Yell puts profit warning behind it

Yell, the directories group that issued a severe profit warning last month, said margins in its troubled US business would hold stable this year as it posted full-year results in line with expectations and hiked its final dividend by 12 per cent.

The company saw 20 per cent wiped off its shares in April when it warned that revenue growth from its US business in the current financial year would be just 3 per cent amid increased competition.

”We believe that [US] incumbents have put pricing programmes in place to become more competitive. We are addressing the competitive forces as rapidly as they arise through our products and our sales,” the company said on Tuesday as it reiterated April’s guidance.

John Condron, the chief executive, said: “What we saw in April has not got worse.”

Yell said it anticipated group revenues to grow around 9 per cent, or 4 per cent organically, this year. However, its first-quarter earnings would be hit by several accounting adjustments regarding the timing of expense recognition.

Revenues from Yell’s US business last year were £1bn, up 10 per cent or 18 per cent in constant currency.

Group revenues were £2.1bn, up 28 per cent, or 33 per cent in constant currency, following the acquisition of Yell Publicidad in Spain. Rrevenues rose 7 per cent on an organic basis in constant currency.

The result benefited from a 61 per cent increase in revenues at Yell.com, the group’s UK online business, to £95.9m. That comfortably offset a 3.1 per cent decline in domestic print revenues, helping drive UK revenues 3 per cent higher to £720m

Pre-tax profit fell 22 per cent to £248m, after £57.4m of exceptionals charges covering debt refinancing, restructuring costs in Spain and a small loss on a Brazilian disposal.

Diluted earnings per share rose 8.2 per cent to 35.5p, while the final dividend will be 11.4p per share, up 11.8 per cent. The shares rose 11p to 500p in early trading.

John Davis, the chief financial officer, said the dividend increase reflected “our confidence in Yell’s overall future financial performance in spite of increased competition in the US.”

Shares in Yell added 11p to 500p. They have been buoyed in recent weeks by speculation it may be a candidate for a buy-out, and amid improved sentiment towards media stocks following Thomson’s agreement to buy Reuters.

However, John Condron, the chief executive, on Tuesday sought to scotch rumours of any large deals either as a bidder or target, saying the group had received no approaches.

“We have had no approaches whatsoever. We are very busy at the moment, and very happy with the assets we’ve got. There are no plans to acquire further companies, although we may do some bolt-ons in the US,” he said.

But there was takeover speculation surrounding Italian rival Seat Pagine Gialle. Shares in the company opened sharply higher in Milan after it appointed Lehman Brothers to look at a possible sale for private equity groups BC Partners, CVC Capital, Permira and Investitori Associati who between them own 49.6 per cent. The shares gained more than 3.5 per cent to 48 euro cents.