YLO Paying Down DebtBy LuAnn LaSalle, The Canadian Press
MONTREAL - Directories publisher Yellow Media said Thursday it will focus on paying down its debt and its transition to a digital company after posting a $2.8-billion loss in its latest quarter related to a writedown of almost the same amount to the value of its business.
"Our industry is undergoing a major transformation and although it represents a great opportunity, it will not come without challenges and this will not happen overnight," president and CEO Marc Tellier told analysts on a conference call.
The publisher of the Yellow Pages print and online directories logged a $2.9-billion writedown to the value of its business at the end of September.
Chief financial officer Ginette Maille said as of Sept. 30 that Yellow Media (TSX:YLO) had about $1.8 billion in net debt.
"We are focused on strengthening our capital structure and insuring financial flexibility," Maille told analysts.
The Montreal-based company reduced its debt by about $700 million in the quarter after it sold Trader Corp., home of AutoTrader magazine, to London-based private equity firm Apax Partners for $745 million.
Trader was formed in June 2006 with the integration of Classified Media (Canada) Holdings Inc. and Trader Media Corporation and was purchased for a total of $1.2 billion.
Yellow Media said that after filtering out the $2.9-billion non-cash goodwill charge, it earned $74.6 million from its continuing operations, or 14 cents per share. That's up from $65.6 million, or 12 cents per share, for the same period in 2010.
Adjusted earnings per share from continuing operations were seven cents, well below average analyst estimates of 18 cents per share, according to a poll by Thomson Reuters, and down from 19 cents a year ago.
Quarterly revenue fell 9.1 per cent to $323.4 million from $355.9 million due to lower print revenues as well as lower revenues associated with Canpages and its U.S. operations.
Yellow Media has been struggling as it tries to reposition itself primarily as an Internet company. Earlier this year, the company said it would stop paying dividends to improve its financial position.
"Although our digital growth continues to be steady and strong, it is not currently sufficient to offset the continued pressure on our traditional print franchise," Tellier said.
Online revenues now represent more than 27 per cent of total revenues compared to 20 per cent in the third quarter of 2010, the company said.
"In order to grow and protect our user franchise, we need to offer much more than phone numbers with the goal of helping consumers make smarter purchasing decisions," Tellier said.
Yellow Media, for example, has relaunched its RedFlagDeals.com website and integrated deals into its yp.ca search results, he said.
Tellier said he wants to enrich the company's online and mobile content.
"We hope these initiatives will help us find the tipping point between our digital growth and our current print erosion."
RBC Capital Markets analyst Drew McReynolds said operating trends continued to deteriorate in Yellow Media's third quarter.
He said he expected Yellow Media's management to discusses such issues as expected uses of cash for debt repayment.
As well as publishing print and online directories, Yellow Media builds websites for small and medium-sized businesses and provides such services as email marketing and video production.
Yellow Media retained the real estate, employment and LesPAC.com businesses, which were excluded from the sale of Trader Corp. Those businesses will continue to be owned and managed by Yellow Media Inc.
Shares in Yellow Media closed up 9.5 cents, or 28 per cent, at 44 cents on the Toronto Stock Exchange