TORONTO – Lower advertising revenues and soaring restructuring costs weakened the first-quarter results of Postmedia Network Canada Corp. (TSX:PNC.B), owner of the National Post and other Canadian newspapers.
The company reported an $11.8-million net loss in the three months ended Nov. 30, primarily due to a $15.3-million increase in restructuring expenses from the company’s outsourcing of printing operations.
A year earlier, Postmedia had a profit of $6.7 million when the costs of reworking its operations were significantly lower.
Postmedia’s loss was equal to 29 cents per share versus 16 cents per share of net income in the comparable period.
Revenue fell eight per cent to $194 million from about $212 million, primarily from reduced print advertising sales, while digital revenue fell by $1.3 million or five per cent.
Like most of the newspaper industry, Postmedia has been grappling with a years-long trend in which readers and advertisers turn away from print publications to digital media, including websites.
To counter the decline, Postmedia began a three-year plan to dramatically change its business model by setting up digital pay walls for its websites, ending the publication of many Sunday newspapers and selling its headquarters in Toronto.
In November, the company outsourced the production of the Calgary Herald to TC Transcontinental Printing and said it would also outsource contracts for the production of both the Vancouver Sun and the Province.
Restructuring expenses, and other items meant to lower its operational costs, grew to $20.1 million in the quarter from $4.8 million a year earlier.
However, Postmedia’s overall operating expenses — excluding depreciation, amortization and restructuring items — fell by nine per cent, or $14.7 million, from a year before.
“We continue to face significant revenue challenges as a result of a rapidly changing advertising market,” CEO Paul Godfrey said in a statement.
“In spite of these challenges, however, we are very pleased with the progress we have made in stabilizing circulation revenue, deepening insights into our audiences across multiple platforms, and transforming our cost structure to match the realities of the business.”
Postmedia rose from the ashes of bankrupt media company Canwest when Godfrey culled together a group of investors in 2010.
Since then, the company has been focused on reworking its operations, which has included shutting down an in-house wire service and expanding its Hamilton operations to handle the editorial production of newspaper pages.