The Investment Column: Times are tough for Yellow Pages, but don't dump them yet

Unilever; Invensys


Our view: Hold

Share price: 279.75p(-50.25p)

In the internet age the Yellow Pages phone book dumped at the front door is becoming increasingly redundant. Many are probably lobbed into the recycling bin before they are even opened.

Shares in Yell, the company which publishes the directory here and in the US, received similar treatment yesterday from a nervous City after warning of a sudden slowdown in sales.

Yell, stripped out of BT and floated in 2003, warned that growth in sales in the final quarter to March will be £8m lower than expected. The market's response was to lop 15 per cent or £390m off its value. It ended the day as the biggest faller in the FTSE 100.

The explanation offered for the slowdown, which will trim full-year growth from 3 per cent to 2 per cent, was that many advertisers are cutting back on their budgets after returning from the Christmas break. After taking a look at the prospects for corporate Britain, who can blame them?

Despite the hitch Yell will still hit other targets on earnings and margins. Nine-month profits were up from £175m to £216m.

Yell is clearly running at two speeds. While the printed directory enters what must surely be the twilight years of its usefulness – sales are currently 4.4 per cent down – the online version is growing at 50 per cent a year and accounting for 20 per cent of total revenue. In the US, from a much smaller base, the business is increasing at 70 per cent.

In the coming year Yell will benefit from the equivalent of a 6 per cent price rise as a cap on the rates it can charge advertisers comes to an end. But the real issue is whether demand from advertisers will pick up, and when, or remain at present subdued levels. There are little grounds for optimism.

The shares have lost 56 per cent of their value over the last year, briefly fluttering higher on vague talk of a bid from Google. The prospect of corporate action would inject some life into the shares. Hold.

Unilever

Our view: Buy

Share price: 1598p (-57p)

Supermarkets are known for using their power to tell suppliers they will not accept price increases. Unless they are dealing with Unilever. The Anglo-Dutch food-to-soap giant delivered a thumping 6.1 per cent rise in sales during the final quarter of last year, of which half came from higher prices. Its brands are so important the supermarkets had no choice but to pay up.

The rises were forced on Unilever by rising commodity costs – something even it has little control over.

Unilever is a leaner, fitter group than in the past, when it was slow to spot trends and bureaucratic in its response to new opportunities. Best known for Hellmann's mayonnaise and Dove soap, it has shrunk the number of products it produces into a more manageable portfolio and is responding more quickly to changes in consumer tastes. So clear anti-dandruff shampoo has been successfully launched in Russia, and Lipton slimming teas in France. In Japan the company owns the leading deodorant brand within six months of launch.

Unilever reported pre-tax profits for the year of £3.8bn, up 11 per cent, reflecting a marked improvement in Europe. Sales rose 5.5 per cent, ahead of the group's own target.

Further growth is on the cards this year, although in a weakening consumer market its customers may adopt a more challenging attitude towards price rises.

Some dealers were disappointed at the buy-back programme for 2008, which is less than expected. Buy.

Invensys

Our view: Hold

Share price: 246.5p (+23.25p)

The rehabilitation of the engineering group Invensys is well underway. Trading is strong in the parts of the group that matter, debts are being repaid, and there is talk of a return to the dividend list – although that may be a little way off. The shares went better in a weak market.

The company is benefiting from strong demand in industries served by its process systems and rail divisions, which are now generating nearly two thirds of total sales. They are the real engines of growth, supplying components and electronic systems needed in large-scale infrastructure projects. Their order books stand at £1.8bn. The picture was less rosy in its controls division, which experienced weaker demand in the US. It also lost one key customer.

At the operating level, profits for the third quarter to end December were 26 per cent ahead, but at the pre-tax level they were down £5m at £33m after one off charges and foreign exchange losses.

After a series of disposals of low-margin businesses, Invensys is now planning to pay off £343m of high-yield bonds as a prelude to eventually resuming dividend payments.

The shares have been weak over the past year on its exposure to the US, but the current performance suggests it has the resilience and spread of activities to withstand any short- to medium-term deterioration in market conditions.

The group is likely to turn in full year profits of £190m, putting the shares on a multiple of 14. Hold.

News
Alan Bennett has criticised the “repellent” reality shows which dominate our screens
tvBut he does like Stewart Lee
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
tech
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Sport
David Moyes and Louis van Gaal
football
PROMOTED VIDEO
News
i100
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
News
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Life and Style
food + drink
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
News
A cabin crew member photographed the devastation after one flight
news
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
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

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits