Transcontinental Reports a 1.9% Revenue Increase for Q1 of Fiscal 2016
MONTREAL — March 10, 2016 — Transcontinental Inc. (TSX: TCL.A TCL.B) announces its results for the first quarter of Fiscal 2016, which ended Jan. 31, 2016.
"The growth in our revenues and profitability in the first quarter confirms the success of our strategy," comments François Olivier, president and CEO of TC Transcontinental. "In our printing division, we continued to sign new agreements and adapt our printing platform to industry realities. In our packaging division, we successfully completed the integration of our most recent acquisition and we are satisfied with the results. As for the Media Sector, the acceleration of the transformation of the advertising market led to lower results for the newspapers in our Local Solutions Group. To better adapt to new market realities, we have taken important measures to give ourselves the agility needed to adjust our costs and our service offering."
Olivier continued, "We will continue to optimize our operations in the printing division and grow our packaging division through acquisitions and sales development. We have a sound financial position and continue to generate significant cash flows that will enable us to pursue our transformation."
2016 First Quarter Results
Revenues for the first quarter of 2016 went from $489.7 million to $498.9 million. The increase is mainly attributable to the contribution from the acquisition of Ultra Flex Packaging and the appreciation of the U.S. dollar against the Canadian dollar. In its Printing division, revenues remained relatively stable when excluding the effect of the loss of a U.S. customer and a Canadian retailer early in 2015. In addition, the timing of purchases from an important client had an impact on the Packaging division. In the Media Sector, the decline in advertising revenues continues to have a significant impact on the results of the company's publishing activities, mainly within newspapers in the Local Solutions Group.
Adjusted operating earnings went from $55.7 million to $57.1 million, an increase of 2.5%, in the first quarter of 2016. This performance is attributable to the net effect of an acquisition, disposals and closures and, to the favorable effect of the exchange rate, as well as to the favorable effect of a decrease in the stock-based compensation expense. The increase is also attributable to the optimization of the cost structure. It was however mitigated by the aforementioned decrease in revenues in the Media Sector. The recent investments in the structure of the packaging division to promote and support the acquisition and sales development strategy also explain the slight decrease in organic growth.
Adjusted net earnings attributable to shareholders of the Corporation increased 8.4%, from $38.2 million, or $0.49 per share, to $41.4 million, or $0.53 per share. This performance is due to an increase in adjusted operating earnings, as well as a decrease in adjusted income taxes and net financial expenses. Net earnings attributable to shareholders of the corporation decreased from $37.9 million, or $0.49 per share, to $37.3 million, or $0.48 per share. This slight decrease is explained by the sale of a building in the first quarter of 2015 which offset the increase in adjusted net earnings attributable to shareholders of the corporation.
- On Nov. 25, 2015, TC Media launched the TC Media Nouvelles app in the Quebec market, signalling a major milestone in the development of its local digital media offering for businesses and communities.
- On Jan. 26, 2016, the corporation announced the transfer of its marketing product printing activities from Transcontinental Québec to other plants in its network. This decision will result in the closure of the Transcontinental Québec plant by April 30, 2016.
Flyer printing volume is expected to remain stable throughout the remainder of fiscal 2016. In addition, the success of the company's in-store marketing product offering for retailers and the impact of the previously announced new contracts, including those to print the Toronto Star and the Census of Canada, should act as positive catalysts during the year. However, these items should be offset by the negative impact of the advertising market on the company's magazine, newspaper and marketing product printing activities. Lastly, the company will continue to improve its operational efficiency in order to ensure that it maintains the long-term profitability of the printing division.
Transcontinental successfully completed its 100-day integration plan with respect to the acquisition of Ultra Flex Packaging and the evolution of its national sales force enables it to continue developing new business opportunities. Furthermore, the recent investments in order to promote and support its acquisition and sales development strategy will have an unfavorable impact on results for the remainder of fiscal 2016.
Within the Media Sector, the significant impact of the transformation of the advertising market should continue to affect the company's newspaper publishing activities. In order to reduce costs and better adapt to these market dynamics, it has put in place a new operational structure that allows for the necessary agility with a particular focus on the profitability of its products which will ensure their viability and perenity.
Lastly, the company expects to continue generating significant cash flows during the next quarters, and its excellent financial position should permit it to continue its transformation in the flexible packaging industry. Transcontinental will maintain its disciplined acquisition approach in this promising market in order to invest in quality assets that meet its strategic criteria.
Reconciliation of Non-IFRS Financial Measures
Financial information has been prepared in conformity with IFRS. However, certain measures used in this press release do not have any standardized meaning under IFRS and could be calculated differently by other companies. The company believes that many readers analyze its results based on certain non-IFRS financial measures because such measures are normalized for evaluating the Corporation's operating performance. Management uses such non-IFRS financial information to evaluate the performance of its operations and managers. These measures should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with IFRS.
The Corporation’s Board of Directors declared a quarterly dividend of $0.185 per share on Class A Subordinate Voting Shares and Class B Shares. This dividend is payable on April 21, 2016 to shareholders of record at the close of business on April 4, 2016. The Corporation thus increased the dividend per participating share by 9%, or $0.06, raising the annual dividend from $0.68 to $0.74 per share. This increase reflects TC Transcontinental’s solid cash flow position.
About TC Transcontinental
Canada’s largest printer, with operations in print, flexible packaging, publishing and digital media, TC Transcontinental's mission is to create products and services that allow businesses to attract, reach and retain their target customers. Respect, teamwork, performance and innovation are strong values held by the corporation and its employees. The corporation's commitment to all stakeholders is to pursue its business and philanthropic activities in a responsible manner. Transcontinental Inc. (TSX: TCL.A TCL.B), known as TC Transcontinental, has over 8,000 employees in Canada and the United States and revenues of C$2.0 billion in 2015.
Source: TC Transcontinental.