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Transcontinental on the hunt for media acquisitions

Bloomberg, CP

MONTREAL -- Transcontinental Inc., Canada's second-largest commercial printer, wants to buy magazine and newspaper companies to increase profit, chief executive officer Luc Desjardins said yesterday.

"The appetite is there" for acquisitions, Mr. Desjardins told analysts on a conference call. "We would like to buy in the media business in Canada if we can find a magazine competitor that could be for sale, or some community newspaper that would make sense to us. We are certainly looking at that seriously."

Transcontinental, which publishes Elle Canada and prints The Globe and Mail, gets about one-quarter of its revenue from the media unit. Media revenue at the Montreal-based company was about $134-million in the company's fiscal first quarter, which ended Jan. 31.

Transcontinental is also looking for acquisitions in book printing, Mr. Desjardins said. He didn't name potential targets.

As of Jan. 31, Transcontinental had $50.2-million of cash available and about $400-million in unused credit facilities.

The company hiked its quarterly dividend yesterday even though first-quarter profit dropped 4 per cent to $27.9-million or 31 cents a share, compared with $29.1-million or 33 cents a year earlier.

The dividend will increase by 18 per cent to 6.5 cents a share, starting in the second quarter.

It also appointed corporate treasurer Benoît Huard as its new vice-president and chief financial officer.

The company blamed negative foreign exchange impact, combined with slight increases in amortization and financial expenses.

Excluding unusual items and the foreign exchange impact, share profit rose 9 per cent. First-quarter revenues rose 6 per cent to $547.4-million, mainly from the acquisition of U.S.-based direct marketer JDM in February, 2005, as well as from growth of 2 per cent.

Mr. Desjardins said the first-quarter results were in line with expectations, with revenue growth coming both from acquisitions and sales initiatives, while the exchange rate continued to have an impact on the bottom line.

Among measures to compensate for the stronger Canadian dollar, Transcontinental has almost completed a $53-million investment to replace seven older presses with three state-of-the-art machines at three plants that mostly export to the United States.

It includes magazine and catalogue plants at Owen Sound, Ont., and Boucherville, Que., and a book-printing plant at Beauceville, Que.

Transcontinental also completed in November a new press in Mississauga, to print The New York Times for the Ontario and upper New York State market, the first time the Times has been printed outside the United States.

"The startup went very well and the customer is very impressed," Mr. Desjardins said yesterday. "The success of this new contract has opened doors for a unique newspaper outsourcing model with U.S. publishers."

The firm's class A shares closed yesterday up 80 cents at $18.50.

Transcontinental

Q120062005
Profit$27.9-million$29.1-million
EPS31¢33¢
Revenue$547.4-million$515.3-million

© The Globe and Mail

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