Transcontinental Reports Positive Trend in Q3 Financial Indicators
MONTREAL—September 8, 2010—For the fifth quarter in a row, Transcontinental improved its operating income, excluding unusual items, over the previous fiscal year. Management said the results stem primarily from the corporation’s diversified customer base of retailers, advertisers and publishers; its leading position in each of its niches; the success of its unique service offering which combines new digital and print platforms; the rationalization measures implemented in 2009; and the important contributions from print contracts signed in recent years.
Highlights:
• For a second consecutive quarter, positive organic growth in revenues, up 3.2% over 2009. Slight 0.8% decrease in consolidated revenues, mainly due to asset disposals.
• Adjusted operating income before amortization grew 9.2%, from $82.6 million in 2009 to $90.2 million in 2010, and operating income margin rose from 16.4% to 18.0%.
“I am very satisfied with the return to organic revenue growth for our second quarter in a row and the fact that all financial indicators were up in the third quarter of 2010 over the third quarter of 2009, which was, itself, higher than that of 2008,” said François Olivier, President and CEO of Transcontinental. “It is encouraging to see that all three sectors contributed to the organic growth in revenues, even as we continued to develop our offering to accompany our customers in their new marketing needs. I’d like to thank our employees for their commitment to always serving our customers better and for their daily efforts to improve efficiency.
“I am optimistic about the coming quarters, even though the economic context is still unstable,” said Olivier. “Our already enviable financial position should continue to improve given the dual impact of our higher operating income and, with the end of the major investments in print infrastructures, the decrease in our capital expenditures. We will thus be in an excellent position to make targeted strategic acquisitions in new media and digital technology. We will also continue to develop our offering to meet the growing demand from our customers for custom marketing programs tied in with one-to-one advertising and mobile technology. We will also continue to identify possibilities for synergies across the Corporation, notably by integrating our service offering and getting the most out of our top-performing equipment.”
Financial Highlights
In the third quarter ended July 31, 2010, Transcontinental recorded consolidated revenues of $500.3 million compared to $504.4 million in the same quarter of 2009, down 0.8%. Excluding acquisitions, divestitures or closures of plants and publications, the paper effect and the exchange rate effect, revenues grew 3.2%. This is the second quarter in a row in which Transcontinental has generated positive organic growth in revenues.
Adjusted operating income before amortization grew 9.2%, from $82.6 million in 2009 to $90.2 million in 2010, and operating income margin rose from 16.4% to 18.0%. This dual increase is mainly due to the impact of the rationalization measures in 2009, to the contribution from new printing contracts, and to the higher advertising spending by major retailers. During the quarter Transcontinental also recorded positive growth in adjusted operating income, which amounted to $3.2 million, up 6.0%, mainly due to the rationalization measures in 2009 and enhanced operational efficiency across the organization.
Net income applicable to participating shares rose 14.2%, from $25.3 million in 2009 to $28.9 million in 2010. The increase stems mainly from the higher operating income, partially offset by increased income taxes, a higher net loss related to discontinued operations, and by dividends on Preferred Shares.
Adjusted net income applicable to participating shares was up 8.2%, from $31.8 million in 2009 to $34.4 million.
In the first nine months of fiscal 2010, consolidated revenues amounted to $1.522 billion versus $1.600 billion in 2009, down 4.9%. Excluding acquisitions, divestitures and closures, the paper effect and exchange rates, organic growth in revenues was 1.1%. Adjusted operating income before amortization rose from $218.8 million in 2009 to $262.3 million in 2010, up an appreciable 19.9%.
Net income applicable to participating shares went from a net loss of $125.4 million in 2009 to a gain of $122.1 million in 2010. Lastly, adjusted net income applicable to participating shares rose 17.9%, from $81.1 million to $95.6 million.
For more detailed financial information, please see Management’s Discussion and Analysis for the Third Quarter ended July 31, 2010 at www.transcontinental.com, under “Investors.”
Operating Highlights
The operating highlights for the third quarter 2010 reflect the key directions identified by the Corporation in its strategic plan, and its core competencies.
• Offering integrated solutions to local communities in Canada is one of these key directions, and it involves a broad range of print and digital channels: some 170 newspapers and their websites, the door-to-door distribution and portal Publisac.ca / Dealstreet.ca, the Canada-wide local search site weblocal.ca, and a series of websites such as merkado.ca. Achievements in the third quarter include the launch of three weekly papers in Quebec: Point de vue Sainte-Agathe and Point de vue Mont-Tremblant in the Laurentians, and Abitibi Express for the towns of Val-d’Or and d’Amos. On the digital front, we redesigned the shopping site Publisac.ca and introduced Dealstreet.ca, its English-language counterpart. Furthermore, the introduction of mobile applications for Canadian Living, Coup de Pouce, Les Affaires, Finance et Investissement, Investment Executive, Metro and The Hockey News has been highly successful. The thn.mobi version for The Hockey News recently topped one million users, putting it among the top performers in downloaded mobile applications. This is how Transcontinental is meeting the new needs of Canadian consumers, who are increasingly turning to the Web or new communication platforms for their information.
• Another strategic direction: development and marketing of mobile solutions. With its Mobile Solutions Division created after the acquisition of LIPSO, Transcontinental is Canada’s leading company in this forward-looking segment, which seeks to facilitate communications and transactions between organizations and mobile users. Highlights of the third quarter include two agreements to provide custom text messaging services: one with the Toronto Transit Commission, the third largest public transit system in North America, and the other with the Société de transport de Laval in Quebec. Transit riders on the Toronto transit system can now find the arrival times of upcoming streetcars, in real time, anywhere along their routes. Riders on the Laval transit system can do the same for buses. LIPSO already provides the same service to Translink, Metro Vancouver’s regional transportation authority, and a number of other commercial applications to large transportation organizations in North America and Europe.
• Printing is one of the corporation’s core competencies and Transcontinental has always stood out for its culture of technological innovation and efficiency. Since 2007, the corporation has invested some $700 million in capital expenditures that have included three major projects. First there was the building of the Fremont plant, which has been printing the San Francisco Chronicle since July 2009; this was followed by the modernization of the Transcontinental Transmag newspaper printing plant in Montreal, which was completed in 2009; the focus has now turned to the Canada-wide hybrid platform to print newspapers and retail flyers, which will be fully operational by no later than early fiscal 2011. Using state-of-the-art technology, this unique platform will generate new revenues as well as significant gains in synergies and efficiency. For their part, The Globe and Mail and Transcontinental’s retail customers will enjoy print quality, format options and colour options that have no equivalent in Canada. The Corporation will reap the full benefit of these investments in the years ahead.
Sustainable Development
The corporation’s commitment to social responsibility and sustainable development was again recognized in the third quarter. For the seventh year, Corporate Knights ranked Transcontinental among the Best 50 Corporate Citizens in Canada. In addition to environmental practices, this ranking takes into account labour relations, community involvement, occupational health and safety, and the quality of corporate governance. Corporate Knights Inc. is an independent Canadian company that publishes the magazine of the same name dedicated to corporate social responsibility. This magazine is the most widely read magazine in the world in its category.
Note that in the second quarter, Transcontinental published its first complete Sustainability Report and received the “Best of Show” award from the magazine PrintAction for “most environmentally responsible corporation” in Canada overall, in 2009. It goes without saying that the Corporation’s paper purchasing policy played a key role in these awards.
About Transcontinental:
Transcontinental creates marketing products and services that allow businesses to attract, reach and keep their target customers. The Corporation is the largest printer in Canada and Mexico, and fourth-largest in North America. As the leading publisher of consumer magazines and French-language educational resources, the largest community newspaper publisher in Quebec and the Atlantic provinces, and with its digital platforms that deliver unique content through more than 120 websites, it is also one of Canada’s leading media groups. In addition, Transcontinental offers marketing products and services that use new communications platforms supported by database analytics, premedia, e-flyers, email marketing, custom communications and mobile solutions.
Source: Company press release.
