Yellow Pages finds the going harder

21.01.2010
Yellow Pages Group is finding the going tougher now than at the height of the recession but the heavily indebted directories group's boss does not think its owners will have to pump more cash into the business.

Chief executive Bruce Cotterill said it was unlikely the group would need to undertake a capital restructure as TV3's owner, MediaWorks, did last month. MediaWorks' owners were forced to pump in $70 million of equity to keep the group's bankers happy.

Both Yellow Pages and MediaWorks get their revenue from advertising and both were taken over in heavily debt-funded deals by overseas private equity groups in 2007.

Cotterill said Yellow Pages, which last month posted a $338.3 million loss for the June 2009 year compared with a $61.2 million loss the previous year, had not breached any banking covenants and did not expect to in its 2010 financial year.

Nonetheless, he said the advertising market remained tough and Yellow Pages was feeling the slump later than firms that derived their revenue from television, radio and newspaper advertising.

"We came through that first nine to 12 months of the recession reasonably well but the second 12 months, which we're in now, we're finding a little bit harder," Mr Cotterill said.

Hong Kong-based Unitas Capital and Canada's Teachers' Private Capital bought Yellow Pages for $2.24 billion -- including $1.5 billion of debt funding -- from Telecom in 2007. The owners received annual management fees totalling $4.7 million and Yellow Pages is committed to paying them $61 million in fees over 10 years.

Yellow Pages' annual loss was blown out by $350.9 million of non-cash charges stemming from a goodwill impairment charge and a write-down of interest rate swaps.

With debt on its books of $1.7 billion, held by a consortium of 36 banks, Yellow Pages also paid net finance costs of $190.9 million.

The group's 0.7 percent revenue growth to $296.9 million was significantly slower than its 11 percent increase in expenses, to $156.2 million.