Postmedia rings up first-quarter profit
Restructuring deal provides one-time boost
• Canada’s largest newspaper company, Postmedia Network Canada Corp., reported Thursday a profit of $ 17.1 million in the first quarter of its 2017 fiscal year, but says it will keep cutting costs as steep declines in its print revenue continue and growth in digital revenue remains lukewarm.
The profit was primarily the result of a one- time, $ 78- million gain on debt restructuring reported in the three- month period ended Nov. 30. The gain was part of a recapitalization deal, completed in October, that removed about $ 307 million in debt and $ 50 million in annual cash interest from Postmedia’s books, according to the company.
While that deal has allowed for what executives have called added “runway,” Postmedia’s core revenue streams continued to exhibit attrition in the quarter, as the newspaper industry undergoes unabated financial disruption while multinational tech giants Google Inc. and Facebook Inc. pull in nearly two- thirds of Canada’s online advertising revenue.
Postmedia’s overall revenue fell 14.4 per cent to $214.9 million in the quarter, against $ 251.1 million in the same period one year ago. Print advertising revenue fell $ 31.1 million or 21.9 per cent and print circulation revenue fell $ 6.1 million or nine per cent.
Those declines were cast against a digital revenue increase of $ 1.2 million or 4.1 per cent, but digital accounted for just $ 31.4 million or 14.6 per cent of Postmedia’s total revenue; meanwhile, print advertising and circulation accounted for a combined $172.7 million.
As for the digital increase, Postmedia CEO Paul Godfrey said in a memo to staff that the “promising sign” was in part a result of “our newer forays — including digital marketing services — bearing fruit.”
Nevertheless, the company faces an uphill battle for market share against the tech giants.
According to a November report by the Canadian Media Concentration Research Project, Facebook alone earned more than two times the online and mobile advertising revenue of the entire Canadian newspaper industry — $ 757.5 million against $ 282.5 million — in 2015.
Last s pring, Godfrey asked a committee of MPs studying the future of media in Canada to consider tax incentives that would encourage digital advertisers to spend on domestic media companies over f oreignowned tech giants.
On an investors call, Godfrey reiterated his hope the f ederal government will come to the assistance of Canada’s media industry, calling Heritage Minister Mélanie Joly’s declaration this week that the Trudeau government believes in the importance of journalism “the first big ray of sunshine that I’ve heard that may help us to a more profitable future.”
Postmedia reported an operating loss of $ 46.3 million in the quarter, including a $21.6-million non-cash impairment charge and over $36 million in restructuring costs.
The company also said it implemented cost-saving initiatives that will lead to $18 million in annual savings.
“While we see encouraging signs from our newer efforts we continue to see steep declines from traditional revenues,” Godfrey said in his memo to staff.
“As we move forward we must remain concentrated on accelerating the reduction of operating costs, divesting of non- core assets including real estate properties across Canada, and as we announced last quarter, salary cost reductions.”
Postmedia is working to complete staffing cuts that would reduce its salary costs by 20 per cent.
In the fall, it offered voluntary buyout packages to all of its about 4,000 employees.
Godfrey said the company has replied to those who made applications for a package, but that Postmedia has not yet met its reduction target, adding “with the revenue declinations we face we must continue to redesign what we do and how we structure our teams.”
At Postmedia’s Vancouver papers, The Province and the Vancouver Sun, a separate process is underway as per the collective bargaining agreement between staff and the company at those publications.
Province and Vancouver Sun employees have been presented with their own buyout offer, and have been given a deadline to apply next week.
Unifor Local 2000, which represents journalists at the Vancouver papers, informed its members in December that it expects layoffs at the publications in early 2017.
The salary cost- cutting initiative follows a decision earlier in 2016 to merge Postmedia’s tabloid and broadsheet newspaper operations in Ottawa, Edmonton, Calgary and Vancouver in an effort to reduce production and administrative costs.
WE MUST CONTINUE TO REDESIGN WHAT WE DO.