As income-hungry investors bid farewell to favourite holdings - Rothmans and BCE are just two of the dividend-spinners departing public markets - has anyone noticed what Marc Tellier is doing with Yellow Pages Income Fund?
The CEO of a supposedly moribund phone book publisher is successfully and profitably evolving from dead tree media to the Internet. After tabling a stellar set of results on Thursday, Yellow Pages raised its all-important distribution to unitholders by 3.5 per cent, to $1.17 annually.
That boost came on the back of an 8.7 per cent increase in profits and 7.7 per cent rise in distributable cash at Yellow Pages, results that were driven by an increasingly vibrant online advertising business. The party line from Mr. Tellier was “this sustained growth shows our ability to grow the company and grow it profitably.”
The distribution hike was the latest investor-friendly move from a company that's getting little love from the market. Trusts are an endangered species, and investors seem to be steering clear, as Yellow Pages units are down 27 per cent year-to-date. Despite the boost in distributions, units dropped 8 cents Thursday to close at $10.05 on the Toronto Stock Exchange.
Along with bumping up distributions, Yellow Pages has been buying back its own units, based on the trustees' view that the company is undervalued. Up to 5 per cent of the public float could be soaked up over the course of the year.
In looking at Yellow Pages' results, it's worth noting that even the rare mistake in execution works to the benefit of unitholders.
In Thursday's numbers, Yellow Pages revealed that one of its divisions wasn't hitting sales growth targets. What the company calls "vertical media” and the rest of us think of as used car bible AutoTrader and similar publications experienced just 0.1 per cent growth in the past six months. The target for the year is 5 to 7 per cent revenue growth.
What went wrong? Nothing serious: New projects are just a tad behind schedule, or as Yellow Pages put it: “The progressive integration of technology platforms across the country... caused delays in the introduction of new revenue initiatives and product launches.”
However, moving slowly on cash-hungry new projects translated into stronger-than-expected growth in all-important EBITDA at Yellow Pages. Earnings before interest, taxes, depreciation and amortization in the vertical media division grew 9.7 per cent over the first six months of the year.
Yellow Pages boasted $32.4-million of EBITDA from its "vertical media” division in the most recent quarter. The directories unit had $203.5-million of EBITDA, up 5.3 per cent from the same period last year.
