May 22, 2012 / 6:55 AM / in 6 years

RPT-UPDATE 2-Outlook black for Yellow Pages group Yell

* FY pretax loss 1.42 bln stg, hurt by goodwill impairment charges

* New digital products taking time to get going

* Equity “not worth the risk”-analyst

* Appoints advisers on new capital structure; To change name to hibu

* Shares down 11 pct

By Brenton Cordeiro

May 22 (Reuters) - 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 years time.

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 fruit.

“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.”


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 listings.

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 year.

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 this year.

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