The Yellow Pages business is still worth something despite the physical books falling out of favour. Photo / Ross Setford
The internet has created countless billionaires and some brilliant companies over the years. It has also destroyed plenty of traditional businesses that were too slow to adapt to new technology.
Telephone directory business Yellow is still standing but is a shadow of its former self after being slow to adapt to internet search operators which quickly displaced its core business of paper-based directories.
Financial accounts for the 2023 financial year reveal that the company’s sale to United States-based Yellow Pages conglomerate Thryv fetched a paltry NZ$14.1 million.
The deal, struck in April this year, highlights the vast decline in value since the business was spun off from Telecom in 2007, when a private equity consortium largely backed by a Canadian pension fund paid $2.24b for Yellow.
The timing couldn’t have been worse, with the Global Financial Crisis about to cause havoc on credit markets. Just a few years later, the new shareholders were wiped out when bankers - owed $1.5b - assumed control.
Thryv’s financial statements show the Yellow assets acquired include US$5.1 million in goodwill. The company also assumed liabilities of US$4.7m.
Yellow’s latest accounts show the company booked $30.3m in revenue for the year to June 30 for a net profit of $5.9m, down from the previous year’s $7m.
The company had no bank debt on its books at balance date.
A surprise poor trading update for honey producer Comvita has seen the company downgraded by analysts this week.
Comvita told the market its sales for the first four months of the 2024 financial year were down by about 10 per cent on the same period last year and Ebitda was down by around $6m, resulting in a drop in its guidance for Ebitda after software investment from $41m to around $33m-$38m.
Jarden analyst Christian Bell noted even that level of guidance would require a strong second-half turnaround. He also questioned Comvita’s 2025 financial year guidance.
“We make material earnings cuts and no longer assume $50m Ebitda in FY25, despite Comvita continuing to reiterate its guidance.”
Bell noted the difficult trading environment and said despite Comvita’s expectation for a strong recovery and better FY24 first half, it had not provided any substantive disclosure on initiatives to provide confidence in meeting its second half guidance or 2025 guidance.
“So we assume a more modest recovery. We note a further downturn from here could pose a risk to our revised earnings forecasts.”
Bell said he also had less confidence about Comivta’s ability to execute its plans after the company provided a May trading update that said there were “initial indications of strong forecast demand continuing into Q1 FY24.
“Second, Comvita has not formally updated its FY25 target for HoneyWorld, which leads us to believe in an underlying downgrade. Third, there was no indication of weak trading at the October [annual meeting] which we assume would have been evident to Comvita at that time.”
Bell downgraded his rating from buy to overweight and substantially reduced his target price from $4.40 to $3.35.
Craigs Investment Partners analysts Josh Dale and Nick Hill also downgraded their rating to neutral. Dale said Comvita’s FY25 Ebitda target “now looks like a stretch.
“From this c.$40m Ebitda base in FY24 Comvita would need to deliver organic Ebitda growth of c.$10m (+25%) in FY25 in order to hit its $50m target (and that’s with c.$4m of acquired Ebitda from Honeyworld).”
Dale cut his 2025 estimate to $43m with a target price of $2.90. Comvita’s share price opened at $2.52 on Thursday and the shares are down by about 22 per cent over the past year.
Kiwi Scott Perkins has found himself at the centre of an intense takeover battle in Australia.
Perkins, who is chair of ASX-listed Origin Energy, has been dealing with a takeover offer from Canadian private equity investor Brookfield and US-based institution EIG Global Energy Partners in a deal that could be worth A$18.7 billion - if it ever gets over the line.
A shareholder vote was meant to be held on the offer last week but superannuation fund AustralianSuper opposed the offer on the basis of its price and upped its stake in Origin to 17 per cent in a bid to block the deal, which required 75 per cent shareholder approval.
A revised offer was then put on the table but yesterday Origin’s board rejected that.
Fisher Funds senior portfolio manager Robbie Urquhart said the takeover battle was the biggest event in the Aussie financial market at the moment and had far-reaching implications.
The bidders have promised to pump money into the energy company to shift its coal-focused generation towards renewable energy in a move that could reduce Australia’s carbon emissions by 6 per cent, while carving off Origin’s oil and gas assets.
Urquhart said the offer had gained approval from Australia’s competition regulator because of the major emission reduction it offered, despite it reducing competition.
“This shines a light on the energy transition debate - many investors typically exclude upstream oil and gas and fossil fuel producing and related companies - this opens the debate about whether you are better off engaging in a business and helping them speed up their transition or whether you should stay out of that debate.”
He said the Australian competition regulator’s decision raised an interesting situation where public good was so favourable because of the need to adopt Paris agreement-aligned climate targets that they were willing to forgo blocking the deal despite it lessening competition.
Urquhart said it also raised questions about whether companies had the capacity to remain listed and make the transition because one of the sources of funding Brookfield was going to use was money that was currently being paid out as dividends to Origin’s shareholders.
“Is the public market prepared to withstand a dearth of dividends from typically dividend-paying energy companies to facilitate transition?”
The original offer will now go to investors for a vote on Monday but seems unlikely to get over the line.
Former Fonterra executive Fraser Whineray has been appointed to Waste Management’s new board.
Whineray, who was Fonterra’s chief operating officer, resigned from the co-op last year.
Murdo Beattie, a founding partner of Cameron Partners who retired from the partnership early this year, has also been appointed to the board.
They join appointees Lorenzo Kozlovic, Tania Simpson and Vanessa Stoddard, according to a filing lodged with the Companies Office.
Waste Management – once one of the market’s most successful companies - delisted from the NZX in 2006 after being taken over by Australia’s Transpacific Industries.
Last year, Igneo Infrastructure Partners bought Waste Management for about $1.9b from Chinese private equity firm Beijing Capital.
Igneo is part of the investment group First Sentier.
Whineray also joined the board of Port of Tauranga on October 1, replacing Sir Rob McLeod.
At the time, Port of Tauranga chair Julia Hoare said Whineray’s strong executive experience, including most recently as chief operating officer of Fonterra and as a former CEO of Mercury, brought valuable commercial expertise to the board of New Zealand’s largest port.
“Fraser also brings a deep understanding of global trade and supply chains, and his knowledge will be invaluable as we continue to invest in building New Zealand’s supply chain capacity and resilience,” she said.
- additional reporting Jamie Gray and Duncan Bridgeman
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