RHD Plans 2008 Dividend

R.H. Donnelley announced on its third-quarter earnings call Thursday that concurrent with first-quarter earnings next year it will pay a dividend equal to 25 percent of free cash flow. The publisher took some heat recently when it used money that might have gone to a dividend to invest in Business.com.

RHD also announced that ad sales declined 1.1 percent in the third quarter, with Florida and Nevada (both Embarq markets) being the main drag. Where those two markets together grew 4 percent in third-quarter 2006, for third-quarter 2007, they declined 7 percent. The company’s ad sales excluding the impact of Business.com were down 2.2 percent. While RHD’s stock was trading up Friday, it took a pounding Thursday, apparently reflecting disappointment over the soft ad sales figures.The company maintains that ad sales will be flat to 1 percent for full-year 2007.

Here are a few more details from Thursday’s earnings call:

  • The company says it does not expect any near-term improvement in the downturn in housing related headings in Florida and Nevada, its two hardest-hit markets. According to RHD CEO Dave Swanson, housing related-headings accounted for about 4 percent of revenue in those markets before the correction, and after will account for about 2 percent, which is in line with ratios for the rest of RHD’s markets.
  • Florida and Nevada account for 12 percent of revenues overall, but 20 percent of third quarter revenues.
  • The company says its heavy investment in sales training to prepare all of its reps to sell its “triple play” bundle (print directories, online directories and SEM) has been a drag on productivity, as has been ongoing efforts to integrate all of RHD’s disparate systems onto a single platform. CFO Steve Blondy said the company has invested 20,000 person hours in training during the third quarter.
  • The company spent US$11 million on advertising in the third quarter, much of it on its roll out of the Dex brand in the AT&T and Embarq regions. The company expects to spend a similar amount in the fourth quarter, but cut back somewhat on marketing spend in 2008.
  • Swanson said the rollout of triple play should have a positive impact on major markets, which will be a focus for improvement for RHD. The CEO notes that broadband penetration is higher in urban core markets, as is “the appetitive for Internet solutions” among SMBs.

As always, The Kelsey Report will offer a detailed write up of the quarterly numbers as a “Client Inquiry Brief” to be posted early next week.

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