October 19, 2017 Last Updated 3:31 pm

Postmedia Network reports sharply lower Q4 print ad revenue, but improves bottom line due to divestment efforts

Total revenue for the final quarter of the publisher’s fiscal 2017 fell 9.2 percent, mostly due to 15 percent drop in print ad revenue

TORONTO, Ontario — October 19, 2017 — Postmedia Network Canada Corp. today released financial information for the three months and year ended August 31, 2017.

Fourth Quarter Operating Results

Net earnings in the quarter ended August 31, 2017 were $40.3 million, as compared to a net loss of $99.4 million in the same period in the prior year. The change was primarily the result of a gain on the sale of Infomart, decreases in non-cash impairment charges, as well as a decrease in interest expense and costs related to the recapitalization transaction in Q1 of fiscal 2017.

Operating income before depreciation, amortization, impairment and restructuring of $12.4 million in the quarter represents an increase of $7.1 million relative to the same period in the prior year. The increase is due to operating cost savings related to cost savings initiatives, partially offset by a decrease in total revenues.

Revenue for the quarter was $176.8 million as compared to $194.6 million in the prior year, a decrease of $17.8 million or 9.2%. The revenue decline was primarily due to decreases in print advertising revenue of $14.7 million or 15.0% and print circulation revenue of $4.7 million or 7.3%. Digital revenue increased $3.4 million or 15.0% in the quarter with digital advertising revenue up 19.7%.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $24.9 million or 13.2% for the quarter, relative to the same period in the prior year. The decrease was primarily related to cost savings initiatives.

Full Year Operating Results

Net earnings for the year ended August 31, 2017 were $44.8 million, as compared to a net loss of $352.5 million in the same period in the prior year. The increase in net earnings was primarily the result of a $241.9 decrease in non-cash impairment charges, a gain on debt settlement of $78.6 million and a decrease in interest expense, both as a result of the recapitalization transaction in Q1 of fiscal 2017 and a gain on the sale of Infomart.

Operating income before depreciation, amortization, impairment and restructuring for the year ended August 31, 2017 was $54.6 million, a decrease of $19.5 million relative to the same period in the prior year. The decrease is due to revenue declines which were only partially offset by operating cost savings.

Revenue for the year ended August 31, 2017 was $754.3 million as compared to $860.4 million in the prior year, a decrease of $106.1 million or 12.3%. The revenue decline was primarily due to decreases in print advertising revenue of $93.1 million or 19.9% and print circulation revenue of $21.8 million or 8.4%. Digital revenue increased $11.7 million or 12.4% in the year ended August 31, 2017 with digital advertising up 16.5%.

Total operating expenses excluding depreciation, amortization, impairment, and restructuring decreased $86.6 million or 11.0% for the year ended August 31, 2017, relative to the same period in the prior year. The decrease was primarily related to cost reduction initiatives.

Business Transformation Initiatives

During the three months and year ended August 31, 2017, the Company implemented initiatives which are expected to result in approximately $9 million and $84 million of net annualized cost savings, respectively.

The Company will continue to identify and undertake ongoing cost reduction initiatives in an effort to address revenue declination in the legacy print business.

Infomart Transaction

On June 22, 2017, the Company entered into an agreement with Meltwater News Canada Inc. to sell Infomart, its media monitoring division, for gross proceeds of approximately $38.3 million subject to adjustments (the “Infomart Transaction”). Included in the Infomart Transaction are Infomart’s media monitoring business, direct feed business and professional services operations, including clients of such services. The Infomart Transaction closed on August 15, 2017, at which time an amount of $5.7 million was paid into escrow to satisfy any closing adjustments arising under the purchase agreement. The remaining net proceeds of the Infomart Transaction will be used to redeem a portion of the Company’s long-term debt. During the three months and year ended August 31, 2017, the Company recognized a gain on sale of $36.1 million related to the Infomart Transaction. As a result of the Infomart Transaction, the earnings of Infomart have been reported as earnings from discontinued operations for the three months and years ended August 31, 2017 and 2016.

Debt Repayment

Subsequent to August 31, 2017, the Company used $62.1 million to make principal payments of $60.0 million on the Company’s long-term debt and pay accrued interest of $2.1 million with the net proceeds from the Infomart Transaction and other asset sales, including the Islington production facility which was sold in the three months ended August 31, 2017.

On October 23, 2017, the net proceeds of $9.9 million from an additional asset sale will be used to make a principal payment of $9.5 million on the Company’s long-term debt and pay accrued interest of $0.4 million.

Management Commentary

“This quarter we have continued to divest of non-core assets – including the sales of the Infomart business and the Islington, Ontario print facility – with the net proceeds applied to debt repayment,” said Paul Godfrey, Chief Executive Officer Postmedia. “On the revenue front, while traditional print revenues continue to be under significant pressure, this was our third quarter of continued digital advertising revenue growth – a positive sign that new customers are embracing our innovative solutions.”

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