Postmedia to cut $50M in costs by June

Low oil prices hurt titles in the traditionally strong Edmonton and Calgary markets during the media co's fiscal first quarter, which saw it post a net loss of $4.2 million.
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Decreases in print advertising revenue continue to hurt Postmedia overall, while the low cost of oil and resulting job losses in Western Canada hit what are traditionally some of its strongest titles in Edmonton and Calgary in its fiscal first quarter, said Paul Godfrey, CEO at Postmedia in a call to investors.

Revenue for the quarter, which ended Nov. 30, 2015, was $251.1 million compared with $169.5 million the previous year, an increase of $81.6 million. That increase can be attributed largely to Postmedia’s acquisition of the Sun Media titles. Excluding those titles, first quarter revenue at Postmedia was $147.4 million, a decrease of $22.2 million compared with the same three months last year.

That revenue decline, which excludes Sun Media titles, is primarily due to a decrease of print advertising revenue of $16.4 million (17.6%). Postmedia also experienced a drop in print circulation revenue of $3.2 million (6.7%) and a dip in digital revenue of $ 1.4 million (5.7%) for the quarter.

Breaking those numbers down further, national run-of-press revenue was hardest hit, down 23% for the quarter. The automotive category was the hardest hit, dropping 20% for the quarter. Local run-of-press revenue dropped 17%, while insert revenue decreased 7%. Digital ad revenue was down 10% for the quarter.

Doug Lamb, EVP and CFO at Postmedia, said those decreases are due to a number of factors, including the impact of the price of oil in the Western Canada on ad sales and readership. He added that negative environment, which lifted partially in September, has continued into the first month of Postmedia’s fiscal second quarter.

At the national level, Andrew MacLeod, EVP and CCO, said dips to print advertising are partially due to an “accelerated substitution effect” from print to large digital companies like Facebook.

Because of those continuing declines, Postmedia has added $30 million to its original $50 million of cost-cutting initiatives. It has also accelerated the timeline behind the cuts, moving it up from the end of fiscal 2017, to implementing $50 million in cuts by the third quarter of fiscal 2016, which ends on May 31, 2016. The remaining $30 million in cuts will be implemented by the end of fiscal 2017. Godfrey said on the investor call details on how those cuts will be implemented are still being worked out, so more details aren’t available at this time.

The media co has already implemented cost saving measures amounting to $32 million, or 40% of the $80 million target, since the program was first launched. That number includes $17 million in changes made during the first fiscal quarter.

Postmedia posted a net loss of $4.2 million, compared with $10.3 million for the same period last year. That decrease in net loss is primarily attributed to an increase in operating income due to and decreases in non-cash foreign currency exchange losses related to the company’s U.S. dollar dominated debt. On Wednesday the Canadian dollar dipped under the 70-cent mark, a level not seen since 2003.

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