PagesJaunes, the French directories business, warned that sagging call volumes in the directory enquiries market and higher-than-expected advertising expenditure would mean that it would achieve full-year sales and margins in the lower end of the target range.

Revenues are now expected to grow by about 6.5 per cent, compared with a previously forecast range of between 6.5 and 8.5 per cent. Gross operating margins will also be at the lower end of its 5 to 7 per cent target range, excluding costs related to the sale of France Telecom’s 54 per cent stake in the company. France Telecom announced the sale in June and Vivendi, the French media and telecommunications group, earlier this week pulled out of the auction.

PagesJaunes said the opening up of the French market this year resulted in a lower number of directory enquiry calls. Michel Datchary, chief executive, said that the entrance of many rivals had confused customers. In addition, the advertising campaign for the launch of its enquiry number 118 008, which replaced France Telecom’s traditional 12, weighed on the group’s gross operating margin.

The news came as the company, which also has a print and online directories business reported that net income in the first half of the year rose by 9.5 per cent to €131.5m ($166.3m) on revenues that rose by 6.4 per cent to €512.4m.

The new directory enquiry service, launched in April, did not record significant revenues in the first half. PagesJaunes estimated that the annual trend in the market would be 35-45 per cent below 2004, but it would be among the three main directory enquiry operators. Because of high levels of advertising spend, the business is not expected to break even before 2008, a year later than expected.

Revenues from printed directories in France rose by 4 per cent to €296.4m and online services by 9 per cent to €153.2m. International revenues rose 13 per cent to €51.4m.

Vivendi earlier this week blamed “the high price of the offering” for its decision to pull out of the sale process for France Telecom’s stake in the business.

A pairing of Kohlberg Kravis Roberts, the US private equity group, and the buy-out arm of Goldman Sachs is thought to still be in the running, while Texas Pacific, another US private equity investor, has also been seen as a likely bidder.

Shares in PagesJaunes fell 3 per cent by mid-morning in Paris.

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