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Advo Builds Valassis Profits

By Howard French

Journal Inquirer

12/24/07

Michigan-based Valassis Communication, which this year bought Windsor-based Advo, expects its net profits for the year ahead to start growing after the assimilation of Advo’s operations, company officials said.

For all of 2008, Valassis officials projected net earnings between a low of $53.5 million and a high of $65.9 million.

Earnings per share before taxes should range between $2.14 and $2.39, according to the financial projections from Valassis chairman, president, and chief executive officer Alan F. Schultz. “The Advo Inc. integration cost synergies have exceeded our 2007 targets and our shared mail optimization efforts have improved margins,” Schultz said.

Valassis expects to continue cost-control efforts in the first half of 2008, he said, and in the second half of 2008, the company should begin to see higher revenues. “This is expected to set the stage for long-term revenue and earnings growth,” Schultz said.

Real Results

Direct Mail Grows Positives for the coming year include expected growth in the company’s direct-mail advertising business, offset in part by rising cost of paper and overall administrative costs, he said.

Valassis also has made $78 million in debt repayments and in 2008 the company expects roughly $7.1 million in mandatory debt repayments, Schultz said. In its most recent financial report filed in November, covering the third full quarter since buying Advo, Valassis reported that sales and profits rose sharply in the third quarter, but still lagged behind for the first nine months of the year. For the three-month period ended Sept. 30, net earnings were $16.44 million, a huge 148 percent jump from the same period a year ago when Valassis had net profits of $6.62 million.

The Bottom Line

But for the first nine months of the fiscal year, the company had net profits of $37.45 million, down 15.6 percent from the same point a year ago when the company earned $44.3 million. In comments accompanying the financial report, Schultz said the third-quarter results show that the Advo buyout is starting to show some positive results. “During 2007, we have made substantial progress to improve Advo’s cost structure and to optimize this business,” he said. “These efforts drove an outstanding $24.9 million improvement in Advo’s segment profit, as compared to the third quarter of 2006,” Schultz said.

Valassis on March 2 announced the completion of its acquisition of Advo for $1.2 billion. The combined companies have 7,500 employees with operations in 22 states and nine countries.

The Advo buyout is the largest acquisition in Valassis history, company officials said. Investors found reason for optimism in the forecast.

Valassis stock ended the trading day Tuesday at $12.72 per share, up $1.02 per share. Volume also was heavy with more than 2.66 million shares changing hands, compared with an average day’s volume of around 1.06 million shares.