Yell Cites Tough Times in Dividend Cut

Yell Group announced results today that showed all its operating groups generated top-line growth in its 2007-08 financial year (ended March 31), with almost all the growth coming from the Internet. The company emphasized that it hit its EBITDA guidance for the year.

Yell CFO John Davis announced Yell will cut its dividend in half, calling it a prudent decision to achieve more flexibility in the face of economic uncertainty. Yell’s stock took a hit today, closing down about 26 percent. Here are a few highlights:

• Yell in the U.K. showed a 5.8 percent decline in print revenues, offset by strong online growth to reach total growth of 1.7 percent. This fell short of both original guidance of 3 percent growth and revised guidance of 2 percent issued in February.
• As part of a broad cost-cutting move, Yellow Book USA cut its sales staff by 550 over the past year, which is about 10 percent of the sales force. During Q&A, Yellow Book CEO Joe Walsh said the reduction was the result of overstaffing, with many sales offices built for new directory titles and fewer reps needed as books mature in a market. He said the cutbacks are popular with the remaining reps, who see better earnings opportunity.
• Yellow Book posted 4.1 percent overall growth, but same-market growth was down 0.5 percent.
• Yell executives say they plan to continue investing in advertising and promotion, despite widespread economic softness. Yell CEO John Condron cited a recent study from the London Business School showing businesses that continue to advertise in a recession fare better than those that cut back.
• Economic softness is mostly affecting yield. Bad debt and retention rates are relatively stable.
• Yell executives strongly emphasized that the focus of investment will be on the online business, which accounts for 11 percent of group revenues and 19 percent of U.K. revenues.
• Despite the investment online, Condron insisted that much of what they are fighting against in the marketplace is the widespread misconceptions about the effectiveness of directories. “It is easier to contend with fact-based rather than perception-based objections … and today we are dealing with perceptions, not facts.”

We’ll have more later in a brief for TKR clients.