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Yellow Pages still awash in red ink, writes off goodwill

Yellow Pages still awash in red ink, writes off remaining goodwill

By Paul McBeth

Nov. 27 (BusinessDesk) - Yellow Pages, the directory company whose lenders seized control in 2010, was tipped into the red in the latest financial year by writedowns that wiped out remaining goodwill.

Holding company NZ Directories Holdings narrowed its net loss to $78 million in the 12 months ended June 30, from $353 million in a five-month trading period a year earlier, according to financial statements lodged with the Companies Office.

A $112.9 million impairment charge on the value of its brand, goodwill and customer relationships unwound its trading profit of $64.3 million on revenue of $209.7 million. The company had made a trading loss of $3.9 million on sales of $111.4 million in the shortened 2011 period.

Yellow Pages booked a $55.4 million charge on its goodwill, adding to the $329.3 million impairment it took in 2011, completely wiping out that intangible asset. The directory company wrote down its brand by $45.8 million, valuing that intangible at $212.2 million, while customer relationships wore a $12.1 million impairment charge.

Notes in the financial statements characterise goodwill as "the excess of the cost of an acquisition over the fair value of the group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition."

In 2010, Yellow Pages' lenders took control after its private equity owners saddled it with too much debt after buying the business from Telecom three years earlier for $2.24 billion in a leveraged buy-out. The company was forced to book a $1.6 billion charge to its goodwill and brand name in a restructuring agreement to hand it over to the banks that valued the company at $750 million.

The financial statements were tagged by auditor PwC, which gave an 'emphasis of matter' on the company's ability to continue as a going concern relying on its future profitability, securing sufficient working capital to meet its operational needs, and being able to service its debt.

The directors were satisfied the company could continue as a going concern "based on the substantial commonality between lenders and ultimate equity shareholders" and that it will be able to meet its interest and principal debt repayments based on its two-year forecasts.

"The group's trading operations remain profitable, with the two-year forecast and strategic plan supporting the continued profitability of the trading group," the company said.

Yellow Pages paid $39.3 million in finance costs, and had $461.9 million in interest bearing liabilities as at June 30. In the 2011 and 2012 years it complied with its financial covenant, which relates to earnings, before interest, tax, depreciation and amortisation.

With accumulated losses of $430.9 million, Yellow Pages was in negative equity of $180.9 million as at June 30. The company's gearing ratio, representing its debt as a proportion of total capital, was 174.6 percent, up from 130.6 percent a year earlier.


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