Merci, Francois.

Speech Webcast

This afternoon I will comment on how our disciplined financial management over the years has put us in a strong position to face the challenging financial environment that lies ahead as well as discuss our fiscal 2008 results and put them in perspective with regards to our Evolution 2010 objectives.

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With this in mind, given current market conditions, I would like to shed some color as to what lies ahead for us in 2009 in terms of financial management. First, remember that our ultimate goal is to ensure the sustained growth and profitability of Transcontinental over the long term. In order to continue to do this we must strike a delicate balance between investing for the future and dealing with the ramifications from the current financial crisis.

On the one hand, our management team has decided to continue to invest for the future growth of Transcontinental through large capital investments primarily related to two newspaper outsourcing projects over the next two years.  While these two projects require large capital outlays, they represent an excellent investment opportunity as they provide a long term revenue stream for fifteen plus years with the base contracts alone and have potential for further growth and synergies.

On the other hand, at the end of fiscal 2008 we were facing three financing maturities: a $150 million line of credit due in May, a $100 million debenture due in June and our $300 million securitization program due in August. These financing needs combined with our capital expenditure program mean that we will need some new financing to support our initiatives. Our investment grade credit rating status from both DBRS and Standard and Poor’s are an asset these days to find additional financing or re-finance existing debt.

We have been working on securing financing for many months now and I am happy to report that we have secured $100 million with “le Fonds de Solidarité” at relatively attractive conditions as well as renewed our securitization program of $300 million for an additional year. We are also working on other financing projects, so please stay tuned. We are very confident to be able to fulfill all our financing needs for the year as the market recognizes our strong financial position, our disciplined approach to financial management as well as our strong cash flow generating ability. Notwithstanding this, we will be very prudent as to how we spend our cash. Rest assured, your company understands the current challenges and is acting accordingly.

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On that note, let’s take a closer look at our financial condition in 2008, the hot topic for many companies these days. I am happy to report that Transcontinental continues to generate strong cash flow year after year. In 2008 we generated $300 million of cash flow from operations an increase of 4% over the prior year. Let me highlight the major uses of this cash.

First, we invested $229 million in capital expenditures, of which close to 75% was related to the four major projects we previously announced. Excluding the San Francisco Chronicle project, we invested $131 million, in line with our Evolution 2010 objective of $120 million.

We also used our cash to purchase Rastar, ThinData, as well as small but strategic acquisitions, for approximately $67 million. These acquisitions clearly support our growth strategy to develop marketing communication services by leveraging the trends of one-to-one marketing and new platforms.

In addition, we purchased 2.9 million shares for a total of about $49 million in the first half of the year. Since then we put our share buyback program on hold as we believe that preserving our cash in these uncertain times becomes the priority.

Furthermore, we raised our annual dividend to 32 cents per share in 2008, a 13% increase over 2007. Again this is in line with our Evolution 2010 objective to sustain our dividend growth. In fact, we have raised our dividend consistently year over year in the past five years, from 17 cents in 2004 to 31 cents in 2008, but it still represents only 8% of cash flow from operations.

Finally, our net debt to total capitalization ratio at the end of last year stood at 39%, at the low end of our Evolution 2010 objective of between 35% and 50%.  In fact, if we were to exclude projects that are not yet generating cash, our net debt to total capitalization ratio would have been 31%.

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Now if we turn our attention to the income statement. We are pleased with our results for 2008 given the current operating context.

First let me begin with our top line. Our revenues increased 4% to $2.4 billion principally as a result of acquisitions as well as organic growth from some of our businesses. As you can see from the graph on the screen, our revenues have grown on average 4% per year, over the past five years, despite the strength of the Canadian dollar and the profound and rapid transformation of the print and media industries.

We achieved organic revenue growth of 2% for the year, which is below our Evolution 2010 objective of 5%, but still quite an achievement, as market conditions significantly deteriorated in the fourth quarter ultimately erasing a good part of the gains we had made in the first nine months of the year.

In fact, these deteriorating market conditions combined with the fallout in the financial sector particularly affected our direct mail operations in the United States where the majority of our revenues are from financial institutions. As a result, in the fourth quarter, we reorganized and consolidated our operations in the Philadelphia area to quickly adjust our cost base to the new demand levels and wrote down the complete goodwill for these operations. Total costs related to this consolidation are expected to reach $227 million before tax, a portion of which was charged to income in 2008. Having said this, it is important to keep in mind that this business represents only 10% of our consolidated revenues.

As a result of this unusual charge, net income obviously decreased in fiscal 2008. However, excluding unusual items, it increased 11%. These results could be achieved because of our disciplined financial management and acquisition strategy as well as the development of new sales and our cost reduction program.

Hopefully for the last time in a little while, let me point out the negative impact of the foreign exchange on our fiscal 2008 results. The unfavourable variation in the average spot exchange rates between the Canadian dollar and its US counterpart translated into a $48 million hit to our revenues, a $12 million hit to our EBITDA and a 5 cent hit to our earnings per share. In the past six months the loonie has weakened considerably and that will help if this trend persists, but if it doesn’t, our operations have proven competitive even at parity and beyond.

If we exclude the foreign exchange impact, adjusted earnings per share would have increased 19% in 2008 well above our long-term objective of 10% on average per year. In fact at 2008 exchange rates our adjusted EPS compounded annual growth rate over the last three years would have been 16%.

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Before I conclude, I would like to quickly comment on fiscal 2009. It seems every piece of news these days is negative about the economy. I am not going to tell you we will go through this unscathed. The financial crisis and ensuing economic slowdown which is turning into a recession will more severely affect three of our businesses namely, our direct mail operations in the U.S., our magazine publishing activities and our commercial printing activities. Other businesses will also be affected, but to a lesser extent. As Francois mentioned earlier, we have prepared and are implementing a capacity reduction plan in order to alleviate the effect on our bottom line.

On the flip side, we have many positive contributors coming online in 2009 such as the start of the San Francisco Chronicle in the second half of the year, the start of the Rogers contract in the second quarter, the full-year impact from the Shoppers Drug Mart contract and the full contribution from acquisitions like Rastar, ThinData and Redwood to name just a few.

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To conclude, Transcontinental has performed very well operationally speaking in 2008 growing both the top line and the bottom line and is in a strong financial position to weather the current market turmoil and come out on top. We have a balanced portfolio of businesses which represents a significant advantage in these conditions. Furthermore, we have solid relationships with our customers, strong brands and relevant content, state-of-the-art capital assets, a disciplined approach to financial management, a culture of continuous improvement at every level of the organization and dedicated employees.

We will address the short term issues without compromising our longer term vision which is to grow responsibly and, I can assure you, with financial discipline and rigour as we always did.

Thank you very much for your time, and I’ll now hand things back over to Rémi to conclude.