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Yellow revenues still southward bound while bottom line improves

Yellow revenues still southward bound while bottom line improves

A shift from legacy technology to the cloud is improving Yellow's business

Darren Linton (Yellow)

Darren Linton (Yellow)

Marketing and directories business Yellow reported lower revenues across both print and digital in 2018, but a much improved bottom line.

In what it described as "an encouraging financial result", Yellow said its transformation to a digital marketing agency is continuing to reap benefits - CEO Darren Linton also promised a significant announcement in the new year.

Total trading revenue continued a decade-long decline, this time from $98.4 million in 2017 to $80 million in the year to 30 June.

Yellow said the percentage of revenue derived from digital services grew significantly – up from 39 percent in 2017 to 43 percent in 2018.

However, those numbers indicate digital revenues, the supposed growth engine of the business, also declined - by around $4 million from around 38.4 million to $34.4 million.

Yellow said while it have seen a drop in dollar terms, this was expected "given the transformational year the company has had reworking its business proposition and sales focus". 

The company substantially reduced its net loss, from $15.2 million in 2017 to $3.3 million, while returning $19.5 million to shareholders. Yellow also reduced its debt significantly, from $50.6 million to $37.2 million.

“We envisage overall revenue will continue to decline in the short to medium term off the back of ongoing pressures on the legacy print side of the business, however we believe it will stabilise in the longer term," Linton said.

The business has the ability to scale its operations to retain a positive cash position and take advantages of opportunities as they arise, he said.

“We have been right-sizing the business and, over the next three years, we will invest $7 million in new technology and strategic acquisitions to cement our position as New Zealand’s leading digital agency," he said.

"We will make an exciting announcement in this regard early in 2019. This result is very gratifying and proves our strategy is working.

“Yellow continues to deliver to its customers and its shareholders, and we are well on our way to transforming the business to become the largest digital marketing agency for small business."

Linton said Yellow, which is Google's largest AdWords partner locally, is establishing opportunities for digital growth.

“We are creating greater efficiencies, bringing in-house some key digital fulfilment that has improved our customer service," he added. "Where we need specialist capabilities, we have formed the right strategic partnerships that have reduced overheads."

Legacy in-house systems  for order management have been replaced by cloud-based systems, which also saves money, he said.

Linton told NBR earlier this year Sugar CRM had been replaced by Microsoft Dynamics alongside Netsuite for financials and Marketo for digital marketing. A new self-service website had also been deployed.

“Our aim is to transform the small business community by delivering the world’s best marketing technology to Kiwi SMEs, making it easily affordable for them to navigate the ever-evolving digital world.The end game is to create a more productive local SME community," he added.

Total expenses were down from $81.7 million in to $67.3 million. 

The results in summary: Total trading revenue - $80 million, EBITDA - $19.5 million; trading profit - $12.7 million; net loss - $3.3 million.


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