National Post (National Edition)
Sun deal helps boost Postmedia Q4 revenue
Media giant to slash $50-million in annual costs
TORON TO •The recent purchase of several English-language Sun newspapers helped Postmedia Network Canada Corp. boost its revenue in the fourth quarter by 64 per cent and offset declines in advertising, circulation and digital revenue.
Yet times remain tough in the Canadian media business. Taking the impact of the company’s $305-million acquisition of the 170 Englishlanguage properties from Quebecor Media Inc. out of the equation, Postmedia’s quarterly revenue dropped 36 per cent.
Looking ahead, Postmedia is banking on a plan to remove $50 million in annual costs to help the company deal with an industry-wide reduction in print advertising revenue.
“We cannot take our foot off the gas with respect to cost savings,” Paul Godfrey, Postmedia’s chief executive, said during a conference call with investors and analysts on Thursday. “We will continue to rethink the way we do business with respect to costs and exploiting new revenue streams.”
Postmedia said in July it hopes to trim $50 million in annual costs by the end of fiscal 2017. Financial results released Thursday show the company has already realized $14 million in net annualized cost savings and company officials expect the cost reductions to be fully implemented well ahead of the 2017 deadline, and possibly during the next 12 months.
“We originally said we’d realize $50 million over two years. I think we’re going to do a large majority of that in the first 12 months,” Doug Lamb, Postmedia’s chief financial officer, said during the call. “You can expect to see the cost cutting continue at a pretty good clip.”
Among recent corporate changes since the close of the fourth quarter, Postmedia ended its daily tablet magazine in Calgary, Ottawa and Montreal.
Postmedia reported revenue for the three months ended Aug. 31 of $230.2 million, an increase of $83.4 million from $146.8 million in the same period a year ago. The fourth quarter was the first three-month period to capture the full impact of Postmedia’s purchase of the Sun Media English-language assets from Quebecor Media.
Excluding the newly acquired properties, Postmedia’s fourth-quarter revenue dropped by $13 million to $133.8 million. The drop was attributable to declines in advertising, circulation and digital revenue, the company said. “The environment continues to be challenging,” Lamb said.
On an operating basis, Postmedia reported a loss of $5.7 million, narrowed from $28.1 million in the same period last year. The improvement comes from the impact of the Sun properties, as well as a decrease in depreciation expense.
Postmedia reported a net loss of $54.1 million for the quarter, compared with a loss of $49.8 million in the same period last year, due to an increase in non-cash losses on derivative financial instruments, as well as exchangerate losses related to the carrying value of the company’s U.S.-dollar denominated debt.
For the full year ended Aug. 31, Postmedia reported a net loss of $263.4 million, widened from $107.5 million in the prior fiscal year. The increase was due to a $153-million non-cash impairment charge and an increase in noncash currency-exchange losses related to the company’s U.S.dollar-denominated debt.
The company’s operating loss for the full year ended Aug. 31 was $148.4 million, compared with a loss of $35.5 million in the prior fiscal year. The widened loss was due to that one-time $153-million impairment charge, though this was partially offset by operating income improvements due to the Sun acquisitions.
Full-year revenue was $750.3 million, up from $674.3 million. The $76-million increase was due to the Sun acquisitions. Excluding the impact of the Sun purchases, revenue decreased by $77.6 million due to declines in revenue from print advertising, circulation and digital.