TRANSCONTINENTAL INC. (Toronto symbol TCL.A; www.tctranscontinental.com) gets 68% of its revenue from its commercial printing business, which is the largest in Canada. The remaining 32% comes from publishing newspapers and magazines.
In its 2013 second quarter, which ended April 30, 2013, Transcontinental’s revenue fell 0.2%, to $521.3 million from $522.4 million a year earlier. Revenue from six recently acquired printing plants in Canada helped offset the loss of a contract to print flyers for the now-closed Zellers retail chain.
So far, the company has realized annual savings of $30 million by combining the new plants with its current operations. Even so, earnings fell 2.0% in the latest quarter, to $34.8 million from $35.5 million. Earnings per share were unchanged at $0.44 on fewer shares outstanding.
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Canadian stocks: New acquisition strengthens Transcontinental in profitable textbook business
Transcontinental has renewed several multi-year printing contracts worth a total of $200 million.
The company also recently paid an undisclosed sum for privately held Groupe Modulo, which publishes French language textbooks for schools and universities across Canada.
Many traditional book publishers have suffered due to rising competition from cheaper e-books. However, specialized textbooks are still highly profitable, and the purchase looks like a nice fit with Transcontinental’s current textbook business: it will expand the company’s catalogue of French-language titles to 11,000 from 8,000.
Moreover, Groupe Modulo’s high-quality titles could be an asset for Transcontinental if it decides to expand its own electronic-textbook business.
The annual dividend of $0.58 a share yields 4.8%.
In the latest edition of The Successful Investor , we look at whether Transcontinental’s savings from merging its new plants plus its new printing contracts will let the company keep its dividend at the current rate. We conclude with our clear buy-sell-hold advice on the stock.
COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members
Do you read less printed material and read more online or e-books than you did a few years ago? Do you think printing will die out in the next decade or so and be replaced entirely with electronic media, or do you think people will always want books or newspapers in their hands? Let us know what you think.
Comments
Steve
Regarding the printing industry. I have worked in this industry almost my entire career (30+ years). Our company in the Kitchener area is struggling to maintain market share. Competitors continue to “cannibalize” each other by undercutting quote costs and margins.
One of our largest clients and one of Canada’s largest grocery chains recently cut their print budget in HALF.
Another major client recently closed it’s internal design and advertising division and handed it over to a large print / advertising broker. The broker simply puts print items out for tender, and the lowest bidder wins the contract. Nothing based on ability, service, or any other indicators that used to count for the integrity of any business. It’s all about the almighty dollar and nothing else.
Will print survive? In my lifetime it will. But eventually it will fade. My daughters are not interested in any “hardcopy” information. They can obtain it all from a Smartphone on Google and use it as they please. POS items, store signage and outdoor advertising will always be in demand to some degree. But print as we know it will continue to decline.
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Regarding the printing industry. I have worked in this industry almost my entire career (30+ years). Our company in the Kitchener area is struggling to maintain market share. Competitors continue to “cannibalize” each other by undercutting quote costs and margins.
One of our largest clients and one of Canada’s largest grocery chains recently cut their print budget in HALF.
Another major client recently closed it’s internal design and advertising division and handed it over to a large print / advertising broker. The broker simply puts print items out for tender, and the lowest bidder wins the contract. Nothing based on ability, service, or any other indicators that used to count for the integrity of any business. It’s all about the almighty dollar and nothing else.
Will print survive? In my lifetime it will. But eventually it will fade. My daughters are not interested in any “hardcopy” information. They can obtain it all from a Smartphone on Google and use it as they please. POS items, store signage and outdoor advertising will always be in demand to some degree. But print as we know it will continue to decline.