Canadian newspaper company PostmediaNetwork posts Q1 loss of $11.8 million
Times have gotten even tougher for Postmedia Network, the Canadian publisher. Q1 earnings were released today and it shows the company in the red, posting a loss of $11.8 million (CAD). Revenue declined 8.4 percent, driven mostly by print advertising which fell 12.2 percent in the quarter.
The newspaper company publishes the National Post, The Vancouver Sun, Calgary Herald and other major metro newspapers.
Here is the press release:
Toronto, Ontario – January 9, 2014 -– Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months ended November 30, 2013.
First Quarter Operating Results
Net loss in the quarter ended November 30, 2013 was $11.8 million compared to net earnings of $6.7 million in the same period in the prior year. The increase in net loss was largely due to a $15.3 million increase in restructuring expenses, primarily associated with print production outsourcing, an increase in depreciation expense and a modest decline in operating income before depreciation, amortization and restructuring, all as compared to the same period in the prior year.
Operating income before depreciation, amortization and restructuring of $46.0 million in the quarter represents a decrease of $3.0 million (6.1%), relative to the same period in the prior year. This drop is the result of revenue declines of $17.7 million, partially offset by decreases in compensation, newsprint, distribution and other expenses totaling $14.7 million. Excluding non-cash compensation expense, related to option and other long-term incentive plans, operating income before depreciation, amortization and restructuring decreased $3.7 million (7.4%).
Operating income in the quarter was $2.3 million as compared to $26.6 million in the same period in the prior year. The decrease was primarily as a result of increased depreciation ($6.4 million increase) and restructuring expenses ($15.3 million increase) and a modest decline in operating income before depreciation, amortization and restructuring.
Revenue for the quarter was $194.0 million, a decrease of $17.7 million (8.4%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $16.1 million (12.2%) with the declines occurring across all categories. Print circulation revenue increased $0.3 million (0.6%) relative to the same period in the prior year as a result of price increases in excess of volume declines. Digital revenue decreased $1.3 million (5.1%) relative to the same period in the prior year as a result of declines in local digital advertising revenue and digital classified revenue, partially offset by increases in digital circulation revenue.
Total operating expenses excluding depreciation, amortization and restructuring decreased $14.7 million (9.0%) relative to the same period in the prior year. Expense reductions occurred in all operating expense categories, including compensation, newsprint, distribution and other operating expenses. Excluding non-cash compensation expense, operating expenses excluding depreciation, amortization and restructuring decreased $14.0 million (8.6%).
Business Transformation Initiatives
In November 2013, the Company outsourced the production of the Calgary Herald and committed to third party outsourcing contracts for the production of both The Vancouver Sun and The Province. These initiatives are key elements of the three year transformation program announced in July 2012 and are expected to result in significant operating cost savings. In addition, our production outsourcing program enables the sale of production related real estate in Vancouver, Calgary and Edmonton. Future proceeds from these potential sales will be used to accelerate repayment of our debt.
As announced in July 2012, the Company is implementing a three-year transformation program that is targeted to result in net operating cost savings of 15%-20%. During the three months ended November 30, 2013, the Company implemented transformation initiatives which are expected to result in an additional $5 million of net annualized cost savings. In total, the Company has implemented net annualized cost savings of approximately $87 million, or 12.5% of operating costs since the program was announced.
“We continue to face significant revenue challenges as a result of a rapidly changing advertising market,” said CEO Paul Godfrey.” In spite of these challenges, however, we are very pleased with the progress we have made in stabilizing circulation revenue, deepening insights into our audiences across multiple platforms, and transforming our cost structure to match the realities of the business. As the newspaper industry continues to transform, we are confident that we are positioning the company for future success.”
Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.