Yellow Media says online revenues not yet offsetting print declines

MONTREAL – The company that owns the Yellow Pages online and print directories continues to face the challenge of increasing its digital revenues.

Recently, Yellow Media had a major financial restructuring to help it transform itself into a digital company and cut its debt by more than $1 billion.

“As anticipated the decline in revenues from print have not quite been able to be offset by the online growth yet,” chief executive Marc Tellier said Tuesday in an interview.

“It’s a journey,” he said, adding he continues to expect Yellow Media’s digital transformation to take 18 to 36 months.

Yellow Media (TSX:Y) reported a lower adjusted profit of $24 million and lower adjusted earnings per share of 70 cents in the fourth quarter.

The Montreal company has been hit with declining print revenues as consumers use their personal computers, tablets and smart phones to search for information about local businesses.

In 2012, Yellow Media published more than 375 different print telephone directories with a total circulation of about 18 million copies. That’s down from 2011, when the company published more than 400 different print telephone directories with a total circulation of about 29 million copies.

But Yellow Media said the decrease in 2012 is due to such reasons as the elimination of the Canpages directories and the switch to “by request only” delivery of its white pages telephone directories in large urban markets.

On the digital front, Yellow Media also owns Canada411.ca and RedFlagDeals.com.

Yellow Media had approximately $782 million of net debt as of Dec. 31, compared with $2.1 billion of net debt at the same time in 2011.

“So clearly the focus is we need to invest in our business transformation, but first and foremost we also need to continue to reduce our debt,” Tellier said.

He said the company is committed to paying back a minimum of $100 million in debt in 2013, $75 million in 2014 and $50 million in 2015. He added that 75 per cent of excess cash flow would go to mandatory redemption provisions.

In the fourth quarter, online revenues represented about 38 per cent of total revenues, compared with 29 per cent in 2011.

For the fiscal year, online revenues grew to $367.2 million compared with $346.1 million the year prior, representing growth of 6.1 per cent.

Tellier said Yellow Media is going beyond offering a phone number and hours of operation and is offering expanded digital services. Consumers want pictures, videos, directions, deals, coupons and reviews of businesses in their neighbourhood, he said.

The company’s 360 Solution product suite can build a business a website, do a video and help drive traffic to the website through search engine rankings and marketing.

In its quarterly financial results, the $24 million adjusted profit, before impairment charges and a major gain on settlement of debt, was down from net earnings from continuing operations of $48.2 million or $1.53 per share in the same 2011 period.

The latest quarter’s adjusted earnings included a $300-million impairment charge related to certain intangible assets on property, plant and equipment, and a gain of some $995 million on a debt settlement.

Revenue declined by more than 15 per cent to $264.5 million from $313.3 million in the same 2011 quarter.

That was mainly due to lower print revenues, the discontinuation of duplicate directories published by Canpages, the divestiture of LesPAC.com, and the sale of Deal of the Day, the company said.

Yellow Media’s recapitalization plan was approved last fall by Quebec Superior Court after getting the go-ahead from debtholders, shareholders and convertible debenture holders.

The restructuring saw the company’s various creditors exchange their debt for a combination of cash and new secured and unsecured debt as well as new shares and warrants in Yellow Media depending on their holdings.

Shareholders in Yellow Media (TSX:Y) also received new shares in the company and warrants.

For fiscal 2012, revenues decreased 16.6 per cent to $1.1 billion, compared with $1.33 billion last year. The decline is due mainly to lower print revenues.

As of Dec. 31, Yellow Media had 309,000 advertisers. During the year, the company experienced an advertiser renewal rate of 86 per cent and acquired about 17,000 new advertisers.

Shares in Yellow Media gained almost five per cent, or 38 cents, to $8.15 in trading Tuesday on the Toronto Stock Exchange.