Business News

Yellow Pages Income Fund Reports Third Quarter Financial Results

Friday 07. November 2008 - - Distributable cash per unit up 8.8% to $0.37 - Strong EBITDA margin performance in both platforms - Targeted initiatives to position 2009

Yellow Pages Income Fund (TSX:YLO.UN) reported third quarter results today highlighted by gains in EBITDA margin performance in both Directories and Vertical Media. The company continues to strengthen its leading position through investments to expand its product portfolio and improve its market coverage.

For the third quarter ending September 30, 2008, consolidated net earnings increased 19.6% to $146.1 million compared to $122.1 million for the same period in 2007. Income from operations during the quarter reached $204.4 million, a 24.8% increase over the $163.8 million reported last year. Cash flow from operating activities amounted to $187.5 million during the quarter.

Consolidated Adjusted Revenues(1) and revenues in the third quarter of 2008 reached $426 million. Consolidated Adjusted EBITDA(1) grew by 4.3% to $237.5 million. EBITDA (income from operations before depreciation and amortization) increased by 4.1% to reach $237.8 million.

“We continue to deliver best-in-class financial and operational results, which enable us to grow distributable cash, offering investors a solid current distribution,” said Marc P. Tellier, President and Chief Executive Officer of Yellow Pages Group. “Our long-term strategy has been and remains to position our various assets for sustained growth.”

Online revenues from both Directories and Vertical Media reached $62.4 million in the quarter. This represents organic growth of 38.4% over the third quarter of 2007. On an annualized basis, online revenues reached $249.5 million.

In the third quarter, Distributable cash(1) was $192.4 million, an increase of 5.2% over the same period last year. Distributable cash per unit grew by 8.8% to reach $0.37, compared to $0.34 in the third quarter of 2007.

Directories

For the third quarter, Adjusted Revenues in Directories reached $343.9 million, an increase of 3.7% over the third quarter of 2007. This represents growth of 3.0% on a comparable basis for the third quarter. Adjusted EBITDA increased by 4.8% to reach $208.0 million. This represents 4.5% growth on a comparable basis over the third quarter of last year. Adjusted EBITDA margin was 60.5% compared to a margin of 59.8% reported in the third quarter of 2007.

In September, YPG introduced its new “Showcase Bundle”, a multimedia advertising solution that combines compelling print and innovative online elements. Showcase offers Profile Plus featuring the business’ profile page that can include a dynamic video, photos and text, visibility on YellowPages.caTM, a search engine presence, a display ad in the Yellow PagesTM print directory and a listing in the alphabetical section of the business directory.

YPG has also revamped its Canada411.caTM site, after taking ownership of the trademark earlier this year. Canada411.ca is the country’s preferred website for finding people and is now fully integrated with YellowPages.caTM’s database. It now has a more user-friendly interface with only two search boxes on the home page, enabling visitors to locate individuals more easily and quickly. Canada411.ca additionally offers popular mapping and driving directions functions.

Vertical Media

During the third quarter of 2008, Trader continued to make progress in positioning itself for sustained profitability by further integrating operations across Canada and improving productivity through the implementation of harmonized business processes, the deployment of new technology and improved product sets for advertisers.

Revenues at Trader were $82.2 million in the quarter, a decrease of 4.4% over the same period last year. EBITDA increased by 0.8% to reach $29.5 million compared to $29.2 million reported in the third quarter of 2007. Trader’s EBITDA margin was 35.8% in the quarter compared with 34% for the third quarter of 2007.

Trader continues to focus on delivering a better online experience to its users and advertisers, while seeking a deeper understanding of their needs to develop tailored value-added marketing propositions. A key highlight of the quarter was the signing of a four-year partnership with the Canadian International AutoShow (CIAS), making Auto Trader the presenting Title Sponsor, Show Program Publisher and sole online partner of the CIAS.

Recent Developments

During the quarter, YPG acquired “Get It Pages” which publishes four directories in Saskatchewan: Battleford, Meadow Lake and area; Prince Albert and area; Yorkton, Melville and area; and Estevan, Weyburn and area. This acquisition represents YPG’s first entry into the province. To complement these new print directories, YPG began selling online advertising in these four communities and in the major centres of Regina and Saskatoon.

On September 5, 2008, the company closed the acquisition of the assets of Volt Information Sciences, Inc., namely Volt’s directory systems and services and its directory publishing operations. An 18-month integration plan was launched immediately following the close of the transaction, and YPG has since identified additional opportunities for further cost savings and incremental efficiencies.

In Vertical Media, Trader’s management conducted a review of its operations in the United States. The decision was taken to sell these publications. The transaction closed on October 31, 2008. Concurrently, the team has begun to execute initiatives to further improve Trader’s revenue and EBITDA, including business process changes in its call centers, the shutdown of underperforming publications and other cost containment efforts.

“We recognize that the business environment is facing highly uncertain times,” said Christian M. Paupe, Executive Vice President, Corporate Services and Chief Financial Officer of Yellow Pages Group. “We are focusing on those aspects of our business that we control. With our strong capital structure and certain targeted initiatives to improve returns and bolster cash flow in both Directories and Vertical Media, we expect to further grow distributable cash and thus sustain our peer-leading performance in 2009.”