Yell hits a new low

Bombed-out debt-laden media company Yell saw revenues tumble in the April to June quarter, with even its digital operations - the key to recovery for the company - taking a step back.

The Yellow Pages directory owner is desperately trying to refashion itself as a digital company before the revenues from its printed directories decline to the point where the company is unable to service its massive debt. Net debt in the quarter fell £19m to £2,181m at the end of June.

Group revenue of £331m was down 15% from the corresponding quarter of 2011, with revenue from print and other directories down by 21% to £225m. Perhaps more worryingly, the digital directories business also saw its revenue fall, by 16% to £68m. There was brighter news on the digital services front, where revenue rose 40% to £38m and digital directories revenue.

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Total digital revenue, which is now accounting for almost one-third of group revenues, declined by 2%, which is a worrying development for the group. The total number of digital customers decreased by 0.2% over the period to 925,000, while annual digital revenue per advertiser fell by 10% to £478.

On a brighter note, digital directories visitors increased 13% to 44m in June while mobile directories visitors increased 71% to 4.8m in June.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell to £71m from £11m in the corresponding quarter of 2011.

"Whilst we continue to deliver cost savings through our global operating model, the decline in our legacy product revenue continues to negatively affect EBITDA. The group continued to generate significant amounts of cash and pay down debt. Looking ahead, we remain confident in our four year strategy to transform Yell," said Mike Pocock, the Chief Executive Officer of Yell.

There was no news to report on the group's review of its capital structure, but Yell warned that one or more of the options being considered will result in a dilution of shareholders' interests; for long term holders of the stock who have seen it lose four-fifths of its value over the last year, that is not the sort of thing they want to hear. There was more woe for those shareholders after the trading update, as shares hit a new low.

With so much of the group's money going to service or reduce its debt, the management feels it is unable to give a clear forecast for the current year until the new capital structure is in place, but the group did say that the adverse margin and revenue trends reported in May continue to have an impact on current and expected financial performance.

JH