Transcontinental Reports Increase in Net Earnings for Fiscal 2017
François Olivier
MONTRÉAL - December 14, 2017 - Transcontinental Inc. has announced its results for fiscal 2017, which ended October 29, 2017.
"I am very proud of our performance in 2017," said François Olivier, president and CEO of TC Transcontinental. "While pursuing our transformation with determination, we recorded, for a third consecutive year, the highest profitability in our history."
He continued, "The printing division posted excellent results in 2017 and continued to improve its profitability, notably as a result of increased demand from Canadian retailers for our integrated service offering. We also renewed and expanded our long-term agreements with large retailers. Finally, we implemented measures to optimize the utilization of our printing platform."
Olivier added, "In the packaging division, we successfully integrated Robbie Manufacturing and Flexstar Packaging. With the investments made in our platform and the development of our sales force, many business opportunities came to fruition this year. As a result, this division generated sustained organic growth in 2017. Lastly, we pursued numerous acquisition initiatives and recently announced the acquisition of Les Industries Flexipak Inc., located in Montréal."
Olivier added, "In the Media Sector, we continued to strategically transform our asset portfolio to refocus on our most promising niches. Our specialty media and educational book publishing activities generated solid results in 2017. In addition, we disposed of our publications in Atlantic Canada and have already sold close to 60% of our local and regional newspapers in Québec and Ontario."
"To conclude, with our sound financial position and our significant cash flows, we are very well positioned to continue building our North American flexible packaging platform."
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Fiscal 2017 Results
Revenues went from $2,019.5 million in fiscal 2016 to $2,007.2 million in fiscal 2017, a decrease of $12.3 million, or 0.6%. Excluding the unfavorable impact from the sale of newspapers and other media assets in 2016 and 2017 related to the Corporation's strategy, as well as the favorable exchange rate effect, revenues increased by $58.6 million, or 3.0%. This increase is mostly due to the contribution from acquisitions, particularly in the packaging division, higher demand for all services to Canadian retailers, notably under the expanded agreement with Lowe's Canada, higher volume in the packaging division and additional volume resulting from the agreement to print the Toronto Star.
However, the contribution of these factors was mitigated by lower volume in printing verticals not related to services to Canadian retailers, notably as a result of the completion of the non-recurring agreement to print Canada's Census forms in 2016, and reduced activity in the local and regional newspaper publishing niche in Québec and Ontario in the Media Sector.
Operating earnings increased by $89.2 million, or 41.9%, from $212.8 million in fiscal 2016 to $302.0 million in fiscal 2017. This increase is mostly attributable to the decrease in the asset impairment charge as a result of a charge related to intangible assets of daily and weekly newspapers outside Québec in 2016, as well as to the decrease in restructuring costs as a result of gains on the sale of certain activities in the Media Sector and lower costs due to workforce reduction in 2017. Adjusted operating earnings increased by $9.9 million, or 3.5%, from $283.4 million in fiscal 2016 to $293.3 million in fiscal 2017.
Excluding the $16.7 million unfavorable effect of the stock-based compensation expense as a result of the change in the share price in fiscal 2017 compared to fiscal 2016, the unfavorable impact from the sale of newspapers and other media assets in 2016 and 2017, as well as the favorable exchange rate effect, adjusted operating earnings increased by $23.9 million, or 8.5%. This increase is mostly attributable to the contribution from acquisitions and the favorable impact of cost reduction initiatives in the printing division and in the local and regional newspaper publishing activities in the Media Sector, partially offset by the effect of lower volume in printing verticals that are not related to Canadian retailer services.
Net earnings increased by $65.2 million, from $146.3 million in fiscal 2016 to $211.5 million in fiscal 2017. This increase is mostly attributable to the increase in operating earnings, as explained above, partially offset by the increase in income taxes. On a per share basis, net earnings went from $1.89 to $2.73. Excluding restructuring and other costs (gains) and impairment of assets, net of related income taxes, adjusted net earnings increased by $5.9 million, or 3.0%, from $196.3 million in fiscal 2016 to $202.2 million in fiscal 2017. This increase is attributable to the increase in adjusted operating earnings, as explained above. On a per share basis, adjusted net earnings went from $2.53 to $2.61.
2017 Fourth Quarter Results
Revenues went from $555.6 million in the fourth quarter of 2016 to $527.2 million in the fourth quarter of 2017, a decrease of $28.4 million, or 5.1%. Excluding the unfavorable impact from the sale of newspapers and other media assets in 2017 related to the Corporation's strategy and the unfavorable exchange rate effect, revenues increased by $3.3 million, or 0.6%. This increase is mostly due to the contribution from acquisitions, particularly in the packaging division, and to higher volume in this division. However, the contribution of these factors was mitigated by lower volume in printing verticals that are not related to services to Canadian retailers and reduced activity in the local and regional newspaper publishing niche in Québec and Ontario in the Media Sector.
Operating earnings increased by $22.3 million, or 27.4%, from $81.3 million in the fourth quarter of 2016 to $103.6 million in the fourth quarter of 2017. This increase is mostly attributable to the decrease in the asset impairment charge as a result of a lower charge in the fourth quarter of 2017 in the local and regional newspaper publishing niche in Québec and Ontario in the Media Sector, as well as to the decrease in restructuring costs as a result of gains on the sale of certain activities in that same sector and lower costs due to workforce reduction in the fourth quarter of 2017.
Adjusted operating earnings decreased by $9.0 million, or 8.4%, from $107.4 million in the fourth quarter of 2016 to $98.4 million in the fourth quarter of 2017. Excluding the $3.6 million unfavorable effect of the stock-based compensation expense as a result of the change in the share price in the fourth quarter of 2017 compared to the corresponding period in 2016, the unfavorable impact from the sale of newspapers and other media assets in 2017, as well as the unfavorable exchange rate effect, adjusted operating earnings only decreased by $0.4 million, or 0.4%. This slight decrease is mostly attributable to the effect of lower volume in printing verticals that are not related to services to Canadian retailers, mitigated by the contribution from acquisitions and the favourble effect of cost reduction initiatives in the printing division and in the local and regional newspaper publishing niche in Québec and Ontario in the Media Sector.
Net earnings increased by $15.7 million, from $57.7 million in the fourth quarter of 2016 to $73.4 million in the fourth quarter of 2017. This increase is mostly attributable to the increase in operating earnings, as explained above, partially offset by the increase in income taxes. On a per share basis, net earnings went from $0.75 to $0.94. Excluding restructuring and other costs (gains) and impairment of assets, net of related income taxes, adjusted net earnings decreased by $8.3 million, or 10.8%, from $76.6 million in the fourth quarter of 2016 to $68.3 million in the fourth quarter of 2017. This decrease is attributable to the decline in adjusted operating earnings, as explained above. On a per share basis, adjusted net earnings went from $0.99 to $0.88.
Subsequent Events
Sale of local and regional newspapers in Québec and Ontario
In November and December 2017, the Corporation disposed of several groups of local and regional newspapers in the province of Québec, representing a total of 34 newspapers and related web properties, as well as one website in exchange for cash consideration and an amount receivable.
These sales of newspapers are in the context of the sale process of local and regional newspapers in Québec and Ontario announced by the Corporation on April 18, 2017.
Business combination
On October 31, 2017, the Corporation acquired all the shares of Les Industries Flexipak Inc. ("Flexipak"), a flexible packaging supplier located in Montréal, Québec. The Corporation will perform the assessment of the fair value of assets acquired and liabilities assumed of Flexipak during the next fiscal year.
This acquisition allows the Corporation to pursue its development in the packaging industry.
Outlook for 2018
In the printing division, we expect revenues from all our services to Canadian retailers to remain relatively stable in fiscal 2018 compared to fiscal 2017. We will benefit, in the first months of the fiscal year, from the additional contribution from the expanded agreement with Lowe's Canada, and we intend to seize the opportunities to expand our services to our retail customers. In all the other printing verticals, we expect that our revenues will continue to be affected by a decline in volume caused by the same trends in the advertising market. In addition, in the newspaper printing activities, we will experience a volume decrease as a result of the end of the printing of La Presse as of January 2018 and The Globe and Mail in the Maritimes as of December, 2017. To partially offset the lower volume, we will continue with our operational efficiency initiatives, in particular the previously announced consolidation of our newspaper printing activities in Québec.
In our packaging division, the acquisition of Les Industries Flexipak Inc., completed in October 2017, will contribute to results in fiscal 2018, and we expect to maintain our disciplined acquisition approach. We also rely on our sales force to continue developing our funnel of potential customers and we expect for other sales to materialize. As a result of the temporary disruption in resin supply caused by the hurricane in the Gulf Coast of the United States in summer 2017, the price of several plastic resins increased and could have an unfavorable impact on costs in the first half of fiscal 2018.
In the Media Sector, we expect that the Business and Education Group will continue to perform well by diversifying its revenues in niches that depend little on advertising, while a reduction in advertising revenues will have an unfavorable impact on the print version of our specialty publications. In addition, our Sector revenues will be affected in 2018 by the sale of our media assets related to local and regional newspapers, but we will continue to adjust our cost structure based on the volume of activity.
To conclude, in fiscal 2018, we expect to continue generating significant cash flows from our operating activities and maintaining our excellent financial position, which should enable us to continue making acquisitions to support our transformation into packaging.
The preceding press release was provided by a company unaffiliated with Printing Impressions. The views expressed within do not directly reflect the thoughts or opinions of Printing Impressions.
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