Yellow plans $40m spend up

Yellow Pages headquarters in Greenlane, Auckland. Photo / Paul Estcourt

Yellow Pages Group expects to spend around $40 million on building its business this year despite an expected drop in operating profits.

The directories business, which was last week pulled off the market by its shareholders and bankers after a failed sales process, is expected to file its year to June 30 annual results any day.

The company is not listed but must file annual results to the Companies Office because it is foreign-owned.

Its earnings before interest, tax, depreciation and amortisation are expected to be $154.5 million, down on $166.3 million last year.

Declines in predicted earnings are thought to be one of the reasons the company struggled to find a buyer for the debt-laden business.

The company is thought to have been hit hard by declines in its print revenues although its performance online is expected to show double-digit revenue growth.

Despite the decline the company is said to be planning a $30 million spend on a new digital platform and customer relationship management system.

A further $10 million is also expected to be spent on other capital projects. The group is said to be keen to recruit new sales staff.

CEO Bruce Cotterill has declined to comment on the company's prospective results.

Last week he said the end of the sales process had brought clarity to the business and the company was working on positive initiatives to ensure its success in the next few years.

Telecom sold the Yellow Pages Group to Hong Kong-based Unitas Capital and Canada's Ontario Teachers' Pension Plan for $2.24 billion in March 2007 in the country's largest leveraged buyout.

It was funded to the tune of $1.7 billion through a consortium of 28 banks.

The consortium has said it will now work on restructuring the debt and intends to take a long-term view.

The bankers are expected to meet again tomorrow although a spokesman for the company said last week any deal was expected to take eight to 12 weeks to put together because of the number of parties involved.

Speculation has also mounted over whether the bankers will bring in an outside consultant to help turnaround the management of the business.

Potential buyers are thought to have been put off by staff turnover and the recent departure of the group's chief financial officer.

Market commentators had put the value of the company at between $900 million and $1.05 billion, but last week put the offers as low as $450 million to $600 million.

Last year the group posted a $338.3 million loss after it had to take into account a $195 million writeoff in goodwill, plus a $155 million adjustment for interest rate changes.

LOOKING AHEAD

*Yellow Pages plans to spend $30 million on new technology.

*A further $10 million will be invested in other capital projects.

*But the group's earnings are expected to have fallen by about $10 million.

*Last week the sale of Yellow Pages was cancelled after the process failed to attract a suitable price.