July 23, 2009 / 6:31 AM / 9 years ago

UPDATE 3-Yell says debt talks on track; shares rise

* Q1 slightly better than guidance, in line with consensus

* Debt talks on track, extending maturity still favoured

* Shares rise 26 percent

(Adds executive comments on debt talks, updates shares)

By Georgina Prodhan

LONDON, July 23 (Reuters) - British yellow pages publisher Yell YELL.L said talks to restructure its 3.8 billion pounds ($6.2 billion) of debt were on track and said it outperformed guidance for the first quarter, lifting its share price by over a quarter.

Yell reiterated it was seeking to extend the maturity of its debt and made no mention of rights issues or debt-for-equity swaps, cheering investors. It said it still expected talks to take until the autumn to conclude.

“We’re talking about extension of debt with our banks, but we do recognise that we will need at some stage to continue consulting with our shareholders,” Chief Financial Officer John Davis told Reuters, when asked about a possible rights issue.

He said Yell had started talks with its agent bank, HSBC (HSBA.L), and a couple of others. It would extend talks to a wider circle of banks after the August holidays and expected to talk to shareholders in the autumn, he said in an interview.

Yell shares rose as much as 26 percent and by 0840 GMT were trading up 17.6 percent at 26.87 pence. The shares have lost almost half their value since the start of the year, underperforming the European media index .SXMP by 40 percent.

The company’s market capitalisation as of Wednesday’s close was 179 million pounds, or 7 percent of last year’s revenues.

DECLINES TO ACCELERATE

Yell reiterated its forecast for the current quarter in which it expects sales and core profit declines to accelerate — to 17 and 30 percent respectively — as small businesses squeeze spending on classified advertising.

In the quarter to end-June, core earnings fell 18 percent at constant currencies, slightly better than its guidance for a 20 percent decline, and revenues fell 10 percent, also slightly better than the 11 percent forecast.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were 148 million pounds, in line with Reuters consensus of around 147 million. Revenues of 475.3 million pounds were also in line.

Internet revenues from online marketing and helping companies make their businesses easier for search engines to find made up 21 percent of group revenues, up from 16 percent a year earlier.

UBS analyst Simon Whittington also noted Yell’s strong cash performance. “Cash conversion was strong at 139 percent, and whilst we do not expect this to continue, highlighting the cash generative nature of the business may help with negotiations with lenders,” he wrote.

Yell operates in Britain, the United States and Spain — currently some of the world’s most challenged economies — as well as Latin America. The company wrote down its Spanish and Latin American assets by 1.3 billion pounds in May. [ID:nLK210307]

U.S. competitors R.H. Donnelley RHDC.PK and Idearc IDARQ.PK have both filed for bankruptcy in the past two months. R.H. Donnelley published the first yellow pages in 1886. ($1=.6103 Pound) (Editing by David Cowell)

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