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Transcontinental officially launches its new business project and announces its financial objectives for 2006-2010

Press release from the issuing company

MONTREAL, Nov. 16 -- At a Montreal meeting of about 50 representatives from the financial community, Transcontinental senior management, headed by Luc Desjardins, president and CEO, officially launched the company's new business project, Evolution 2010, and announced its financial objectives for the next five years. At the same time, an internal launch for all of Transcontinental's approximately 14,000 employees in Canada, the United States and Mexico took place, and will culminate in a North American tour by Mr. Desjardins in the coming months. "Evolution 2010 is an important step in Transcontinental's development," Mr. Desjardins said at the start of his presentation. "From now on, this will be our game plan for taking on the major challenges ahead and continuing to create long-term value for our employees, customers and shareholders. We have the managers and employees to do it, and a solid financial position to support our efforts." Mr. Desjardins continued, saying "overall, we are putting more emphasis on our role as a marketing advisor to our customers, by developing an even greater knowledge of their markets and integrating ourselves into their value chain. We will also be improving our content, product and service offering, and technology platform so that we can serve our advertisers, readers and website visitors even better. Furthermore, we will be stressing organic growth, based on innovative and creative initiatives by our people, and continuing to target strategic acquisitions. Plus, we will be investing even more heavily in long-term development." Evolution 2010 According to Mr. Desjardins, Horizon 2005 was a great success on all levels: instilling the culture of continuous improvement and corporate values in employees, reducing costs, recruiting and developing talent, training leaders, performing well financially, reorganizing and developing sales, and growing through acquisitions. He also talked about Transcontinental's strategy to counter the impact of the exchange rate and competitive pressures. Among other things, he touched on the Corporation's revised manufacturing strategy, the consolidation and reorganization of book printing operations in Canada and direct marketing operations in the United States, investments in US facilities to serve the direct marketing market, the addition of value-added services to Transcontinental's offer and, lastly, building partnerships with customers. "Transcontinental has changed a lot over the past five years," he said. "The company's success is now more than ever a matter of mobilizing our employees and working as a team. And no matter what business unit or region we're in, we're thinking and acting like ONE company. Now we have to strengthen these gains and take a further step toward meeting the major challenges of the next few years: the emergence of new economies and increased competition, the information technology environment - especially the impact of the Internet and digital media on consumer habits, and the demographic changes all across North America. That's the goal of Evolution 2010." Mr. Desjardins presented Transcontinental's vision, revised to take into account the technology environment and new consumer habits. He also presented the updated mission and guidelines; the company's strategy for developing through both organic growth and acquisitions, aimed at increasing earnings per share by an average of at least 10% a year; and, lastly, the "2010 Issues" that teams have already been working on for a number of months: developing new products and services on a multi-channel delivery platform, organizing integrated marketing services supported by data management and complementary services, reducing cycle time, increasing organic sales and developing talent. Mr. Desjardins ended by saying "with Evolution 2010, we will continue to differentiate ourselves and remain in the vanguard of our industry. We will succeed by working together as a team and implementing our values and culture of continuous improvement." The presidents of the three operating sectors then presented their main projects for the next five years. For Andre Prefontaine, president of the Media sector, the main issue is the development of digital media. For Guy Manuel, president of the Marketing Products Printing sector, it is developing a more integrated direct marketing approach all across North America. For Francois Olivier, president of the Information Products Printing sector, the issue is the need to accelerate organic growth, particularly in the area of outsourced newspaper printing, where discussions are progressing well with US publishers. 2006-2010 Financial Objectives Daniel Denault, vice president and CFO, then reviewed the financial achievements of Horizon 2005 in terms of growth in revenue and earnings per share, as well as improved financial flexibility. He also set out the financial goals of Evolution 2010: higher economic value creation; an average annual increase of 5% in revenue from organic growth; an average growth in earnings per share of over 10% per year excluding the exchange-rate impact; the search for strategic acquisitions; a target net funded debt/total capitalization ratio of 35% - 50%; keeping capital expenditures at an average of $120 million per year excluding newspaper outsourcing projects; and, lastly, continued growth in dividend payments to shareholders. Although major efforts to grow sales will have a positive impact on all of Transcontinental's operating segments in 2006, the Corporation's results will be affected by difficult market conditions in some printing niches and by a negative exchange-rate impact of about $15 million on the basis of current exchange rates and given the Corporation's currency hedging program. Furthermore, Transcontinental will be investing more in long-term development and will use about $10 million for strategic expenditures in 2006 to accelerate the implementation of strategies to address key issues identified by the Corporation in Evolution 2010, namely the development of the Internet and digital media, database management, premedia, brand development and talent management. Given this context, Transcontinental management expects to achieve earnings per common share of $1.50 - $1.60 in 2006, which is slightly lower than the objective of $1.57 - $1.65 for fiscal 2005. Excluding the negative exchange-rate impact of $15 million ($0.12 per share), the objective for 2006 represents growth of 3% - 4% over the objective for 2005. Mr. Denault concluded by saying that "2006 will be a transition year during which we will be investing significantly in long-term development. Starting in 2007, these investments, and the synergies arising from current consolidations and reorganizations, will contribute to our growth and enable us to achieve our target growth objective of an average of 10% a year for the period from 2006-2010."