UPDATE 2-Yell says small-business confidence returning

* Revenue decline stabilises

* U.S. market share gains seen

* Shares rise 9 percent

(Adds CFO and analyst comments, shares, background)

By Georgina Prodhan

LONDON, Feb 4 (BestGrowthStock) – Yellow-pages publisher Yell Group
Plc (YELL.L: ) beat third-quarter guidance and said small-business
customers in Britain and the United States were starting to feel
more confident, adding to a wave of cautious corporate optimism.

Yell, which refinanced its debt after a struggle in the past
year, said its revenue decline stabilised at 13 percent in the
quarter to end-December, better than the 16 percent decline it
had forecast. Its shares rose 9 percent in a flat market.

“We are beginning to see a return of customer confidence,”
Chief Financial Officer John Davis told Reuters by phone. “But
we’re quite cautious about calling a significant upturn.”

By 0904 GMT, Yell shares were up 6.4 percent to 39.2 pence,
off a high of 40.25 pence.

“This looks to be a very good set of results for a stock
where the mere absence of bad news often comes as a relief,” UBS
Simon Whittington wrote in a note.

UK-based Yell makes half its revenues in the U.S., about 30
percent in Britain, and the rest in Spain and Latin America.
Davis said the trend was improving in all its markets.

According to surveys, British business confidence climbed to
a six-year high in the fourth quarter. [ID:nGEE5AM00D]. But U.S.
small-business sentiment stalled in December, hurt by weak sales
and worries about government policies. [ID:nN11159902]

Yell is currently selling ads for directories it will
publish in the June quarter, when it will book those revenues.
It said sales would likely decline 16 percent this quarter
before an improvement was reflected in its results.

Print directories remain an important part of Yell’s
business, although it is stepping up online operations to
compete with Internet rivals, for example by helping customers
optimise search results and reselling Google’s (GOOG.O: ) AdWords.

Davis said he believed Yell was taking market share from
troubled U.S. rivals RH Donnelley and Idearc — renamed
SuperMedia (SPMD.O: ) — which have both recently emerged from
bankruptcy after painful debt refinancings.

DEBT CUT

Yell also completed a debt refinancing in November after
months of negotiations with lenders, and issued new shares,
removing fears of a debt-for-equity swap. Still, its shares
continued to slide, losing a further 18 percent since that date.

At Wednesday’s close, the shares were trading at just 5
times estimated earnings for the fiscal year to March 2011,
about half the sector average.

Yell cut its net debt by 1.2 billion pounds to 3 billion
pounds by end-December thanks to strong cash generation,
favourable foreign-exchange movements and proceeds from the
rights issue.

In the first nine months of its fiscal year, Yell made
revenue of 1.523 billion pounds ($2.42 billion), implying a
figure of 540 million pounds for the third quarter.

According to Starmine’s SmartEstimates, which are weighted
towards analysts with a history of correctly predicting results,
Yell was expected to report third-quarter revenue of 511.7
million pounds. Consensus was 518.3 million pounds.

Nine-month adjusted earnings before interest, tax,
depreciation and amortisation (EBITDA) fell 20.5 percent at
constant currencies to 476.5 million pounds, after a 21 percent
fall in the first six months.

Yell reiterated it expected to make full-year adjusted
EBITDA of at least 600 million pounds for the full year,
compared with consensus of about 613 million pounds and 2009
EBITDA of 819 million pounds.

Investing Basics

(Editing by Sharon Lindores)
($1=.6299 pounds)

UPDATE 2-Yell says small-business confidence returning