financial Position of Yell Limited and (ii) the Condensed Statement of Financial Position of SSL, which are derived from the historical Financial Statements included from page F 1 of this document. B 4

10 Other Condensed Combined Financial Data (1) m Year ended 31 March Yell Limited and SSL Normalised Digital Revenue (2) Digital Product Contribution (%) (3) Digital EBITDA (4)(5) Digital EBITDA margin (%) (6) (1) The Other Condensed Combined Financial Data of Yell Limited and SSL is derived by adding together the corresponding (i) Other Condensed Combined Financial Data of Yell Limited and (ii) Other Condensed Combined Financial Data of SSL. (2) Normalised Digital Revenue is the combined digital revenue of Yell Limited and SSL less a one off non cash valuation adjustment to deferred digital revenue of 1.9 million in the year ended 31 March The table below provides a reconciliation between total revenue and combined normalised revenue and digital revenue and Normalised Digital Revenue for the years ended 31 March 2018 and m Year ended 31 March Combined Yell Limited revenue SSL revenue Non cash valuation adjustment on deferred revenue... (1.9) Combined normalised revenue (a) Print and other Yell Limited print and other revenue Print and other revenue Digital Yell Limited Yell.com revenue Yell Limited digital marketing services revenue SSL digital marketing services revenue Non cash valuation adjustment on deferred revenue... (1.9) Normalised Digital Revenue (a) Combined normalised revenue is the combined revenue of Yell Limited and SSL less a one off non cash valuation adjustment to deferred digital revenue of 1.9 million in the year ended 31 March (3) 2018 Contribution: Yell.com 99.5% (2017: 99.2%) Digital Marketing Services 55.3% (2017: 53.3%) Print 50.5% (2017: 66.4%). B 5

11 Other Condensed Combined Financial Data continued (4) Combined Adjusted EBITDA (see table below) is defined as Yell Limited and SSL combined operating profit adjusted to add back amortisation, depreciation, restructuring costs, non cash valuation adjustments and Hibu Group management costs relating to the Group, including share based payments. Depreciation and amortisation include adjustments to carrying values for impairments and gains or losses on disposal. Restructuring costs are the costs associated with programmes that reduced headcount in Yell Limited. Non cash valuation adjustments are primarily adjustments releasing valuation reserves against working capital items, many of which were in place at the time of the financial restructuring that took place on 3 March Hibu Group management costs are primarily an estimate of management costs occurring above the Group that are charged to Group operations in accordance with the Hibu Group s arm s length transfer pricing methodologies. Share based payments and other small rounding adjustments have been included with the Hibu Group management costs and described as other. Combined Adjusted EBITDA and Digital EBITDA are not measurements of financial performance under FRS 101 and should not be considered as alternatives to profit or any other performance measure derived in accordance with FRS 101. Combined Adjusted EBITDA and Digital EBITDA are presented for informational purposes only. This information does not represent a projection of future results. It may not give an accurate or complete picture of the results of operations and should not be relied upon when making an investment decision. The table below provides a reconciliation between (i) Yell Limited and SSL operating profit and Yell Limited and SSL EBITDA, respectively, (ii) Yell Limited and SSL EBITDA and Yell Limited and SSL Preliminary Adjusted EBITDA, respectively, (iii) Combined Preliminary Adjusted EBITDA (see table below) and Combined Adjusted EBITDA, and (iv) Combined Adjusted EBITDA and Digital EBITDA for the years ended 31 March 2018 and m Year ended 31 March Yell Limited Operating profit Depreciation and Amortisation (a) EBITDA (b) Restructuring costs (c) Non cash valuation adjustments (d) (3.2) Preliminary Adjusted EBITDA (e) SSL Operating (loss) profit Depreciation and Amortisation (a)... EBITDA Restructuring costs (c) Non cash valuation adjustments (d)... (0.4) Preliminary Adjusted EBITDA (e) Combined Combined Preliminary Adjusted EBITDA (f) Hibu Group management costs and other (g) Combined Adjusted EBITDA Remove Print EBITDA (h)... (11.4) (26.6) Digital EBITDA (a) (b) (c) (d) (e) (f) (g) (h) Depreciation and amortisation include adjustments to carrying values for impairments and gains or losses on disposal. EBITDA is defined as operating profit adjusted to add back depreciation and amortisation. Restructuring costs are the costs associated with programmes that reduced headcount in Yell Limited. Non cash valuation adjustments are primarily adjustments releasing valuation reserves against working capital items, many of which were in place at the time of the financial restructuring that took place on 3 March Preliminary Adjusted EBITDA refers to EBITDA that has been further adjusted to add back restructuring costs and non cash valuation adjustments. Combined Preliminary Adjusted EBITDA is calculated by summing together the Preliminary Adjusted EBITDA of Yell Limited and the Preliminary Adjusted EBITDA of SSL. Hibu Group management costs are primarily an estimate of management costs occurring above the Group that are charged to Group operations in accordance with the Hibu Group s arm s length transfer pricing methodologies. Share based payments and other small rounding adjustments have been included with the Hibu Group management costs and are described as other. See footnote (5) below for a discussion of the derivation of Print EBITDA. B 6

12 Other Condensed Combined Financial Data continued (5) Digital EBITDA is derived by separating Combined Adjusted EBITDA between digital and print products by applying costs directly attributed to printed directories against revenue relating to print and other non digital products. The only costs that have been allocated to the printed directories on an apportioned basis are the costs of specific sales units. These sales units costs have been allocated to print products by (i) allocating the total costs of sales employees serving only print customers to print products and (ii) allocating the remaining costs for sales units that sell both digital and print products on the basis of (a) the number of print customers compared to the number of digital customers served by the sales units in a given period and (b) the number of contacts that the sales units make with print versus digital customers in a given period. Total indirect costs were 120 million and 95 million in the years ended 31 March 2018 and 2017, of which 3 million and 2 million were allocated to print on an apportioned basis in each of the respective years. All other costs are attributed to digital products and are applied against revenue relating to digital products. The table below provides a breakdown of Combined Adjusted EBITDA between Digital EBITDA and Print EBITDA for the years ended 31 March 2018 and m Year ended 31 March Combined Combined normalised revenue Cost of sales and administrative expenses... (153.0) (150.9) Combined Adjusted EBITDA Print and other Print and other revenue Cost of sales and administrative expenses... (15.9) (16.9) Print EBITDA Digital Normalised Digital Revenue Cost of sales and administrative expenses... (140.0) (134.0) Digital EBITDA (6) Digital EBITDA margin is the ratio of Digital EBITDA to Normalised Digital Revenue. (7) Net debt is financial debt of the Group at 30 June 2018 and presented without comparative information as the Group issued debt during the quarter ended 30 June The Revolving Credit Facility entered into on the same date remains undrawn. Historical Financial Information of Yell Limited Condensed Income Statement of Yell Limited m Year ended 31 March Digital revenue Print and other revenue Revenue Cost of sales... (106.2) (105.9) Gross profit Distribution costs... (7.0) (7.1) Administrative expenses... (47.7) (43.0) Depreciation and amortisation (1)... (7.0) (5.8) Operating profit Income from shares in group undertakings. 1.4 Net finance costs... (23.6) (45.8) Profit before taxation Tax charge... (7.1) (11.8) Profit for the period (1) Depreciation and amortisation include adjustments to carrying values for impairments and gains or losses on disposal. B 7

13 Condensed Statement of Financial Position of Yell Limited m At 31 March Non current assets Intangible assets and goodwill Investment in subsidiaries... Property, plant and equipment Retirement benefit surplus Deferred tax assets Intercompany receivables Other receivables Total non current assets Current assets Trade receivables Intercompany receivables Other receivables Cash and cash equivalents Total current assets Current liabilities... (70.7) (59.6) Net current (liabilities)/assets... (8.4) 3.0 Total assets less current liabilities Non current liabilities Deferred tax liabilities... (22.0) (18.7) Intercompany payables... (286.8) (318.6) Other payables... (5.9) (6.0) Net liabilities... (95.4) (126.7) Total capital less accumulated deficit... (95.4) (126.7) Condensed Statement of Cash Flows of Yell Limited m Year ended 31 March Net cash flows from operating activities Net cash outflow from investing activities... (3.3) (8.7) Net cash outflow from financing activities... (8.6) (9.1) Net increase (decrease) in cash and cash equivalents... (7.9) (7.4) Cash and cash equivalents at beginning of period Exchange gains (losses) on cash and cash equivalents Cash and cash equivalents at end of period B 8

14 Historical Financial Information of SSL Condensed Income Statement of SSL m Year ended 31 March Digital revenue Cost of sales... (0.6) (0.6) Gross profit Administrative expenses... (1.7) (1.6) Depreciation and amortisation (1)... Operating profit Net finance costs... (0.1) (0.2) Profit before taxation Tax charge Profit for the period (1) Depreciation and amortisation include adjustments to carrying values for impairments and gains or losses on disposal. Condensed Statement of Financial Position of SSL m At 31 March Non current assets Property, plant and equipment Deferred tax assets Total non current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Current liabilities... (2.9) (5.0) Net current liabilities... (2.4) (3.0) Total assets less current liabilities... (2.2) (2.8) Net liabilities... (2.2) (2.8) Total capital less accumulated deficit... (2.2) (2.8) SSL cash generated from operations m Year ended 31 March Cash generated from operations B 9

15 F-1

16 F-2

17 F-3

18 F-4

19 F-5

20 F-6

21 F-7

22 F-8

23 F-9

24 F-10

25 F-11

26 F-12

27 F-13

28 F-14

29 F-15

30 F-16

31 F-17

32 F-18

33 F-19

34 F-20

35 F-21

36 F-22

37 F-23

38 F-24

39 F-25

40 F-26

41 F-27

42 F-28

43 F-29

44 F-30

45 F-31

46 F-32

47 F-33

48 F-34

49 F-35

50 F-36

51 F-37

52 F-38

53 F-39

54 F-40

55 F-41

56 F-42

57 F-43

58 F-44

59 F-45

60 F-46

61 F-47

62 F-48

63 F-49

64 F-50

65 F-51

66 F-52

67 F-53

68 F-54

69 F-55

70 F-56

71 F-57

72 F-58

73 F-59

74 F-60

75 F-61

76 F-62

77 F-63

78 F-64

79 F-65

80 F-66

81 F-67

82 F-68

83 F-69

84 F-70

85 F-71