Postmedia Network Reports First Quarter Results

By: Press Release | Postmedia Network

Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months ended November 30, 2014.

First Quarter Operating Results

Net loss in the quarter ended November 30, 2014 was $10.3 million compared to a net loss of $11.8 million in the same period in the prior year.

Operating income in the quarter was $18.0 million as compared to operating income of $2.3 million in the same period in the prior year. The improvement in operating income was primarily due to lower restructuring costs.

Operating income before depreciation, amortization, impairment and restructuring of $45.6 million in the quarter represents a decrease of $0.4 million (0.8%), relative to the same period in the prior year. The decrease was the result of revenue declines of $24.5 million, offset by decreases in operating expenses of $24.1 million. The decrease in operating expenses was partially due to a compensation expense recovery totaling $13.8 million related to the company’s Ontario Interactive Digital Media Tax Credit claim.

Revenue for the quarter was $169.5 million compared to $194.0 million in the prior year, a decrease of 12.6%. This decrease was primarily due to a decline in print advertising revenue of $23.5 million (20.1%) with the declines occurring across all categories, including national, local and insert advertising. Print circulation revenue decreased $2.2 million (4.3%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue increased $0.7 million (3.0%) relative to the same period in the prior year due to increases in local digital advertising and digital subscription revenue partially offset by declines in digital classified advertising.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $24.1 million (16.3%) relative to the same period in the prior year. The decrease includes the claim for the Ontario Interactive Digital Media Tax credit as it primarily relates to previously recognized compensation expense. Excluding the recovery, operating expenses excluding depreciation, amortization, impairment and restructuring decreased $10.3 million, or 6.9%, as compared to the same period in the prior year. Expense reductions occurred in most operating expense categories including compensation, newsprint, distribution and other operating expenses. Production expenses increased as a result of production of the Montreal Gazette and Calgary Herald being outsourced in August 2014 and November 2013, respectively.

Business Transformation Initiatives

As announced in July 2012, the Company is implementing a three-year transformation program that is targeted to result in operating cost savings of 15%-20%. During the three months ended November 30, 2014, the Company implemented transformation initiatives which are expected to result in net annualized cost savings of approximately $3 million. This brings total net annualized cost savings, since the beginning of the program, to approximately $112 million representing approximately 16% of operating costs at the time the program was announced.

On October 31, 2014, the Company completed the sale of the Montreal Gazette production facility. The net proceeds of approximately $12.4M will be used to reduce the size of the rights offering of subscription receipts to be conducted by Postmedia in connection with the equity financing of the Company’s acquisition of Sun Media Corporation’s English language newspapers, speciality publications and digital properties.

Management Commentary

“Great work by teams across the organization led to the launch of reimagined products on four platforms in Montreal and Calgary this quarter,” said Paul Godfrey, President and CEO. “Management’s significant focus now is on working through the regulatory approval process with the Competition Bureau for the Sun Media acquisition, working on the integration plan and, subject to regulatory approval, ultimately welcoming new brands and new audiences into the fold.