Yellow to spend up large on website and directories

Bruce Cotterill says he is not concerned about NZ Post emerging as a rival. Photo / Richard Robinson

The Yellow Pages Group will undertake a complete revamp of its website and print directories in a $30 million spend-up.

From July next year consumers can expect to see more information on opening hours, directions and parking options and when they search for a business.

The debt-laden company, which was pulled off the market last week after a failed sales process, will also be restructured by Christmas with a completely new board in place.

Chief executive Bruce Cotterill promises a "quantum leap" in technology for the business, which has been criticised for its inability to keep up with online search engines.

"We have very dated technology," he admits, "We have seven [databases] and only need one.

"We are very good at numbers and addresses, doctors and plumbers. But the future requires much more of us."

The business spends about $1 million a month on capital expenditure but the $30 million will be on top of that, funded from operating profits.

Cotterill says it has only been through the support of its consortium of bankers that the new spend has been ratified.

Although the business has strong cashflows it has a legacy of more than $1.7 million in debt after its shareholders Hong Kong-based Unitas Capital and Canada's Ontario Teachers' Pension Plan bought the company from Telecom for $2.24 billion in 2007.

In the year to June 30 Yellow had earnings before interest, tax, depreciation and amortisation of $154.5 million. Cotterill says on a like-for-like basis compared with the prior period the operating profits are down about $5 million.

"In a period in which every other media company fell, by revenue, between 16 per cent and 22 per cent. This is a pretty resilient business."

But he admits it is tough out there particularly for its predominant customers - the 190,000 or so small to medium sized businesses that it services. And he isn't expecting it to get any better this financial year.

"When the recession hits big business just stops spending pretty well straight away. That doesn't happen with SMEs - they stop spending when they run out of work. My view of 2011 is that we will have a tougher year."

Despite criticism that many people never even open a paper directory these days, Cotterill says they are still relevant. But he is realistic about its future.

"We have to be aware of the fact that over time print will decline."

About 4 per cent per year is what is generally expected although it has been faster in the current economic climate.

At the moment just 14 per cent or around $36 million of the company's revenue comes from online with about $260 million from the print business.

So what about the other weight hanging around the company - its debt? Cotterill says it is able to service $1.3 million in senior debt. But it also has second and third tier debt. The second tier is being met but in arrears whereas the third tier is unpaid - the interest is being capitalised.

"The business can keep going. But it's not solving the problem."

A restructure is now under way where the company's bankers will have to agree to a set value for the business and then write off some of the debt. The company will then be transferred to a completely new entity and have a new independent board of directors.

Cotterill shrugs off suggestions the new board might also want a new chief at the helm.

"That is the life of the CEO. I have said I will see it through until after the restructure and hopefully beyond that."

He is also unconcerned about a potential rival entering the market in the form of New Zealand Post.

He says it obviously can't be that bad if another company is thinking about going into competition.

"Competition is good. Good luck to them."