Business News

Yellow Pages Income Fund Reports Fourth Quarter and 2008 Financial Results

Friday 13. February 2009 - - Distributable cash increased to $751 million or $1.43 per unit - Online organic growth up 43.5% - YPG reaffirms its commitment to a strong capital structure

Yellow Pages Income Fund (TSX:YLO.UN) reported 2008 results with fourth quarter performance driven primarily by organic growth, and to a lesser extent, by recently acquired businesses, notably VOLT’s directory systems and publishing operations in September, 2008.

For the fiscal year ending December 31, 2008, consolidated net earnings amounted to $509.2 million (including restructuring and special charges) compared to $527.7 million in 2007. Income from operations grew to $710.4 million versus $648.6 million for the prior year. Cash flow from operating activities reached $692.4 million during the year.

Consolidated Adjusted Revenues1 and revenues reached $1.7 billion, representing an increase of 4.2% and 4.5% respectively compared to the prior year. Adjusted EBITDA1 grew by 6.9% to reach $931 million, while EBITDA (income from operations before depreciation and amortization, restructuring and special charges) increased by 6.7% to $932.7 million. For the year, margin performance reached new highs in both Directories and Vertical Media.

Online revenues for Directories and Vertical Media combined increased to $246.8 million in 2008. This represents organic growth of 43.5%, exceeding the company’s 30% growth target.

The company’s solid operating performance during the year was once again accretive to distributable cash which grew by 7.2% to reach $750.9 million. Distributable cash per unit during the year increased by 8.3% to $1.43 in 2008 compared to $1.32 in 2007.

“Despite the current economic climate, 2008 was another year of industry-leading financial and operational performance for YPG,” said Marc P. Tellier, President and Chief Executive Officer. “These positive results demonstrate our ability to grow the directory category and to improve profitability of Trader Corporation. We continued to execute on our long-term strategy during the year, investing in best-in-class product sets for customers in both our operating segments. We will continue in the coming year to invest for our future, and work to heighten organic growth in a challenging economic environment.”

Fourth Quarter Results

For the fourth quarter ended December 31, 2008, consolidated net earnings were $100.5 million, compared to $157 million in the fourth quarter of 2007, mainly due to higher provisions for income taxes and restructuring and special charges. Income from operations was $149.4 million in the quarter compared to $155.1 million for the same period in 2007. Cash flow from operating activities amounted to $177.7 million during the quarter.

Consolidated Adjusted Revenues grew by 2.9% to $425.6 million in the fourth quarter and Adjusted EBITDA increased by 4.7% to $231.4 million. Fourth quarter online revenues for Directories and Vertical Media combined were $69.5 million, representing organic growth of 44.7% over the same period in 2007. Excluding special charges, margin performance for the fourth quarter for both Directories and Vertical Media improved over the fourth quarter of 2007.

Distributable cash in the fourth quarter of 2008 was $184.5 million while distributable cash per unit grew by 9.1% to reach $0.36.

Directories

For the full year, Adjusted Revenues in Directories reached $1,377 million and Adjusted EBITDA was $822.8 million. Excluding the contribution of VOLT, the company posted a record Adjusted EBITDA margin of 60.1% compared to 59.2% in 2007. YPG continues to lead the industry in terms of organic growth and margin performance based on the implementation of new technologies and best business practices. On a comparable basis for the year, Adjusted Revenues increased by 3.5% while Adjusted EBITDA growth was 4.9%.

For the fourth quarter of 2008, Adjusted Revenues grew by 5.8% to reach $354.8 million when compared to the fourth quarter of 2007. This represents growth of 2.8% on a comparable basis. Adjusted EBITDA increased by 5.0% to $208.3 million, representing 4.1% organic growth. Adjusted EBITDA margin (excluding the acquisition of VOLT) was 59.9% compared with a margin of 59.2% reported in the fourth quarter of 2007.

During the course of the year, YPG continued to invest in its various platforms to drive leads to its advertisers and grow revenues. The company doubled the number of face to face sales representatives dedicated to acquiring new customers. New revenues from the Enhanced Directory Plus product, which includes Google AdwordsTM, continued to gain momentum in the latter half of the year. Showcase Bundle, which is a complete multimedia solution including a display print ad, a bold alpha directory listing, Profile Plus with a video feature, and enhanced visibility on our online properties and through Google AdwordsTM, was launched in September, 2008.

Vertical Media

Throughout 2008, Trader faced increasingly challenging market conditions. Revenues for the year were $320.7 million, representing a decline of 1.8% on a comparable basis, excluding the results of the US Operations, over the prior year. Despite these difficult market conditions, Trader achieved 2008 EBITDA of $108.2 million, representing an increase of 6.1% on a comparable basis due to cost containment efforts. Trader’s EBITDA margin in 2008 was 33.7% compared to 30.8% in 2007.

For the fourth quarter, Trader’s revenues amounted to $70.7 million, representing a decrease of 7.0% on a comparable basis. EBITDA reached $23.1 million, up 3.7% on a comparable basis. Trader’s fourth quarter EBITDA margin was 32.6% in 2008, compared to 28.9% for the same period in 2007.

In addition to improving its profitability, Trader continued to make operational progress in 2008 as it introduced new technology and improved business processes. The roll-out of Trader’s new customer management tools such as the national ad taking system, its data capture device and display ad builder is on plan. Trader’s entry into the new car market leverages the strength of its AutoTrader brand to an entirely new market of dealers and prospective buyers.

On January 21, 2009, Trader announced it had entered into a strategic agreement with Burlington, Vermont-based Dealer.com that will deliver a suite of marketing technology solutions to Canada’s new and used vehicle industry. Through an exclusive commercial agreement, Dealer.com’s web solutions will be introduced to Trader’s Canadian customer base. Trader has also acquired a 20% equity interest in Dealer.com for US $35 million. Dealer.com is an industry leader in the United States with a client base of approximately 8,000 dealers.

Recent Developments

During the quarter, YPG increased the size of its revolving bank facility entered into in May, 2008, from $250 million to $450 million. This facility combined with its core revolving bank facility increases the company’s committed bank lines to $1.15 billion, providing the company with ample liquidity to fund its operations. YPG remains committed to investment grade credit ratings and to maintaining adequate liquidity at all times.

The company recently affirmed its distribution policy and the current level of cash distributions per unit of $1.17 annually. YPG continues to be committed to successfully convert from an income trust to a corporate structure on or about December 31, 2010.