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Investors agree to new Yell strategy
By Salamander Davoudi and Miles Johnson
Published: February 4 2011 22:51 | Last updated: February 4 2011 23:07
Shareholders in Yell, the publisher of the UK’s Yellow Pages, have agreed to a new strategy for the
struggling directories company. It includes a rationalisation of the business, further cost-cutting and heftier
investment in digital.
Yell has also been approached by buyers interested in different parts of the group, which spans the UK,
Latin America, Spain and the US. But any sale is considered unlikely this year because of poor market
conditions.
“Management must sort out the web-based proposition, gain more credibility with small and medium-sized
businesses and take more cost out,” said one large shareholder.
Michael Pocock, the new chief executive, held meetings with investors last month. He is drawing up a
detailed battle plan to drive down Yell’s £2.9bn debt pile and reposition the business. The conclusions of
the review are to be unveiled in June.
One plank of the strategy will be to set up a common IT platform between the businesses. Cost-cutting is
expected to come from a range of areas, including licensing and procurement. Yell declined to comment.
One person familiar with the strategy said: “Where there are three businesses doing the same thing, there
will only be one going forward.”
The directories business has struggled in a difficult economic and competitive environment, and there
are concerns that the business model is no longer viable in the internet age.
One shareholder said: “Yell has been terrible, absolutely awful. Cash flow has been better due to cutting
costs but you can’t do that forever, so we want to see some top-line growth as well.”
Standard & Poor’s yesterday downgraded Yell’s credit rating further into “junk” (subinvestment grade)
territory and revised its outlook from stable to negative.
The rating agency said Yell was unlikely to meet its guidance on earnings, debt and banking covenant
headroom in 2011-12.
Full-year earnings before interest, tax, depreciation and amortisation are forecast to be about £520m in
the year to March and are expected to fall further next year.
“Yell has to implement a strict cost-savings programme to bring its earnings back up to £450m or £460m
in 2012,” said one media analyst. “They will come within a whisker of breaching their covenants over the
next 12 months, so they have to do enough cost-cutting to avoid a breach.”
Following a stabilisation of the business, the directories group may look to sell its Latin American or
Spanish businesses or even demerge the group into three parts.
Mr Pocock is well respected for his turnround skills. He built his reputation at Polaroid, where he turned
round the lossmaking business.
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