Yell slumps as results disappoint

Yell Group (YELL) disappointed investors once again with its third-quarter results, sending shares in the company down almost 15%.

Total group revenue tumbled 15.1%, driven by a 15.7% revenue fall from digital directories (Internet Yellow Pages) and a 22% revenue decline from print and other directory (enquiry services).

"The deteriorating macro environment and a more competitive digital directory market are driving a faster rate of directory revenue decline," warned chief executive Mike Pocock.

Digital services, on the other hand, saw revenues more than double to £35.4 million.

"Our digital services revenue continued to grow strongly, reaching an annual run rate of over £140 million," confirmed Pocock, adding that this growth would accelerate as strategic new products come to market. In addition, he stressed that full-year earnings before interest, tax, depreciation and amortisation (EBITDA) was expected to be "within current market expectations".

On the Interactive Investor discussion board for Yell, user 'craig-w' believes that the move to digital is an opportunity for Yell. "If Yell can convert its print customers to digital customers, then the revenues will shift rather than disappear. This may, and probably is, already happening - but what we have to remember is that digital is probably cheaper than print but has a higher margin, so expect falling revenues with higher profits," he commented.

Yell also updated investors on its debt situation, which has plagued the company. Net debt as at 31 December stood at around £2.57 billion. In December, Yell reached a compromise agreement with lenders over the terms of its debt that gave it more headroom within its banking covenants. However, the agreement came only after several weeks of negotiations and resulted in Yell agreeing to pay £22 million in fees to the banks in return for the extra flexibility on its loan covenants.

Interactive Investor user 'Warren Bucket’ stressed that buying the stock was "a pure punt" on whether Yell and its debt mountain could survive the current downturn until there was a sustainable global recovery.

Shares in the company have lost more than 43% of their value over the past year.

Visit Yell's Interactive Investor discussion board to join the debate.