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Investor reaction to the Yell Group (LSE:YELL) Interim Management Statement seems to indicate a lack of confidence in the company’s attempts to redefine itself and grow its business in a rapidly changing market. Shares in the company declined 16% in early trading, compounded by the fact they have declined over 99% in the past five years. The company is struggling to compete in the increasing digital market whilst still providing the published directory services that have been its staple for years.
The Downside
Operations
- Print revenue per advertiser was down 2.7%
- Digital directories, the Yellow Pages on the internet, were down 15.7%
- Print directory revenues were down 22%
- Print advertisers were down 17.5%
Financials
- Group revenue fell 15.1% to £383 million
- EBITDA declined £12.7 million to £108.6 million
- Net debt is at £2.6 billion
The Upside
Operations
- Total digital customers increased 9.8% to 945,000
- The company built 25,000 new websites for digital customers in the 3rd Quarter
Financial
- After tax profit was up £15.0 million
- Digital services revenues grew 112% to £35.4 million
- Cash flow increased £9.0 million to £71.3 million
- Lenders have agreed to relax covenants tied to earnings
Company Plans
Despite Yells‘ attempts to reconfigure the company to better serve a changing market, the increasing demand for digital service is driving an even faster decline in the demand for published directories. CEO Mike Pocock said “The deteriorating macro environment and a more competitive digital directory market are driving a faster rate of directory revenue decline.” On a more positive note, he said, “Our digital services revenue continued to grow strongly. We expect this growth to accelerate as our strategic new products come to market.”
Company Spotlight
Yell Group, publisher of the Yellow Pages, provides lead services through published directories,local guides, online search facilities, and operater-assisted services.
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