* FY pretax loss 1.42 bln stg, hurt by goodwill impairment
* New digital products taking time to get going
* Equity "not worth the risk"-analyst
* Appoints advisers on new capital structure; To change name
* Shares down 11 pct
By Brenton Cordeiro
May 22 Phone directories company Yell Group
acknowledged the depth of its financial distress on
Tuesday as it struggles with a dying core business and over 2
billion pounds worth of debt, much of which it must repay in two
The company, which publishes paper phone books around the
world, said it would try to address its troubles with a
corporate restructuring, and increased focus on becoming a
predominantly digital business under a new name, hibu Plc.
But it acknowledged that its attempts to deliver those new
products were late in the game and taking a long time to bear
"Yell has not progressed as fast as it would like in
bringing new products to market, with the sheer scale and
logistics of the task stretching its nascent teams," the company
said in a results statement that took a big write-down on the
value of its operations.
The company, which was relatively slow in adapting to the
shift to online advertising as people began using the Internet
to look up local listings, said directors saw a "material
uncertainty" which could cast significant doubt about its
ability to continue as a going concern.
Analysts agreed that the outlook is black.
"The equity is just not worth the risk given current macro
fears, potential difficulties in refinance and the structural
challenges faced by the business," Numis Securities' Gareth
Davies said, and highlighted Yell's statement on Tuesday where
it said there was a higher risk in the current year that it
would not be able to meet its financial covenants with lenders.
Yell's shares were down 11 percent at 2.78 pence at 0825 GMT
on the London Stock Exchange.
Yell's debt was built up through a series of acquisitions,
including the 3.3 billion euro purchase of its Spanish
directories business in 2006. Net debt stood at 2.2 billion
pounds ($3.48 billion) as on March 31.
On Tuesday, Yell said it posted a 1.42 billion pounds ($2.24
billion) full-year loss before tax mostly due to a goodwill
impairment charge in relation to its operations in the United
States, the UK, Spain, Chile and Peru.
"The future for print businesses today is quite different
from what it was 5 or 6 years ago when those acquisitions
happened." Chief Executive Mike Pocock said.
"We would just like to bring things up to date, recognising
the reality of life and saying that those asset balances that
made sense 5-6 years ago, no longer make sense today based on
knowledge of where the print industry is going."
ALL OPTIONS ON TABLE
Yell, most of whose debts mature in April 2014, said it
planned to consult with its lenders and shareholders to come up
with a new capital structure within the coming financial year,
and said it had appointed Goldman Sachs and Greenhill as
advisers on the process.
"Inevitably in the current situation we'll be looking at
pretty much all the options that are on the table ... so that
will mean it will be everything from the range of looking at new
equity right the way to changes in the debt structure and
potential different source of debt and quasi debt instruments,"
Chief Executive Mike Pocock said.
"It's unlikely that we'll sell assets because strategically
it doesn't make sense. The business is better working as a whole
rather than in pieces."
The company also said its new name, hibu Plc, would become
the brand name for its new product offerings. All the print
products, which are sold under different brands in each country,
will continue to be sold under those current brands.
Directory publishers like Yell and its Canadian counterpart
Yellow Media Inc have struggled to stem the slide in
their print businesses and pare huge debt loads, as more people
turn to Internet-based giants like Google to find local
Yell has been working to build on its digital offerings,
which now bring in 29 percent of revenue. Last week, Yell bought
do-it-yourself website designer Moonfruit Ltd to complement its
acquisition of another ecommerce company Znode in July last
While Znode provides small and medium enterprises with
opportunities through its e-commerce platform, Moonfruit offers
them the opportunity to enhance their presence online, on mobile
and on social media.
In May, rival Yellow Media posted a C$2.9 billion net loss
in the first quarter on an impairment charge and the debt-ridden
company began a scramble to refinance debt set to mature from