Postmedia targets cost-cutting as it seeks new revenue streams

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With falling revenue driving a $54-million fourth-quarter loss at Canada's largest newspaper chain, Postmedia Network Canada Corp. is keeping its focus on cost-cutting as it hunts for new avenues to make money.

Losses for the three months ended Aug. 31 exceeded the $49.8-million shortfall recorded in the same quarter last year, driven largely by "derivative financial instruments" as well as a $19.4-million foreign currency loss – more than half the company's substantial debt is in U.S. dollars.

The results sum up another hard year for Postmedia, and marked the first full quarter of results that included contributions from the Sun newspaper chain, acquired from Quebecor Media in April. The fourth quarter saw print advertising revenue fall 13.7 per cent, which marked a minor improvement from prior quarters when declines were sometimes above 20 per cent. Two other key revenue sources – circulation and digital – also fell by 4.8 per cent and 2.4 per cent, respectively.

"We cannot take our foot off the gas with respect to cost savings," Paul Godfrey, the company's chief executive officer, said on a conference call with analysts.

"We are developing new revenue sources" around native advertising and content marking, he said, but at the same time "we will continue to rethink the way we do business."

Postmedia has promised $50-million in savings by the end of the 2017 fiscal year, with the vast majority expected in the first year – mainly by shedding staff and other costs made redundant by the Sun deal. The company already cut $14-million in annual costs in the fourth quarter, and "I think you can expect to see the cost-cutting continue at a pretty good clip," said chief financial officer Doug Lamb.

The company also closed the sale of its production facilities in Edmonton and Vancouver in the latest quarter, which yielded combined proceeds of about $25-million, some $6.5-million of which was spent buying back debt.

Postmedia newsrooms have already had a trying start to the new fiscal year. On Monday, prominent political journalist Andrew Coyne resigned from his role as editor of the National Post's editorial board, but remains a columnist at the paper, after he disagreed with the Postmedia's mandated endorsement of the Conservative Party in Monday's federal election. Mr. Coyne clashed with executives when he was denied the chance to write a dissenting column.

And on Wednesday, as first reported by The Globe and Mail, the company discontinued evening tablet editions at the Calgary Herald, Ottawa Citizen and Montreal Gazette, in which it had invested heavily in the hope it could boost ad revenue by targeting readers more precisely.

The company's loss attributable to equity holders for the fourth quarter was 19 cents a share, compared with $1.24 a year earlier, reflecting a rights offering completed in March that diluted the share float by a factor of seven.

Revenue for the fourth quarter was $230.2-million, compared with $146.8-million a year earlier. Excluding the Sun purchase, revenue was $133.8-million, down 8.8 per cent year over year. For the year ended in August, Postmedia recorded a loss of $263.4-million or $1.98 a share, compared with $107.5-million or $2.67 in 2014.

Revenue for 2015 was up to $750.3-million, thanks to the addition of the Sun properties midyear, but excluding that deal, annual revenue fell $77.6-million or 11.5 per cent, due in large part to a 17.9-per-cent year-over-year decline in print ad revenue.

For the fiscal year just ended, the company made $16-million in required principal repayments on its long-term debt, which still stands at more than $646-million, and also paid $61.9-million in interest.