Yell, the publisher of Yellow Pages, plans to target small businesses with services such as payroll software and building online shops as part of their 3-year digital turnaround plan.
International telephone directories company Yell Group saw shares fall sharply as it unveiled a four-year turnaround strategy designed to tackle its £2.7bn debt burden.
Outlining a new direction six months into his tenure, chief executive Michael Pocock said he wanted to move Yell from an advertising business to supplying all the digital services needed by small- to medium-sized enterprises (SMEs).
Announcements earlier in the week of a tie-up with Microsoft and the acquisition of e-commerce website builder Znode pushed Yell up 26% to 11p by the time markets closed on Tuesday, but the stock had nosedived 16% to 9.23p by lunchtime Thursday.
By 2015, Pocock intends to have to expanded Yell’s range of consumer services into newsletters, Groupon-style group buying schemes, local shopping loyalty cards and e-commerce, to create what he calls a local e-marketplace network. Meanwhile Yell will hope to sell SMEs everything from payroll and accounting software to IT hardware.
This would expand its current £28bn print and online small ads market, which spans the UK, Spain, US and Latin America, into a potential £280bn market.
Alan Howard, an analyst at Canaccord Genuity, said: “There is no quick fix, but they are doing the right things. The movements in the share price ahead of today’s announcement were frankly premature. What we’ve got today is a bit of a return to commercial reality, and worse than that they’ve confirmed this morning that current trading remains poor.”
Yell’s chief financial officer, Tony Bates, said the share price had dipped as investors took profits and that the movement was a “blip”.
Yell will use its 6,000 strong sales force, of which 1,200 people are based in the UK, and its longstanding relationships with SMEs to push a new range of products.
“We have the biggest sales force in the SME market, and rather than making a yearly call to advertisers, our sales people will be contacting them monthly or weekly,” said Pocock. “We have to offer far more than just directories online. Consumers and merchants all want to be part of a local internet marketplace.”
In a drive to move its small business customers online, Yell has been offering to build their websites for a number of years, and demand is increasing rapidly. By the end of 2011, it will have created sites for 400,000 of its 1.3 million customers.
Yell also plans to create local marketplaces for consumers, and will focus initially on the Hispanic market and university campuses.
On campuses, for example, Yell will work with universities to create lists of certified or recommended book shops, launderettes, letting agents and restaurants, which can then be promoted to students and their parents with discounts and loyalty schemes.
Yell plans to move into the growing local newsletter market, publishing in print and online with information for example about schools, sports teams, children’s holiday clubs and local events. The newsletters will feature a limited number of ads, be produced by local bloggers and reporters, and distributed by its directories teams.
Printed directories are expected to account for just 40% of revenues by 2015, down from 75% today. In common with other directories publishers, Yell went on a debt-fuelled expansion drive during the past decade, just as Google and the internet in general began to eat into demand for its services.
Yell’s turnover fell 12% to £1.9m in the year to 31 March. But Pocock is committed to returning to growth in revenues, earnings and cash flow by 2015, saying that gaining just a 1% share of its potential new £280bn market would deliver a lift.
He outlined a £100m reduction in costs by the end of 2013, by removing duplication in core services like IT and product development, and said the new strategy would be funded from existing income.
Pocock joined Yell in December from Cisco, where he headed its home and small business IT products division, Linksys. He previously headed photography group Polaroid, which he is credited with bringing into the digital age and returning to profitability.
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