Transcontinental Inc. Predicts Slow Magazine Growth
Company to focus on multiplatform and digital media in 2013.
Transcontinental Inc., the largest printer in Canada and the fourth largest in North America, and publisher of over 30 magazines, saw a mixed end to 2012, reporting an increase in its revenues by 12 percent and adjusted operating income by 21 percent in the fourth quarter. The companyâ€™s community newspaper business remained strong and performed better than expected, but the same cannot be said for its portfolio of glossies.
â€śThe magazine side of the publishing business has remained challenging,â€ť said FranĂ§ois Oliver, the companyâ€™s president and CEO, in a Q4 earnings call last week. â€śAs we stated last quarter, we were anticipating a soft national advertising market in Q4 and that is what happened. As a result, our [media sector] results were down year-over-year. As part of our strategy to build on our core multiplatform consumer brands we reviewed our portfolio of titles and made a decision to close [some of our] publications. This will enable us to focus on our more than 30 industry leading titles and expand our footprint in the market.â€ť
In November, the company announced that it would be closing More Magazine and Vita. The December/January 2013 issues of these titles are the last printed issues of the magazines. The company plans to focus more heavily on developing multiplatform media properties and digital editions.
â€śFor fiscal 2013, we continue to see some headwinds in the soft advertising market,â€ť said Oliver. â€śWe expect the media sector profitability to only slightly improve year-over-year.â€ť
Additionally, Transcontinentalâ€™s acquisition of Quad Graphics-Canada has allowed the company to further consolidate its printing network by using the groupâ€™s most productive assets. The deal, which was completed in March 2012, is expected to generate close to $200 million in annual revenues.
â€śOver the last several years we have sold over $300 million of our print businessâ€”our goal is to focus on niches that will provide the most value,â€ť added Oliver.
Transcontinental Inc. also reached a $200 million deal with the Hearst Corporation for new terms and conditions to print the San Francisco Chronicle.
â€śWhat happened in this market, particularly in the Bay area, instead of growth we got a decrease in circulation,â€ť added Oliver. â€śThe factory was over builtâ€”we needed to adjust the contract to the new reality of the Chronicle. In this new contract, it is a lot simpler to use all the potential assets for a fixed amount of dollars.â€ť
Oliver adds that the $200 million upfront payment by Hearst is to compensate for the depreciation and interest expenses related to the companyâ€™s original investment. Transcontinental will no longer charge Hearst because the company has now recouped 100 percent of its original investment. Under this new agreement Hearst benefits from price reductions of approximately $30 million per year.