FP Newspapers, publisher of the Winnipeg Free Press, reports lower Q1 revenue and earnings
Like many newspaper publishers, the Canadian newspaper company is seeing lower print advertising, including sharp declines in classifieds
I will admit to being a bit of a freak with it comes to P&Ls. I suppose that is why I moved from editorial to advertising to being a publisher – I actually like the P&L statement and looking at the numbers. It is why this website is not a journalism site but concentrates more on the business side of things (besides, there are plenty of sites for journalists to read).
I doubt TNM has ever reproduced an earnings report from the Canadian publisher FP Newspapers, but we are today. Like most newspaper chains, they are reporting that their Q1 revenue is down– in this case, 7.8 percent. But what caught my attention was the nearly 34 percent decline in digital advertising. The only reason given was declines in mobile, which I found odd.
But we are seeing many newspaper chains – not all, but many – reporting lower digital ad revenue. It would be hard to generalize, but my gut tells me it is due to staff cutbacks. But in this case, a little research found out that Postmedia sells national advertising in print and digital for FP Newspapers. Does that have something to do with these numbers? I don’t know, but this is a smaller company, with smaller numbers, which means variations in performance lead to larger percentages. That’s just the way the numbers work.
Here is FP Newspaper’s Q1 earnings announcement:
WINNIPEG, MANITOBA – May 10, 2016 – FP Newspapers Inc. announces financial results for the quarter ended March 31, 2016. FPI is the successor to the business of the FP Newspapers Income Fund and owns securities entitling it to 49% of the distributable cash of FP Canadian Newspapers Limited Partnership (“FPLP”).
First quarter operating results of FPI
FPI had net earnings of $0.3 million, or $0.036 per share, during the three months ended March 31, 2016, compared to net earnings of $0.4 million, or $0.058 per share in the same quarter last year.
First quarter operating results of FPLP
FPLP’s revenue for the three months ended March 31, 2016 was $19.6 million, a decrease of $1.7 million or 7.8% from the same three months in the prior year. FPLP’s print advertising revenues for the three months ended March 31, 2016 were $11.7 million, a $1.3 million or 9.7% decrease compared to the same period last year. FPLP’s largest advertising revenue category, display advertising including colour, was $7.1 million, a decrease of $0.7 million or 8.9% from the same period in the prior year, primarily due to decreased spending in the local and national automotive and government categories, partly offset by increased spending in the financial category. Classified advertising revenues for the first quarter decreased by $0.3 million or 14.9% compared to the same period last year, primarily due to lower spending in most categories. Flyer distribution revenues decreased by $0.2 million or 8.1% compared to the first quarter in 2015, primarily due to a decrease in flyer volumes.
Print circulation revenues for the three months ended March 31, 2016 were virtually unchanged from the first quarter of 2015, with lower unit sales offsetting increased revenue from higher subscription and single copy rates. Digital revenues for the first quarter decreased by $0.3 million or 33.9%, primarily due to a decrease in on-line web ads together with mobile product ad revenues.
Operating expenses for the three months ended March 31, 2016 were $18.5 million, a decrease of $1.2 million or 6.0% compared to the same quarter last year. Employee compensation costs for the first quarter decreased by $0.8 million or 8.8% from the same period in the prior year, primarily due to a reduction in the number of employees across all of our business units. Newsprint expense for FPLP’s own publications for the first quarter decreased by $0.1 million or 9.9% compared to the same period in the prior year, primarily due to lower volumes. Newsprint expense for commercial printing and delivery expenses for the three months ended March 31, 2016 remained at relatively the same levels compared to last year. Other expenses decreased by $0.1 million or 2.8% compared to the same quarter last year, primarily due to lower outside costs from lower levels of production supplies used.
FPLP’s net earnings were $0.8 million for the three months ended March 31, 2016, compared to $1.2 million for the same period last year.
EBITDA(1) for the three months ended March 31, 2016 was $2.2 million compared to $2.7 million for the same period last year, a decrease of 18.4%. EBITDA(1) margin for the three months ended March 31, 2016 was 11.1%, compared to 12.6% in the same period last year. The changes in EBITDA(1) were due to the factors described above.
Advertising revenues early into the second quarter are trending at similar levels to what we experienced in the first quarter. A local sales consultant has been contracted to conduct an in-depth review of our resources, strategies and processes and assist us in identifying areas for improvement. We anticipate this review will carry on throughout the second quarter and possibly longer.
Brandon Sun Publisher Eric Lawson has accepted a Group Publisher Position in Nelson, British Columbia. We thank Mr. Lawson for his dedicated service and wish him much success in his new position. The senior management team in Brandon will be working closely with our Winnipeg senior managers as we work through determining the best structure and staffing going forward. Glenn Buffie, the General Manager of Derksen Printers in Steinbach, announced he is pursuing other opportunities and we will be working to fill his position as soon as the right replacement is identified. We extend our thanks to Mr. Buffie for his dedicated service.