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Oct 25, 2018

Postmedia posts $22.8M Q4 loss as downsizing continues

Postmedia Executive Chairman Paul Godfrey

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TORONTO -- Postmedia Network Canada Corp. continued to experience significant revenue erosion at its newspaper business during its fourth quarter, which ended with a $22.8 million net loss.

The company, which owns the National Post as well as newspapers in several of Canada's largest cities and smaller print and digital publications, said the loss amounted to 24 cents per share.

That compared with a profit of $40.3 million or 43 cents per share last year's fourth quarter, when the bottom line was helped by a gain from the sale of Infomart and a lower restructuring expense.

Restructuring costs totalled $13 million in the quarter, up from $1.7 million a year earlier.

The company announced in June that it would begin another round of cost-reductions aimed at reducing compensation expenses by about 10 per cent during the financial year ended Aug. 31, through voluntary and involuntary departures.

The downsizing comes amid declining revenue for most traditional newspaper and broadcasting companies as they battle newer types of digital media and internet services for audiences and advertisers.

Postmedia's fourth-quarter revenue fell to $158.68 million compared with $176.8 million a year ago, despite a 10 per cent increase in digital revenue, which rose to $28.9 million.

Postmedia management has repeatedly said it has a two-track strategy -- keep its legacy print business going long enough through a combination of cost cutting and asset sales to buy time for building a new digital business.

"We're sticking with that strategy because it's working," chief operating officer Andrew MacLeod said during a conference call to discuss the quarterly report.

He said Postmedia is learning to co-exist with Google and Facebook -- cited by many media businesses as their main rivals -- and reworking Postmedia's own digital network to "remonetize" the audiences it creates through journalism.

For the full year, digital revenue was $116.4 million -- about 17 per cent of total revenue. That's up from $105.471 million or 13 per cent of total revenue in fiscal 2017.

On the other hand, full-year print advertising revenue was down 17 per cent to $308.6 million and print circulation revenue was down nearly eight per cent to $220.4 million.

Total compensation for 2018 dropped to $241.5 million, down 20 per cent or $60.8 million from last year, while interest expenses dropped about 16 per cent or $5.2 million to $27.5 million from $32.7 million in fiscal 2017.

"While hitting the $100 million digital revenue mark in our (fiscal) 2018 year was a very important milestone, one that we are proud of, we know we have much more to do," MacLeod said.

"Management will be keenly focused on continuing the growth, as quickly as possible, in the quarters and years to come."

A similar strategy has been undertaken by Torstar Corp., owner of the Toronto Star and other print and digital publications -- predominantly in Ontario and a few major cities outside its home province.

Chief executive Paul Godfrey pointed out that Postmedia has repaid nearly $100 million of first-lien debt since Postmedia underwent a recapitalization in October 2016.

The first-lien notes mature in July 2021, with $134.3 million outstanding as of Aug. 31. An additional US$108.2 million notes mature in July 2023.

The recapitalization reduced Postmedia's indebtedness by more than half to $307 million, from $648 million, and reduced Postmedia's annual cash interest expenses.