Yell core profit up

By Georgina Prodhan, European Media Correspondent

LONDON (Reuters) - UK-based directories group Yell (YELL.L) said it was on track to meet its full-year guidance for flat core profit after a rise in the first quarter despite tough economic conditions, lifting its shares more than 18 percent.

But Yell, which like its peers is struggling with tight customer advertising budgets while investing to develop Internet offerings, said it expected sales to stagnate in the current, second quarter as slowing economies take their toll.

Yell's market capitalisation has dropped to about 500 million pounds, roughly a seventh of its net debt, but it reassured investors with news that it had cut its debt in the quarter and had headroom on its debt covenants.

Shares in Yell rose almost 19 percent in early trading and at 9:37 a.m. were up 12.7 percent at 80 pence, outperforming a flat European media index .SXMP on Thursday.

Yell's quarterly adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 11.7 percent to 160.8 million pounds, above the 148.8 million average forecast of five analysts polled by Reuters Estimates.

Sales rose 6.2 percent to 468.4 million pounds, slightly above the average forecast of 463.2 million for the April-June period, Yell's fiscal first quarter.

Weakness in Spain and Britain were offset by better-than-expected sales in the key U.S. market, and the company said it should manage flat sales this quarter, or a 3 percent drop in organic sales at constant currencies.

"Everyone recognises that the UK is deteriorating," Chief Executive John Condron told Reuters. "The competitive threat is going away a little bit in the United States," he added, but said it would be premature to say that the worst was over.