R for recovery plan? Yell plots digital future - Business Analysis & Features - Business - The Independent

R for recovery plan? Yell plots digital future

With debts of £2.7bn and falling sales, does Yell have time to turn around?

The Yellow Pages updated its much-loved advert featuring JR Hartley for the digital age this year, with former trance DJ Day V Lately searching for his record using the company's smartphone app. The iconic directory's parent Yell Group has had more difficulty bringing its own business into the digital age, and with a "critical" strategy announcement in July, the new chief executive admits the company is standing at the crossroads.

Yell released its full-year results yesterday, which served principally to underline the company's problems. Revenues fell 12.4 per cent over the year to £1.8bn as the growth in its online operations was unable to offset the plummeting revenues from its print business.

The world has moved on since the time of JR Hartley in the mid 1980s, when directories offered a secure revenue stream even during a downturn. The rise of internet alternatives – especially the advance of Google – and an expensive dealmaking spree that helped to saddle the group with debt has left it struggling to catch up.

The print division makes up 75 per cent of the company's revenues and the structural decline has been enormous. Last year revenues fell 18.6 per cent to £1.3bn. The market has made its feelings about Yell's precarious situation known. Shortly before the credit crunch its shares peaked over 600p. Since then they have lost 98 per cent of their value, with its place on the FTSE 100 index a distant memory.

Angry shareholders warned Michael Pocock, who joined as chief executive in January, that wholesale changes were needed and time was running out. Mr Pocock, the former general manager of Linksys, a part of Cisco Systems, has a reputation as a turnaround expert and he will need all his skill to bring Yell back to its glory days. Yesterday he was bullish about the group's prospects, although admitted much was riding on the success of the new strategy. "The industry is at a crossroads. We can either keep the blinders on and say we'll ride print into the sunset, or we'll invest and keep it profitable for as long as possible, and acknowledge that we need bolder decision-making."

The general plan is to manage the decline in print and build the digital business to provide 75 per cent of revenues within four years. The group brought in the technology consulting firm Booz Allen Hamilton, formed a "core management team" dedicated to working out the strategy and carried out months of focus groups to flesh out its plan.

"The digital marketplace is already twice the size of the total print market and some ten times larger than the segments of the print market Yell traditionally addressed," Mr Pocock said. "Small shares of this fast-growing and highly fragmented market can mean very significant, profitable growth."

One analyst said the new management "seems to understand the problem; the million-dollar question is whether they can turn it round".

Yell is to target further growth of services on smartphones and tablet computers, as well as increasing e-commerce and the use of social networking. It plans to provide new services that "both cement our place as a champion of small and medium- sized enterprises and provide material new value to the customer".

An analyst said the company was "lagging behind many of the internet groups who have been in the area for some time". The move further into digital was not too slow, the chief executive said yesterday, although added: "Would we have liked to do this a few years from now? Sure."

Mr Pocock continued: "The competitive landscape changes every day," adding that Yell's strength lay in its existing sales force with strong contacts among small and medium-sized businesses, and a "robust database" that it will exploit more heavily. "We have a good machine in place," he said. "We just have to redirect it."

Analysts at Numis see the way forward fraught with problems. "We continue to see both cyclical and structural pressures on Yell's business," the broker said. It pointed to the new wave of competitors, such as online discount firm Groupon, adding that execution risk was high for Yell's entrance into the market.

The management said it had "worked hard to reduce its costs" adding that there was more to do. Mr Pocock sees significant savings from bringing the company's divisions closer together and integrating them on to a single technology platform.

Yet, a core issue for Yell is its debts. While the group managed to cut the headline figure by £329.5m last year it remains at £2.7bn. Finance director Tony Bates admitted the debt position "is a pain" but the company believes it will meet its obligations, despite fears it could breach its banking covenants next financial year if earnings fall. The group's credit rating was downgraded by Standard & Poor's further into "junk" status in February, and the rating agency cut its outlook from stable to negative. Rumours have been rife in the market that the company may look to ease the pain with a debt-for-equity swap, another rights issue or possibly by divesting some of its businesses.

The market has the company marked down as "high risk". Ben Timms, head of sales at broker Prime Markets, said: "Yell is now engaged in a desperate race against time to grow digital revenues at a sufficient rate to offset this decline, while attempting to manage the debt pile. Salvation is seemingly as far away as ever, and up to the new strategy announcement in July.

"It seems amazing to say, but I could see Yell as a casualty of the digital age," he said, adding that distribution of the iconic Yellow Pages could finish in the future. Mr Pocock denied the group was considering shutting down its flagship product.

Yell may not be riding into the sunset quite yet, but many in the market are looking to July, feeling the group is drinking in last chance saloon.

Yellow fever

The Yellow Pages telephone directory can trace its roots back to Cheyenne, Wyoming, in 1883, when a printer working on the regular directory ran out of white paper so used yellow. The first Yellow Pages directory was created three years later, and the oldest surviving business still operating in the US is the Yellowbook, founded in 1930.

The General Post Office launched the first Yellow Pages classified directory in the UK in 1966. The business was owned by British Telecom, which was formed in 1981 and remained part of the group when it was privatised four years later, the same time Business Pages was launched. In 1987, the group unveiled Talking Pages and the first electronic delivery of classified directory information. The group launched Yell.co.uk in 1996 and offered transactions on the site a year later. In 2001, private equity companies bought Yell for £2.1bn from BT. The group launched a new telephone service and brought the number of Yellow Pages published to 102. Last year it moved into the digital age with an augmented reality app for the iPhone.

Suggested Topics
Life and Style
tech
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
PROMOTED VIDEO
Arts and Entertainment
Matt Damon as Jason Bourne in The Bourne Ultimatum (2007)
filmMatt Damon in talks to return
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Life and Style
tech... and together they're worth at least £100 million
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig is believed to be donning skies as 007 for the first time
Arts and Entertainment
Fringe show: 'Cilla', with Sheridan Smith in the title role and Aneurin Barnard as her future husband Bobby Willis
tvEllen E Jones on ITV's 'Cilla'
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Bono and Apple CEO Tim Cook announced U2's surprise new album at the iPhone 6 launch
tech(but you can't escape: Bono is always on your iPhone)
Sport
Tim Wiese
sport
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week