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Yellow Media posts lower Q2 profits as print revenues weaken further

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MONTREAL - Yellow Media Ltd. (TSX:Y), the publisher of the Yellow Pages directories, reported lower second-quarter results due to declining print revenues.

Profits for the Montreal-based company dropped 45 per cent in the second quarter as it struggled to create a profitable niche for itself within Canada's local digital advertising market.

Net earnings fell to $27.6 million, or $1.01 per share, compared to $50.3 million or $1.81 per share a year ago.

Revenues slid 9.3 per cent to $220.6 million from $243.2 million a year earlier, mainly from continued weakness in its print operations.

But while print revenues were down 22.5 per cent to $112.2 million, digital revenues grew to $108.4 million. Digital made up 49.1 per cent of total revenues for the quarter, up from 40.5 per cent during the same period in 2013.

Chief executive Julien Billot said the company's growth plans will also "provide Yellow Media with the resources required to enter new digital businesses and, ultimately, meet its long-term objective of becoming Canada's leading local digital company."

Yellow Media competes with big search engines Google, Yahoo and Bing as well as small digital companies to attract consumers who use the Internet to search for businesses and services.

As part of its strategy, Yellow Media acquired the remaining 70 per cent interest of 411.ca, an online search engine dedicated to finding people and local businesses in Canada, and says recent advertising campaigns to promote the Yellow Pages mobile app resulted in 65 per cent increase in average weekly downloads.

Canaccord Genuity analyst Aravinda Galappatthige said the revenue figures were above expectations, noting the results were positive "considering that Yellow Media's international peers are seeing online revenue declines."

"As we track the progress and returns from the company's growth strategy, we are seeing good initial results," Galappatthige said in a note to clients.

Total visits the company's Yellow Pages, RedFlagDeals and ShopeWise brands were slightly up, from 102.4 million in the second quarter compared to 100.1 million visits during the same period last year.

Yellow Media underwent major financial restructuring in recent years, cancelling its dividend and selling some of its assets. The company also cut about 10 per cent of its workforce, mainly in jobs related to print directories.

It's currently consolidating and replacing its print publishing systems, as well as reviewing its national print distribution model.

On the Toronto Stock Exchange Wednesday, Yellow media shares were trading at $17.85, up seven cents.

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