BUSINESS

Your ad here: Postmedia says luring advertisers a challenge as it posts Q4 loss

10/24/2014 11:39 EDT | Updated 12/24/2014 05:59 EST
TORONTO - Advertisers were still elusive for newspaper publisher Postmedia in the fourth quarter and executives say there hasn't been much improvement ahead of the key Christmas holiday shopping season.

"Unfortunately, the weakness in print advertising has persisted into the early portion of the first quarter," chief financial officer Doug Lamb told analysts on Friday, as the media company deepened losses by four per cent to $49.8 million.

Postmedia, owner of several newspapers and websites, including the National Post, "may see some modest growth" in digital ads during the current quarter, Lamb said.

However, he added that print "continues to be a challenge" heading into November, an important buying period for marketers who are lining up campaigns for the Christmas holiday. Postmedia's current quarter ends Nov. 30.

Weakness in advertising isn't a new phenomenon for newspapers, but it's troubling for a company like Postmedia, which has aggressively reworked its digital presence in hopes more marketers will buy space on its websites.

The company has blamed technology giants like Facebook and Google for advertising dollars passing it by. The Silicon Valley giants sell marketing campaigns catered to very specific demographics across the country, a platform that older media companies have struggled to replicate.

"I would guess most other newspapers in Canada would also be following the same trends," president and CEO Paul Godfrey said on the company's quarterly conference call.

"We know why they're falling, it's the same reason why we're falling."

On Friday, Postmedia Network Canada Corp. (TSX:PNC.B) reported that losses deepened in the fourth quarter as revenues dropped 13 per cent, weighed down by weaker print and digital advertising sales.

The Toronto-based media company's net loss amounted to $1.24 per share in the most recent quarter ended Aug. 31, compared with $1.19, or $47.9 million in the same period a year ago.

Overall revenue slipped to $146.8 million from $169.3 million, mainly on weaker print advertising sales that fell 21 per cent to $74.2 million. Print circulation revenue slipped 2.8 per cent to $48 million.

Digital revenue, which includes ad sales and digital subscriptions, dropped 5.3 per cent or $1.1 million.

Postmedia has made its digital business a priority with the redesign of websites for several local city news outlets, including the Ottawa Citizen and the Montreal Gazette.

The company has also been reworking its operations under a three-year turnaround plan and expects that cuts made in the quarter will result in annual savings of $3 million.

Earlier this month, Postmedia announced a deal to buy the assets of Sun Media from Quebecor (TSX:QBR.B) for $316 million.

The company plans to finance the acquisition through a combination of debt and equity financings. They include the issuance of an additional $140 million in senior secured notes and a rights offering of subscription receipts for shares in the company.

Postmedia also intends to cover as much as $50 million of the cost of the transaction, which still requires regulatory approval, through the sale of real estate in Montreal and Calgary. Both of those transactions are slated to close before the end of the year.

The company has also struck a conditional agreement to sell its Kennedy Heights printing facility in Surrey, B.C., for $17.5 million, with the transaction slated to close June 30.

For the year, Postmedia reported losses were tightened by a third to $107.5 million, compared with a loss of $160.2 million in fiscal 2013 when it benefited from a $100-million non-cash impairment charge related to a production facility that was up for sale and other costs tied to goodwill and intangible assets.

Revenue dropped 10.3 per cent to $674.3 million, pulled lower by a 15.7 per cent decline in print advertising revenue and a 3.9 per cent drop in digital revenue.

Subscribers to its digital platform helped partially offset the overall revenue declines, the company said.

Postmedia shares, which are thinly traded, closed up 30 cents at $2.30 Friday on the Toronto Stock Exchange.

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