Postmedia cuts Q3 loss in half but decline in print revenues offsets digital gain

TORONTO — Postmedia Network Canada Corp. cut its third-quarter loss nearly in half to $7.7 million as growth in digital revenue partly offset continued declines in its print business, the publishing company's latest financial report said Wednesday.

The owner of the National Post and other newspapers had $157.1 million in total revenue for the quarter ended May 31. That compares to total revenue of $171 million in the same quarter last year, and a net loss of $15.5 million.

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Postmedia's third-quarter revenue included $32.9 million from its digital businesses, such as websites and marketing services — up 10.1 per cent from last year's third quarter.

Advertising revenue on digital platforms was up 12.2 per cent from a year ago, which Postmedia chief executive Andrew MacLeod said marked the 10th consecutive quarter of double-digit growth in digital ad revenue.

"I don't see a lot of other participants in our marketplace who have managed to do that," MacLeod said in an interview after Postmedia's quarterly conference call.

Nevertheless, MacLeod said, "we need that to continue and we need that to accelerate because we have a legacy business that's larger and it's in decline."

This year's third-quarter loss amounted to eight cents per share, compared with 17 cents per share during the comparable period last year.

Revenue from print advertising was down 17.6 per cent to $64.8 million, from $78.6 million in the 2018 third quarter, while print circulation revenue fell 6.3 per cent to $51.4 million from $54.8 million a year earlier.

Last year's loss included an impairment charge and higher restructuring expenses, partially offset by a tax recovery. This year's third quarter included a gain on derivative financial instruments, partially offset by a higher currency loss.

MacLeod said Postmedia has been using various means — operational cost cutting, sales of real estate and other assets and government tax credits — to prolong the life of its legacy business.

Postmedia estimates that it will eventually qualify for between $8 million and $10 million per year for five years from a new federal program that's designed to pay some of the labour costs for qualifying journalists, he said.

But MacLeod said the exact timing and details of the federal government's funding have yet to be worked out.

In last year's fiscal third quarter report, Postmedia said it had received $20.4 million from a now-ended Ontario digital media tax credit for the period from September 1, 2012 to April 23, 2015.

MacLeod said media companies generally need the assistance to transition to digital publishing because so much advertising revenue has been captured globally by Google and Facebook.

"Our rate of decline tends to be pretty consistent with what the industry's facing. We do everything we can to support (the legacy) business but there's an . . . an inability to control what's occurring in an industry that's in a structural decline," MacLeod said.

He added that Canadian private sector media companies have an additional problem — competition from the Canadian Broadcasting Corp. and, to some extent, Canada Post.

"That's pulling revenue out of the ecosystem that private corporations would otherwise be going after. So I would encourage Ottawa to think about having the CBC emulate the BBC, where they don't take paid advertising."

Companies in this story: (TSX:PNC.A, TSX:PNC.B)

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