Yellow Pages in $338m loss

Yellow Pages Group has posted a net loss of $338 million as big debts weighed down the business and the recession constrained spending on its directories listings.

Chief executive Bruce Cotterill said that like a lot of big private equity deals, the acquisition of Yellow Pages by investors including the Ontario Teachers Pension Plan, happened at the peak of the boom in 2007 and the market now looked very different.

The investors paid Telecom $2.2 billion for Yellow Pages and forked out $191m in interest payments in the year to June to service the $1.7b of debt that was taken on to fund the acquisition.

Net equity fell to $232m, meaning the company ended the year with a gearing ratio of 88 per cent.

"The issues we are grappling with ... are related to the purchase price paid and the capital structure that was put in place when the company was bought from Telecom," Mr Cotterill said.

"Our job is to manage our way through that. It has nothing to do with the fundamentals around the business itself."

The company this year outsourced the handling of its 018 directory services business to a call centre in Manila.

But Mr Cotterill indicated there was limited scope for further cost-cutting, saying that while Yellow Pages was watching its costs like all businesses, it was not a fat business.

Mr Cotterill said Yellow Pages remained cashflow positive.

The losses included a $195m writedown of goodwill – the value of its brands which it now puts at $1.29b – and a $155m loss from a revaluation of interest rate swaps.

Revenue rose $4.1m to $297m, due to a growth in its digital business, which now generates 9.5 per cent of sales. Yellow Pages' products were holding ground compared with other advertising media, Mr Cotterill said.

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