Precipitous declines in print advertising continue to bludgeon holes into the debt-heavy vaults at Postmedia. That’s the story the numbers tell upon the release of the company’s Q2 report.
And while questions about the future of the national publishing empire remain unanswered, the company also announced the resignation of Ted Lodge from its board of directors. Lodge is a partner at New York-based Golden Tree Asset Management, the hedge fund which has a 52.6% stake in the company.
The company also announced the creation of a special independent committee to “explore and review alternatives to improve its capital structure and liquidity.” When asked to specify options on the investor call this afternoon, president and CEO Paul Godfrey declined to comment. An analyst asked about the potential financial restructuring of the business following reports in the media that the fast depleting value of its bonds would lead to a debt restructuring of the company, with the potential impact of lenders writing off their investment in the chain.
According to its unaudited statement of operations, the publisher reported a loss of $225.1 million, $166.9 million more than losses incurred for the same period a year ago. Most of that is attributable to net operating losses, including a $187 million non-cash impairment charge and a $63.8 million increase in operating expenses on account of the publisher’s acquisition of the Sun Media properties in 2015.
And while revenue for the quarter was $209 million, compared with $145 million for the same period ending 2015, much of that increase is because of the addition of the Sun Media properties. When taken out of the equation, revenues stand at $126.4 million, 13.1% less than for the same period last year.
Most of that loss is due to a drop of 18.3% in print advertising to the tune of $13.8 million, supported by an 8% drop in print circulation. Digital revenue is also down by 4.2% for the same period last year. The publisher has been witnessing revenue declines for successive quarters.
The company said a significant chunk of the advertising loss was attributed to a decline in print advertising by automakers, a once lucrative investor in the medium. On the afternoon’s investor call, Andrew MacLeod, EVP and chief commercial officer at Postmedia stated the impact was not specific to the media co.
“There’s a structural shift taking place in our industry, there is a substitution effect in terms of the propensity of our customers to shift media dollars to other platforms,” he said, pointing to Google and Facebook. “It is more pronounced in the auto sector where it is shifting more rapidly than some of the other sectors. But it is not unique to us.”
In a call with investors an embattled Godfrey and the company’s CFO noted Postmedia was moving along with its plans to cut costs by $80 million by the first quarter of fiscal year 2017; the company has so far achieved $55 million in savings since it launched a transformation initiative (to cut costs) in July last year.
Among the efforts already underway is the company’s merging of its real estate in markets where it has duplicate publications serving different audiences and moving its National Post outsourced printing to its own plant.
Earlier this week the publisher wrapped up its eighth and final redesign of its legacy publications bringing a new look to the Vancouver Sun, with the hope of drawing new reader and advertiser interest.
