Transcontinental Inc. Class A · TSX:TCL.A
Transcontinental Inc. Class A — Investor Presentation (April 2013)
41 slides from Transcontinental Inc. Class A's investor presentation, Apr 9, 2013
Slide 1: Executing on New Found Opportunities
EXECUTING ON NEW FOUND OPPORTUNITIES Investor Presentation April 9, 2013
Slide 2: Forward-Looking Statement
Forward-Looking Statement This presentation contains certain forward-looking statements concerning the future performance of the Corporation. Such statements, based on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown. We caution that all
Slide 3: Contents
Contents Our Portfolio 4 Addressing 10 Hot Topics 6 Key Investment Considerations 18 Appendix 30 TC Transcontinental Overview 31 Financials 38 3
Slide 4: Our Portfolio
Our Portfolio t\ @ TRANSCONTINENTAL AMARKETING ACTIVATION COM wr
Slide 5: Our Portfolio
Our Portfolio 2012 Revenues: $2.1B $1,480M $712M PRINTING(1) 68% MEDIA(1) 32% Retail and Newspapers $885 Local* $366 Magazines and Books $330 National** $253 Commercial Products $265 Business & Education*** $93 Good future prospects Moderate future prospects Challenging future prospects (1) Excludes
Slide 6: Addressing Hot Topics
Addressing 10 Hot Topics X @ TRANSCONTINENTAL AMARKETING ACTIVATION COM >
Slide 7: Addressing 10 Hot Topics
Addressing 10 Hot Topics 1. Leading TC Media To New Heights 2. Continuing To Generate Synergies In The Printing Sector 3. Maintaining The Regular Dividend 4. Renegotiating The SFC Contract With Better Terms 5. Successfully Dealing With Headwinds 6. Allocating Our Capital Prudently 7. Improving The M
Slide 8: Leading TC Media To New Heights
1. Leading TC Media To New Heights Who is Ted Markle? Appointed President of the Media Sector Joined TC Transcontinental in 1999. He led strategic development, set up the Shared Production Centre for magazines and oversaw the integration of a large number of acquisitions which built the Media Sector
Slide 9: Continuing To Generate Synergies In The Printing Sector
2. Continuing To Generate Synergies In The Printing Sector Status of the synergies? In line to reach $40 million by the end of 2014 Cumulative Synergies Following Quad/Graphics Canada, Inc. Acquisition Run rate $40M Quad/Graphics At least Canada, Inc. acquisition in $19M $24M March $11M $78M $2M Q2'
Slide 10: Maintaining The Regular Dividend
3. Maintaining The Regular Dividend Why not increase the regular dividend in addition to paying a special dividend? Planning on continuing the dividend growth going forward Dividend Paid Per Participating Shares on an Annual Basis Chose to share a portion of proceeds from Hearst Special dividend $1.
Slide 11: Renegotiating The SFC Contract With Better Terms
4. Renegotiating The SFC Contract With Better Terms Why renegotiate the SFC contract? Finding win-win solutions Given new market realities in the San Francisco Area, the Chronicle only required the use of up to two-thirds of the printing equipment under the original agreement (≈ 400K copies in 2006
Slide 12: Successfully Dealing With Headwinds
5. Successfully Dealing With Headwinds How will TC Transcontinental mitigate margin erosion? By growing organically and cutting costs Positioning ourselves to obtain the Target and Nordstrom business 1 The loss of Zellers business Obtained new flyer business from Safeway U.S. and POP business from S
Slide 13: Allocating Our Capital Prudently
6. Allocating Our Capital Prudently Use of cash in years to come? Multi-prong approach to capital allocation Making strategic acquisitions Increasing dividends Buying back shares Reducing debt Investing in capital expenditures (≈ $70 million in 2013, half of which is in the Media Sector) 13
Slide 14: Improving The Media Sector Profitability
7. Improving The Media Sector Profitability How will TC Transcontinental improve the profitability of the Media Sector? By diversifying its portfolio and optimizing its cost base Issues Solutions 1 Competition in local market for community Maintain our market share by offering new digital newspapers
Slide 15: Growing Revenues Organically
8. Growing Revenues Organically Will TC Transcontinental demonstrate top line organic growth? Internal growth will come from focusing in pockets of growth areas Developing the print market in California (Fremont plant) Developing the point of purchase (POP) market in Canada (contractual and repetiti
Slide 16: Growing Digital Advertising Revenues
9. Growing Digital Advertising Revenues At what pace are digital revenues growing? In 2012 alone, digital ad revenues grew 17% and now 25% of total ad revenues are Web-based Media Sector Total Advertising Revenues of $300M Digital 25% Traditional 75% 16
Slide 17: Ongoing Demand For Retail Flyers
10. Ongoing Demand For Retail Flyers Are printed flyers still relevant? Printed flyers remain a highly effective component of the cross-media communication mix 77% of consumers read, look into or access printed flyers Over 90% of Canadians welcome the receipt of printed flyers Over 80% would like to
Slide 18: Key Investment Considerations
Key Investment Considerations
Slide 19: Key Investment Considerations
Key Investment Considerations 1. Reducing Net Indebtedness And Leverage Ratio 2. Spreading Out Debt Maturities 3. Securing Future Cash Flow 4. Growing Printing Sector In Pockets Of Growth 5. Leveraging Investments Of $700M 6. Increasing Return On Net Assets 7. Increasing Free Cash Flow 8. Sustaining
Slide 20: Reducing Net Indebtedness And Leverage Ratio
1. Reducing Net Indebtedness And Leverage Ratio 1000 3.0 2.6x 2.6x 800 $908M $903M Target leverage between 1.0x and 2.0x going forward 1.9x 2.0 600 $699M 1.5x 1.3x $539M 400 $471M 0.9x 1.0 $334M 200 0 - 2008 2009 2010 2011 2012 Q1'2013 Note: Including securitization. 2011 is adjusted to exclude the
Slide 21: Spreading Out Debt Maturities
2. Spreading Out Debt Maturities Main Debts Maturity Schedule (in millions C$) 500 Private Placement HVB (amortized 5 years) Solidarity Fund Debenture (10 years) Solidarity Fund Debenture (5 years) 450 Revolving Credit Facility Revolving Credit Facility Drawn On as at January 31, 2013 Cumulative 5-Y
Slide 22: Securing Future Cash Flow
3. Securing Future Cash Flow Close to 60% of our total revenues are under contract* 8% Last 6 months renewals 10% 92% 25% 65% 45% 90% 75% 55% 35% Retail Magazines Newspapers Distribution & Premedia Marketing Products Contract length +10 yrs 5 to 10 yrs >3 to < 5 yrs 0 to 3 yrs No contract Note: Esti
Slide 23: Growing Printing Sector In Pockets Of Growth
4. Growing Printing Sector In Pockets Of Growth Point of Purchase Materials Fremont Plant Capacity • Started one year ago and already have a • Gained additional capacity after contract business of $25 million renegotiation with Hearst Corporation for the printing of the SFC • Recent contract with Sh
Slide 24: Leveraging Investments Of $700M
5. Leveraging Investments Of $700M Quad/Graphics 225 Canada, Inc. 60 54 plants acquisition 48 plants 50 200 $198M $200M 38 plants 40 29 plants 29 plants 175 $180M 30 20 150 $148M $147M 10 125 - 2008 2009 2010 2011 2012 Printing Sector Adjusted Operating Income (in $M) And Number of Plants 24
Slide 25: Increasing Return On Net Assets
6. Increasing Return On Net Assets 11.2% 11.0% 9.5% 8.8% Investments in our 8.8% 8.7% hybrid platform 8.0% 8.0% 7.7% 6.9% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 25
Slide 26: Increasing Free Cash Flow
7. Increasing Free Cash Flow 300 300 280 280 260 260 240 $257 $220 240 220 220 $229 $194 200 200 180 180 160 $141 160 140 140 120 120 $125 100 100 80 80 $49 60 60 40 40 $47 20 $37 20 0 - -$27 -20 -20 -40 -40 2008 2009 2010 2011 2012 CAPEX Free Cash Flow Free cash flow is adjusted operating income be
Slide 27: Sustaining Dividend Growth
8. Sustaining Dividend Growth Dividend Paid Per Participating Shares on an Annual Basis We plan on growing the dividend every year Payout ratio per cash flow*: 12.4% Payout ratio per free cash flow**: 23.8% Special dividend $1.00 Dividend yield (at a price of $12.46): 4.7% $0.57 $0.58 $0.49 $0.32 $0
Slide 28: Buying Back Shares
9. Buying Back Shares Plan to renew our normal course issuer bid when the current $67.2 M program expires, subject to regulatory approval. $53.1 M $48.7 M Completed 96% of the share purchase program as at April 4, at an avg. price of No share buybacks $9.27 $17.8 M $11.6 M 2006 2007 2008 2009 2010 2
Slide 29: Making Strategic Acquisitions
10. Making Strategic Acquisitions Media Sector Related Sector • Acquisitions in digital assets • Larger acquisition in our area of expertise / competency • Tend to be smaller in nature • Generates stable cash flow • Objective: to build on current offering • Objective: diversify our portfolio 29
Slide 30: Appendix
Appendix t\ @ TRANSCONTINENTAL AMARKETING ACTIVATION COM
Slide 31: TC Transcontinental Overview
TC Transcontinental Overview
Slide 32: At A Glance
At A Glance Largest printer in Canada Offering a state-of-the-art national printing network Leading provider of media and marketing activation in Canada Managing consumers insight, content and deployment $2.1 billion in revenues Leveraging strong customer relationships 9,500 employees Developing tal
Slide 33: Knowing Canadian Consumers Well
Knowing Canadian Consumers Well 24.1 million Canadian consumers reached Reach in 180 community 10 daily Métro Halifax +30 business Geo targeted Digital network Database Canada newspapers newspapers and Montreal and consumer distribution of more than magazines 3,500 websites 88% 6.8M 426K 1.5M 11.9M
Slide 34: Creating Premium And Targeted Content
Creating Premium And Targeted Content Mass content Custom content Personalized content 34
Slide 35: Offering Powerful Multiplatform Ad Vehicles
Offering Powerful Multiplatform Ad Vehicles POP TELEVISION 35
Slide 36: Presenting The Executive Management Team
Presenting The Executive Management Team François Olivier Christine Desaulniers President and Chief Executive Officer Chief Legal Officer and Corporate Secretary Nelson Gentiletti Sylvain Morissette Chief Financial and Development Officer Chief Communications Officer Brian Reid Alain Gignac Presiden
Slide 37: Focusing On Sustainable Development
Focusing On Sustainable Development governance “To continue our progress in our Sustainable Development, “We believe that promoting women in positions of influence brings a we need to simplify our operations, encourage collaboration competitive advantage to our organization.” internally and develop
Slide 38: Financials
Financials t\ @ TRANSCONTINENTAL AMARKETING ACTIVATION COM wr
Slide 39: Delivering A Track Record Of Performance
Delivering A Track Record Of Performance Revenues ($M) Cash Flow from Operations Dividends Paid per ($M) Participating Share (¢) $373 57¢ $2,429 $2,170 $321 49¢ $2,028 $1,989 $2,112 $297 $311 $247 35¢ 31¢ 32¢ 2008 2009 * 2010 2011 ** 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 * Divested
Slide 40: Segmented Information
Segmented Information 2012 2013 (in millions of dollars), Unaudited Q1 Q2 Q3 Q4 Year Q1 Revenues Printing sector $ 345.1 $ 370.7 $ 363.5 $ 401.2 $ 1,480.5 $ 381.2 Media sector 158.5 173.6 173.6 206.3 712.0 165.5 Other activities and unallocated amounts 2.2 2.1 2.1 2.1 8.5 2.1 Inter-segment sales (18
Slide 41: Transcontinental
X @ = TRANSCONTINENTAL AMARKETING ACTIVATION COMPANY
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