Postmedia posts Q3 loss as pandemic weighs on revenue

TORONTO Postmedia Network Canada Corp. posted a $13.8-million net loss in its fiscal third quarter as both print and digital advertising declined significantly, but the company may have seen the bottom of the financial strain brought on by the COVID -19 pandemic, its chief executive said Thursday.

In the quarter, which covered the three months ending May 31, Postmedia registered greater than 30-per-cent declines in both print and digital advertising revenue as compared to the same period last year. Print circulation revenue, meanwhile, saw a 10.5-per-cent decline. As a result, total revenue slipped to $112.4 million from $157.1 million.

Despite the challenges, Postmedia CEO Andrew Macleod said that there were some positives in the quarter. Postmedia ended the period with $35.2 million in liquidity after receiving a waiver in payments related to first-lien debt and deferring government remittances. The company also saw a substantial decrease — of $57.9 million or 39.2 per cent — in total operating expenses, a figure that excludes depreciation, amortization, impairment and restructuring costs, but that does take into account the impact of recoveries from government programs such as the Canada Emergency Wage Subsidy. Operating costs fell by 26.2 per cent. Most notably, however, Macleod said there are hints that growth is ready to pick up again.

“What’s changed is I think we put a bottom in,” he said in an interview. “We’re seeing the beginnings of growth and that’s a reflection of the economic freeze that is supposed to thaw.”

This is particularly true when it comes to the return of advertising dollars, he said. The early months of COVID-19 were some of the most successful for Postmedia in terms of readership but they did not translate into positive financial results because advertisers did not wish to be associated with stories about the pandemic.

Macleod said he has seen early signs that that stance may be beginning to reverse, but it remains an ongoing challenge.

The Canada Emergency Wage Subsidy has been another positive. Postmedia recognized more than $20 million in support from the wage subsidy in the quarter, the company said. When that subsidy was extended in May, Postmedia qualified for an additional four weeks of payments and that added support has helped allow it to restore employee wages to their regular amounts after issuing temporary cuts.

Macleod recognizes that the support is only temporary.

“The wage subsidies can’t continue forever and at some point, businesses and consumers are going to have to stand on their own,” he said. Should it expire before the end of the economic downturn, Postmedia will have to search for alternate solutions, he said. Commercial real estate could be one potential area for savings, Macleod said, given how successful the company’s pivot to a work-fromhome environment has been.

“We’re constantly searching for cost savings and if we can find ways to free up costs as a function of having a reduced commercial real estate footprint, I think that’s something we’ll be looking at going forward,” he said.

Financial Post