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Loss of Zellers flyer business eats into Transcontinental revenue

In this file photo, paper on rollers are about to be fed into the presses at a Transcontinental plant.

J.P. Moczulski/The Globe and Mail

Transcontinental Inc. fell short of analyst estimates in the first quarter, although it showed year-to-year improvements in income and revenue and plans to issue a special dividend to shareholders.

The Montreal-based printing and publishing company went from a year-earlier loss to $17.8-million or 23 cents per share of net profit in the quarter.

In terms of adjusted earnings, there was a less dramatic improvement to $28.5-million or 37 cents per share.

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That was a penny short of the consensus estimate compiled by Thomson Reuters.

Revenue for the quarter ended Jan. 31 was also less than analysts expected at $528.7-million, although it was up 8.4 per cent from a year earlier.

Transcontinental shareholders may be heartened, however, by a special dividend of $1 per participating share that the company will issue in the second quarter at a total cost of $78-million.

Transcontinental says its revenue for the three months ended Jan. 31 was boosted by acquisitions but partly offset by the termination of a flyer contract due to the closure of the Zellers stores.

Adjusted operating income was $45.7-million, up 6.3 per cent from $43-million, mainly due to efficiencies from the acquisition of the Quad/Graphics Canada printing business and its digital activities.

"The growth in our revenues and profitability demonstrates how effectively we executed our strategy," said Francois Olivier, president and chief executive officer of TC Transcontinental.

He said the company's printing sector is expected to continue improving its profitability as it integrates the former Quad/Graphics printing business and the addition of new multiyear agreements valued at $30-million a year.

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Transcontinental, which publishes a variety of consumer magazines and newspapers as well as websites, said its media sector will continue to be affected by difficult conditions – especially in regards to advertising spending.

"To limit the potential impact of these conditions, efficiency measures are being implemented to protect and improve the sector's profit margins. We will also pursue our efforts to improve the profitability of our digital and interactive offering by further reducing our cost base while continuing to invest in the development of new products," the company said.

In the year-earlier quarter, Transcontinental had $487.6-million of revenue, a net loss of $33.3-million or 41 cents per share and adjusted earnings of $27.1-million or 33 cents per share.

The net loss or 41 cents per share in the first quarter of fiscal 2012 was mainly related to unusual items.

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