Postmedia’s ad and circulation revenue continued on its downward slope in the third quarter, but movement on its cost-reduction plans managed to help it increase its operating income.
For the three months ended May 31, Postmedia’s revenue declined 7.8% to $111.2 million, attributed to a 15.3% decline in advertising revenue and a 15.6% decline in circulation revenue. Excluding last year’s Brunswick News acquisition, revenue declined by 11.9%, with a 15.4% dip in ad revenue and a 16.5% decline in circulation revenue.
Parcel services, however, continue to be a growth area for the company, growing by $4.6 million, or 75.4% year-over-year. The company has also had what Andrew MacLeod, president and CEO of Postmedia, described as a “modest” increase in digital subscriptions.
Despite its revenue declines, Postmedia still had a $1.9 million increase in operating income, thanks to a 9.6% decrease in operating expenses. Cost-reduction initiatives in the most recent quarter, which have included identifying operational efficiencies and restructuring, are expected to result in $21 million in annualized savings, though charges related to the restructuring contributed to Postmedia ending the quarter with a $24.8 million loss.
“A challenging economic landscape continues to affect all industries and requires a continued focus on aggressive transformation,” MacLeod said. “We have undertaken and continue to implement a number of important initiatives focused on a sustainable future including the repayment of the balance on our senior secured asset based facility – with the strong support of our stakeholders, cost reduction initiatives – including a company-wide external spend review, and support of the recent passage of Bill C-18 which will ultimately benefit publishers across Canada.”
A more manageable debt load was one of the motivations for Postmedia to enter merger talks with Torstar owner Nordstar, which the company announced had ended earlier this week. Sources told The Globe and Mail that the deal broke down over the terms of the debt swap, with Nordstar executives “concerned with Postmedia’s debt structure.”
