Yellow Pages written down by NZ$1.6 billion

Yellow Pages written down by NZ$1.6 billion, 2010 loss is NZ$1.4 billion

8th Jan 11, 10:52am by David Chaston

The Yellow Pages (YPG Holdings Limited) financials reveal a huge writedown, a huge 2010 loss, and mammoth negative net worth.

Their June 30, 2010 accounts were filed with the Companies Office on Christmas Eve, declaring that "a debt restructure package is expected to be effected" by a sale into a new holding company, and YPG Holdings will then be placed in receivership and wound up.

The size of the funding bank's haircut has been the subject of speculation, but these accounts seem to suggest it may be slightly larger than the previously suggested NZ$1 billion. About 40 banks hold Yellow Pages debt, led by BNZ and also including ANZ, Westpac, and Deutsche Bank - which may have the biggest individual exposure.

The attached accounts show a writedown of NZ$1.6 billion, made up of $970 million goodwill written down, and $639 million of brand value written down. This leaves goodwill still on the books of $320 million, and brand value still on the books of $259 million.

These accounts also show negative net worth of NZ$1.2 billion.

EBIT was stable and positive at $143 million ($140 million in the previous year). Annual net cash flow rose to more than $60 million.

If EBIT was maintainable at this level, it is hard to see how this business would be worth much more than NZ$600-650 million with a generous p:e ratio. To be worth the written-down value of NZ$750 million, the directors and auditors may be relying on a management plan to grow future maintianable earnings.

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8 Comments

by Robert | 8th Jan 11, 12:12pm 1294441972

Re: "If EBIT was maintainable at this level, it is hard to see how this business would be worth much more than NZ$600-650 million with a generous p:e ratio. To be worth the written-down value of NZ$750 million, the directors and auditors may be relying on a management plan to grow future maintianable earnings."

Agreed, the current value of NZ $750 million "seems" significantly overstated. It was rumoured the recently aborted Yellow Pages sales process had top bids of around the NZ $500 mark, that seemed reasonable for the earnings back then, yet it was thought they were looking for NZ $1 billion!

It has been suggested by some that the recently closed for printing Auckland Yellow Pages [their flagship] directory will be significantly down in revenue, maybe by around 20%, which is after the June 30 reporting date. This coming year with the tide on their print earnings continuing to go out plus a new competitor backed by a NZ Post taking it to them one would suggest the earnings drop might be worse, time will tell .

by RDee | 9th Jan 11, 9:59am 1294520344

Looks like the selling of Yellow Pages was Telecoms only success story in at least the last 10 years.

Looks like a rebranding is needed - the Lemon Pages.

by JB | 9th Jan 11, 1:08pm 1294531737

EBITDA or income before anything ...

Where did old fashioned PAT go ?

In the real world borrowers do have to pay interest and yes it comes form the shareholders income. EBIT is simply a way of inflating returns - a left over from the internet bubble.

Why not ignore wage costs, advertising ?

You can no more discard interest costs than any of the above.

This business is a dog in terminal decline and selling it to a bunch of suckers at an overinflated price was one of the very few smart moves Telecom have ever made in recent years.

Took the banks in too - couldn't get enough of it.

Dim witted marketing executives thinking of their bonuses and market share.

You would have to brain dead from the knees up to have not worked out that Google spelt the death knell for this business.

They will now go through another couple of iterations, pissing away vast sums on web page changes, advertising etc and other exercises in futility plus executive salaries for " turnaround " managers before it finally does the way of the dodo, Encyclopedia Britanica et al.

by Nicholas Arrand | 9th Jan 11, 1:14pm 1294532051

Profit? Are you mad, JB! The whole ethos of business ,and private dealings for that matter, is....capital gains. EBITDA works a treat in that environment....

by speckles | 9th Jan 11, 9:13pm 1294560783

EBIT allows a potential purchaser to apply their debt or specific servicing cost and then determine tax . Standard practice, has nothing to do with inflating anything.

by JB | 10th Jan 11, 6:04am 1294592640

EBIT type analysis has become standard practice and got us into the god awful mess we are now in !

It's a modern phenomena.

Goes with the standard practice of reporting Hanover cash flows as positive when in fact the interest was rolled up and never received. Standard practice - Yeh Right !

Read Buffett on this topic. Absolutely scathing !

by goldenfox | 10th Jan 11, 6:53am 1294595634

Old Gattung saw these boys coming!!

by speckles | 10th Jan 11, 8:24am 1294601097

No people have got us in this mess no problem with EBIT. Standards concerning defining operating cash-flow are entirely different matter and are in NZ. different to US system based accounting rules. I suggest a little knowelgw is s dangerous thing in you case.