About 10 years too late, Yell — the heavily indebted directories group — is going digital.
From Thursday’s strategic review announcement:
(Warning contains management speak.)
Following a rigorous six month strategic review, Yell today announces a detailed four year programme to transform the Group from being a leading supplier of print and online advertising for small and medium-sized enterprises (SMEs) to being the leader in the emerging local eMarketplace for consumers and SMEs. Yell will leverage its strong presence in the local market, providing a broad range of digital services that address the converging SME need to grow, to transact and to be efficient in the digital world and the consumer’s need to be connected locally to the goods and services they want, to save time and money, and to move their lives forward.
Now, this four year programme has five central planks.
- Expand beyond advertising to become the leading provider of SME digital services (marketing services, co-branded affinity cards, payment services, business operations, government access services).
- Establish the first local eMarketplace platform for consumers and SMEs to connect and transact locally (local ecommerce, coalition loyalty programs, concierge services).
- Achieve leading share of attractive new customer segments (Latin markets, campus services, SME industry verticals).
- Extend life of the print business, providing funds to invest in digital growth (Group wide best practices, entry into local newsletter market).
- Deliver best-in-class customer experience with new digital brands (simplification of products, pricing and service delivery, new self-serve sales models).
If all goes to plan, the directories group reckons revenues, earnings and cash flow will all return to growth by 2015 and the top line mix will change so that sales will be 75 per cent digital by 2015 (versus 25 per cent now).
There’s going to be another £100m of costs savings and (don’t laugh) the investment will be funded from cashflow. On top of that there are some new management appointments: a chief consumer officer and head of brand & design.
Hmm.
We’re not convinced and neither is the market judging by the early share price action.
And once again, Yell has failed to mention the elephant in the room — it’s mountain of debt. (For the record net debt at the end of March was £2.7bn , against a market value of just £200m.)
The fact is Yell either needs another rights issue (or a debt-for-equity swap) if it’s to stand any chance of surviving in a fiercely competitive market place.
That, of course, is the real backstory here. Provide the market with some sort of narrative — and some positive(ish) news on current trading — to get another cash call away.
Or as Deutsche Bank puts it:
We fear the positive commentary on strategy and cashflow may simply be a platform for a capital raise/debt restructure further down the line. We therefore remain Sellers.
At least, though, it will save some trees.
Related link:
Microsoft deal lifts Yell’s online profile – FT