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Yells new strategy


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Yells new strategy

  1. 1. FT.com print article 2/6/11 6:50 AMFinancial MEDIA Close 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. Copyright The Financial Times Limited 2011. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others. "FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms © Copyright The Financial Times Ltd 2011.http://www.ft.com/cms/s/ce6a4f7e-3087-11e0-9de3-00144feabdc0,dwp_uuid=cbad994c-3017-11da-ba9f-00000e2511c8,print=yes.html Page 1 of 1