Yell promises £100m cost-cutting package

Yell, the directories business, is to cut another 1,300 jobs worldwide over the coming 18 months, as part of a £100m cost-cutting package to mitigate against the global economic slowdown.

As part of this financial year's £150m cost reduction plan, the global group has already contracted from 15,200 to 13,900 staff in the last year, largely by not replacing employees leaving the company.

Related articles

• Unemployment edges closer to two million mark
• Interest rates may drop to record lows in 2009
• Bankruptcy fear for small businesses starved of borrowing
• Hamish McRae: Cut taxes, but don't expect miracles
• Credit crisis diary: Try not to talk the market down, chaps
• 5,000 jobs axed as City forecasts 3m by 2010
• Jeremy Warner: Sterling crisis threatens Brown's reflationary plans
• Sainsbury's rises out of the gloom
• Brown to act over credit card rate rises
• Taylor Wimpey sees no prospect of recovery in the short term
• Slowdown in Chinese demand triggers Cookson profit warning
• Starbucks blames UK for weak performance
• Virgin Media to cut 2,200 workers in next four years
• InterContinental Hotels revenues tumble
• Vodafone plans to save £1bn to survive recession and intense competition
• Jeremy Warner: Colao makes cash his main priority at Vodafone
• Tax cuts now could mean tax rises later, says minister
• Leahy urges PM to do more to support struggling retailers
• G20 summit: New world order?

John Condron, the chief executive, said: "What we've been asked is whether, as part of the £100m savings, we anticipate more job cuts – and the answer is, probably the same again. In the UK we have had about 300 jobs disappear in 2007-8, of which half were voluntary redundancies and the rest were people not being replaced. I would think we can expect the same kinds of proportion again."

The global economic situation is producing "fear and uncertainty" that is leaving the small businesses that make up Yell's customer base at a "standstill".

"What people are telling us is that they feel confident in their order books for the next six months or so, but after that there is a lot of uncertainty," Mr Condron said. "We are already seeing people retrenching, cutting back and conserving cash. Things are at a standstill because although they are maintaining last year's level of expenditure, people are not increasing their spending."

Numbers of new customers is also being sorely affected. Compared with an expectation of around 100,000 new customers in the year, Yell now forecasts only 80,000 – at least in part because the economic climate is making it so much more challenging to set up a business. "The life blood of our business is beginning to dry up because people are just not getting the funding to set up new businesses at the moment," Mr Condron said.

Despite the gloom, Yell's share price closed up 4.96 per cent at 68.75p yesterday after the company confirmed its full-year expectations notwithstanding predicted declines in the current quarter. Underlying group revenue will fall back by around 5 per cent in the three months to December, with drops of 6 per cent in the UK, 4 per cent in the US and 7 per cent in Spain. But the declines will be offset by the cost-cutting plan, bringing in broadly flat full-year earnings, as planned.

Revenue for the group as a whole over the first half of the year, to September, was £1bn, a 1 per cent rise at constant exchange rates. The minor rise was also well-received by the City, given the trouble buffeting the media sector. Adjusted profit after tax was up 16 per cent to £133m, but pre-tax profits slipped 2.7 per cent to £118m.

The group's paper directories business continues to decline, with sales down 9.4 per cent at £257m and the number of unique advertisers down by 8.9 per cent. The internet is the big growth area. Online revenue was up 23.3 per cent to £80m, representing around 15 per cent of total sales in the first half, compared with 11 per cent last year. The number of unique users is also sharply on the rise – up by 48 per cent in September in the UK, and by 78 per cent and 17 per cent in the US and Spain respectively.

Debt remains a priority, despite the refinancing secured last month. Yell's debt stood at £3.81bn or 4.7 times earnings at the end of September, down from 4.9 times in June. The target is to reduce the ratio to 4.6 times earnings by the end of the year and 4 times by 2011.