Postmedia Reports First Quarter Results
January 9, 2020 (TORONTO) – Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months ended November 30, 2019.
Highlights from the Quarter
- Continued digital growth – Three years (twelve consecutive quarters) of double digit digital advertising revenue growth – up 11.1% in the quarter, equaling the growth rate over the last twelve months.
- Business Transformation – In the quarter we realized an 8.1% reduction in operating costs1, which, together with other initiatives implemented in the quarter, are expected to result in approximately $10.4 million of net annualized cost savings.
- Operating income before depreciation, amortization and restructuring was $21.4 million in the quarter, represents a decrease of $0.3 million.
First Quarter Operating Results
Revenue for the quarter was $156.7 million as compared to $171.3 million in the same period in the prior year, representing a decrease of $14.6 million or 8.5%. The revenue decline was primarily due to decreases in print advertising revenue of $12.9 million or 16.8% and print circulation revenue of $3.1 million or 5.8%. Digital revenue increased by $2.8 million or 8.7% in the quarter with digital advertising revenue up 11.1%, the same growth rate of digital advertising over the last twelve months.
“Our teams are focused on executing on our strategy and this focus is reflected in our digital advertising revenue results. Today we reached an impressive milestone – three straight years of double digit digital advertising revenue growth,” said Andrew MacLeod, President and Chief Executive Officer, Postmedia. “The industry remains in a difficult and disrupted state as pressure on its legacy foundation is accelerating. Any future model relies on growing digital revenue. The success of our teams proves that at Postmedia, we have reason to be cautiously optimistic. Despite these challenges, this established growth provides us with the necessary foundation to transform into a future sustainable model.”
Excluding the impact of the the adoption of IFRS 16 – Leases accounting policy in Fiscal 2020, total operating expenses excluding depreciation, amortization and restructuring decreased $12.1 million or 8.1% for the quarter, relative to the same period in the prior year. The decrease was as a result of lower newspaper circulation volumes as well as the implementation of various cost reduction initiatives.
Operating income before depreciation, amortization and restructuring of $21.4 million in the quarter represents a decrease of $0.3 million or 1.5% relative to the same period in the prior year. The decrease is due to decreases in print advertising and circulation revenues partially offset by an increase in digital revenue and operating expense decreases. Included in operating expense decreases is the impact of the change in accounting policy and a compensation expense recovery of $2.4 million related to the journalism tax credits.
Net loss in the quarter ended November 30, 2019 was $3.0 million, as compared to $1.4 million in the same period in the prior year. The change was primarily the result of the decrease in operating income before depreciation, amortization and restructuring and increases in interest expense and financing expense relating to employee benefit plans, partially offset by decreases in foreign currency exchange losses and loss on derivative financial instruments and a gain on disposal of property and equipment.
Business Transformation Initiatives
During the three months ended November 30, 2019, the Company implemented initiatives including compensation expense reductions, real estate rationalization, production efficiencies and other transformation programs, which are expected to result in approximately $10.4 million of net annualized cost savings.
The Company intends to continue to identify and undertake ongoing cost reduction initiatives in an effort to address revenue declination in the legacy print business.
On September 9, 2019, the Company completed a previously announced refinancing transaction that included the redemption of the Company’s existing first-lien notes in the outstanding principal amount of $94.8 million, plus accrued interest of $2.8 million, and terminated the existing amended and restated senior secured notes indenture. The Company financed the redemption through the issuance of $95.2 million aggregate principal amount of new first-lien notes to Canso Investment Counsel Ltd. of Richmond Hill, Ontario, in its capacity as portfolio manager for and on behalf of certain accounts that it manages for net proceeds of $93.5 million, after financing fees of $1.7 million. The new first-lien notes have substantially similar terms to the existing first-lien notes with the exception of a reduction to the minimum annual excess cash flow redemption from $10.0 million to $5.0 million. In addition, the Company extended the maturity of its existing second lien notes by six months to January 15, 2024.
IFRS 16 Leases
The adoption of IFRS 16 Leases has resulted in an increase in operating income before depreciation, amortization and restructuring for the period ended November 30, 2019 of $2.2 million. Interest of $0.8 million on the lease obligations and amortization of $1.8 million of the right of use assets are charged to the statement of operations below operating income before depreciation, amortization and restructuring for the period ended November 30, 2019.
Additional information, including financial statements and management’s discussion and analysis can be found on the Company’s website at www.postmedia.com/investors/financial-reports or on SEDAR at www.sedar.com.
Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.
About Postmedia Network Canada Corp.
Postmedia Network Canada Corp. (TSX:PNC.A, PNC.B) is the holding company that owns Postmedia Network Inc., a Canadian newsmedia company representing more than 140 brands across multiple print, online, and mobile platforms. Award-winning journalists and innovative product development teams bring engaging content to millions of people every week whenever and wherever they want it. This exceptional content, reach and scope offers advertisers and marketers compelling solutions to effectively reach target audiences. For more information, visit www.postmedia.com.
This news release may include information that is “forward-looking information” under applicable Canadian securities laws. The Company has tried, where possible, to identify such information and statements by using words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “may,” “will,” “could,” “would,” “should” and similar expressions and derivations thereof in connection with any discussion of future events, trends or prospects or future operating or financial performance. Forward-looking statements in this news release include statements with respect to the implementation and results of the Company’s transformation initiatives, continued benefits of historical results into future periods,and the realization of anticipated cost savings and the identification and undertaking of ongoing cost savings initiatives. By their nature, forward-looking information and statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These risks and uncertainties include, among others: competition from digital and other forms of media; the effect of economic conditions on advertising revenue; the ability of the Company to build out its digital media and online businesses; the failure to maintain current print and online newspaper readership and circulation levels; the realization of anticipated cost savings; possible damage to the reputation of the Company’s brands or trademarks; possible labour disruptions; possible environmental liabilities, litigation and pension plan obligations; fluctuations in foreign exchange rates and the prices of newsprint and other commodities. For a complete list of our risk factors please refer to the section entitled “Risk Factors” contained in our annual management’s discussion and analysis for the years ended August 31, 2019 and 2018. Although the Company bases such information and statements on assumptions believed to be reasonable when made, they are not guarantees of future performance and actual results of operations, financial condition and liquidity, and developments in the industry in which the Company operates, may differ materially from any such information and statements in this press release. Given these risks and uncertainties, undue reliance should not be placed on any forward-looking information or forward-looking statements, which speak only as of the date of such information or statements. Other than as required by law, the Company does not undertake, and specifically declines, any obligation to update such information or statements or to publicly announce the results of any revisions to any such information or statements.
For more information:
Vice President, Communications
Executive Vice President and Chief Financial Officer