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Yellow Pages offices in Montreal, Sept. 30, 2011. (Christinne Muschi for The Globe and Mail/Christinne Muschi for The Globe and Mail)
Yellow Pages offices in Montreal, Sept. 30, 2011. (Christinne Muschi for The Globe and Mail/Christinne Muschi for The Globe and Mail)

Print decline outpaces online gains for Yellow Media Add to ...

Advertising in the Yellow Pages and Canpages print directories is drying up at a faster rate, but Yellow Media Inc. chief executive officer Marc Tellier says it’s only temporary.

“We’re pretty much near or at the peak of the print erosion,” Mr. Tellier told analysts on a conference call Thursday to discuss the company’s third-quarter results.

The Montreal-based company, which publishes directories across Canada and offers digital advertising and marketing services, saw its print business decline 15 per cent in the three months ended Sept. 30. Mr. Tellier said that he expects this decline will stabilize soon, even though Yellow Pages publishers elsewhere in the world have often seen greater declines and are generally turning their efforts to making money online.

Yellow Media has been struggling to return to growth by transitioning to a digital advertising company, competing with such online giants as Google Inc. to sell online marketing and advertising services to existing and new clients. Those services include building websites for small businesses, helping them get to the top of listings on search engines such as Google and Yahoo, and managing their online advertising.

Yellow Media’s online revenue continued to rise in the quarter. It now accounts for more than 27 per cent of the company’s total revenues.

However, the online gains have not outpaced declines in the print business. Total revenues fell 9 per cent, to $323.4-million, compared to $355.9-million in the third quarter last year. EBITDA, or earnings before interest, taxes, depreciation and amortization, also declined to $166-million from $193.2-million last year.

If there is a sunny side to the declining print business, it is that the advertisers still buying space in the books are getting more bang for their buck, Mr. Tellier said. This is not because more people are using the books – calls from print searches actually declined – but because there are fewer advertisers in each category to compete for the calls that do come in, “the number of leads actually improved.”

Yellow is ramping up its own advertising, spending more on media buys to increase its visibility, with the goal of attracting more traffic to its websites. The number of unique visitors has seen a boost following ad campaigns in the past, Mr. Tellier said.

An expected goodwill writedown pushed the company to a loss in the quarter. Yellow Media reported a net loss of $2.8-billion, down from a profit of $65-million in the same period last year. The $2.9-billion impairment charge was announced in September. Not including that charge, the company said its earnings from continuing operations were $74.6-million, up from $65-million a year ago.

The company has been held back by a significant debt load. Executives were criticized this summer for using proceeds from the sale of its Trader Corp. division in a share buyback program instead of solely focusing on paying down senior debt. Observers also questioned the company’s decision to continue paying dividends to shareholders – triggering a condition on its credit facility that caused the banks that lend it money to begin asking for lump payments on the debt.

In September, chief financial officer Christian Paupe was asked to step down. Later that same month, Yellow cut its dividend to common shareholders to zero, in an effort to conserve cash to pay down its debt. Its share price has fallen 94 per cent since the beginning of the year.

Shares in Yellow Media rose more than 27 per cent following the earnings report on Thursday, closing at 44 cents.

“We are focused on our transformation. We remain optimistic about our strategy and our plan,” Mr. Tellier said. “…Clearly it’s not going to happen overnight.”

Yellow Media (YLO-T)

Close: 44 cents, up 10 cents

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