Postmedia books $5.8M first-quarter profit
Postmedia Network Canada Corp. on Thursday reported a small net profit for its fiscal first quarter, during which print revenues continued to decline and a deal was announced involving the swapping and shuttering of a number of community publications.
Toronto-based Postmedia, the country’s largest newspaper publisher and owner of the Financial Post, recorded net earnings of $5.8 million for the quarter ended Nov. 30, 2017, down from $17.8 million for the same three months of 2016.
The difference, the company said, was in part due to a gain related to a debt restructuring arrangement between Postmedia and its creditors that was recorded in the previous year’s quarter.
Revenue for the quarter was $189 million, down 10.3 per cent from the previous year, mainly due to a drop in print advertising revenue of $19.9 million. Total print advertising revenue for the quarter was approximately $91.1 million, according to Postmedia’s financial statements.
Digital revenue, however, rose 14.5 per cent to a total of nearly $31.3 million.
“We have a strategy and it is working,” said Paul Godfrey, executive chairman and chief executive officer of Postmedia, in a statement. “The strongest validation that our strategy is working is growth in digital advertising revenue — up for the fourth straight quarter by double-digit percentage increases. While this growth is very promising, digital revenue remains much smaller than our legacy print revenue and as such it needs time to grow. Therefore, we must remain vigilant in aligning our cost structure to the industrywide declines in our legacy business in order to extend our runway to provide sufficient time to transform our business.”
The results follow the announcement this past November of a deal between Postmedia and Torstar Corp., publisher of The Toronto Star. The arrangement saw the two companies agree to essentially trade 41 community and commuter newspapers, mostly located in southern Ontario, with plans to close the majority of them, eliminating 291 jobs between the two companies.
Postmedia said Thursday that it realized a gain for the quarter of $4.7 million because of the transaction, but also recorded restructuring and acquisition-related costs of $5.1 million for a net expense of $400,000 thus far. Postmedia previously said that it would close 23 of its 24 new properties by midJanuary.
Canada’s Competition Bureau has reportedly said it will review the Postmedia-Torstar deal. However, in announcing the transaction, Postmedia said it was not subject to the merger notification provisions of the Competition Act, and therefore, did not require a sign-off from the regulator to close the deal.
The latest earnings statement and newspaper deal also come as tech titans Facebook Inc. and Alphabet Inc.’s Google continue to dominate the online advertising market. Statistics from the Canadian Media Concentration Project showed Google alone earned $2.6 billion in domestic online advertising revenue in 2016, or 48 per cent of the Canadian market.
Meanwhile, the once-lucrative source of revenue for newspapers, print advertising, is drying up, and digital efforts have yet to stem the job losses and cost cutting that have hit the Canadian industry in recent years, Postmedia included.
Postmedia said it redeemed $79.4 million in debt during the quarter using the proceeds form asset sales and annual payment it is required to make. The company said it had also implemented measures during the quarter that were expected to produce $14 million of net annualized cost savings.
“The Company will continue to identify and undertake ongoing cost reduction initiatives in an effort to address revenue declination in the legacy print business,” Postmedia said in a release.
Postmedia adjusted its C-suite last November as well, with Godfrey adding executive chairman to his chief executive officer duties. The move was announced with the resignation of nowformer Postmedia board chair Rod Phillips, who is pursuing provincial politics as a candidate for the Progressive Conservative Party of Ontario.
Those changes came a month after chief operating officer Andrew MacLeod was also appointed to the role of president in a move the company said “formalizes a clear succession plan” for Postmedia.
The strongest validation that our strategy is working is growth in digital advertising revenue — up for the fourth straight quarter by double-digit percentage increases.”
Paul Godfrey, executive chairman and chief executive officer of Postmedia