Yellow Media Inc., a publisher of telecom directories and other businesses, slashed its dividend to common shareholders to 15 cents from 65 cents annually Thursday in a move to cut debt and improve its balance sheet.
The company said it will use the money saved and proceeds from the sale of its Trader Corp. unit last month for $708 million to cut debt and reinvest in its core operations.
Proceeds from this divestiture combined with savings from the reduction in dividends on common shares will be used to pay down debt obligations and to reinvest in the business.
The dividend cut comes as Yellow Media reported a loss of $20.7 million or five cents a share from continuing operations for the quarter ended June 30.
That compares with net earnings of $53 million or nine cents for the same quarter in 2010.
The latest red ink reflected a loss of $50.5 million from the company’s investment in Ziplocal. Including discontinued operations, Yellow Media reported a net loss of $14.3 million for the quarter compared to earnings of $52 million last year.
Revenues fell 4.8% to $342.7 million from $360.1 million.
Despite the loss, the Montreal-based is transitioning to become a digital company, with more than 25% of its revenues coming from the online and mobile side of its business.
“We continue to make progress on YPG’s digital transformation,” Marc Tellier, president and chief executive, said in a release before stock markets opened.
“Our primary focus is now on the execution of our 360 degrees solution, which is designed to deliver a better customer experience from the moment of sale through fulfillment of the actual product. We expect improving sales of our 360 degrees solution to contribute to results in the fourth quarter.”
At the end of May, Yellow Media was asked by the Investment Industry Regulatory Organization of Canada, on behalf of the Toronto Stock Exchange, to respond to market speculation about the company’s dividend policy and the state of the Trader Corp. sale.
The owner of the Yellow Pages online and print directory received federal government approval for the sale of the Trader Corp. auto sales directory business at the end of June.
The transaction with London-based private equity firm Apax Partners closed in late July.
Yellow Media decided to sell the division, which publishes the website AutoTrader.ca as well as printed editions of its classified ad service for car sellers and buyers, to help reduce debt as it continues its transition to a digital company.
