The share price fell heavily earlier in the year as a result of declining profitability amongst its peer group in Italy, France and Spain. This led to fears the same would happen to its own businesses. There was also concern about its high debt and ability to refinance. After a strong bounce in the price, the shares were sold. The poor visibility of demand, the likely downturn in advertising revenue and debt costs are tremendous headwinds; this was confirmed by the subsequent, reasonable, results, yet these also suggested the company is ex-growth.
Yell Group owns the Yellow Pages telephone directories, distributed mainly in Britain and America. A recent warning on profits in the latter market caused the share price to fall by nearly a quarter; the recent final results show that business there is tough, but still highly profitable. Directories may seem woefully old tech, but business advertising is a very steady business, whilst moves towards on-line technology have been well handled. The balance sheet is strong as an ox, the yield 4%, operating margins and free cash flow both high and sustainable. Moreover, there is the possibility of peripheral asset sales (bid prices are currently high), or that the sector consolidates. Worthy, dull and profitable.
| Sedol |
Type |
Price |
Date |
| 3171806 |
Sell |
£ 1.751 |
20/05/2008 |
| 3171806 |
Buy |
£ 5.055 |
22/05/2007 |
|
