An investor seeking clues as to why shares in Yell have rallied more than 50 per cent over the last two months will have failed to find them in today’s full-year results.

Pre-tax profits were near the bottom end of the forecast range, while the directory publisher also lowered profit estimates for 2009. But the biggest disappointment came with the dividend. The final payout for 2007 is being halved, as well next year’s interim dividend. The shares fell 24 per cent in response.

If there was a relief it is that Yell continues to rule out a rights issue. It has £3.8 billion of net debt, or more than five times last year’s operating profit, but the company says it is continues to comfortably meet its debt repayments from internally generated cash. It has also unveiled a cost cutting programme, the savings from which will be reinvested in the expansion of its online operation.

Even on a halved pay-out, Yell, at 158p, offers a prospective dividend yield of 5.6 per cent. But given Yell’s unfavourable conjunction of consumer exposure, a structural shift away from printed directories, and a weak balance sheet, that is insufficiently tempting to warrant a purchase. Avoid.

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