Postmedia Q2 loss falls as cost-cutting, tax credit offset lower revenue

Postmedia Network Canada Corp. says its net loss for the quarter ended Feb. 28 was reduced to $1.3 million, down from $28.5 million a year earlier, despite a continued decline in revenue at its newspaper operations.

The Toronto-based company, which owns the National Post and numerous other paper and digital publications, says the reduced loss was mainly due to its cost reduction initiatives and a tax credit from the Ontario government.

Postmedia's operating expenses were down 21 per cent or $36.2 million, excluding certain items including restructuring expenses, and it received $17 million from the Ontario interactive digital media tax credit.

The net loss was worth one cent per share, down from 28 cents per share a year earlier.

Those positives offset a 10.8 per cent decline in revenue to $157.6 million, which was down $19.1 million from last year's fiscal second quarter.

Print advertising revenue was down $16.3 million, or 18.8 per cent, while print circulation revenue was down $4.6 million or 7.9 per cent.

Postmedia executive chairman Paul Godfrey said in a statement that the revenue declines from its legacy business had slowed and there were "positive signs" from its digital advertising initiatives.

Digital revenue which includes national and local display advertising, classified advertising on Postmedia's newspaper and other websites such as canada.com and canoe.com, and subscriptions totalled $26.4 million in the quarter, up 10.1 per cent from the same time last year.

Shortly after the quarter ended, the Competition Bureau obtained a warrant to search one of Postmedia's offices as part of an investigation into an asset-swap with Torstar Corp., owner of the Toronto Star and other publications.

No charges have been laid and the allegations included in the court documents have not been proven in court. Torstar and Postmedia have said they do not believe they contravened the Competition Act and they are co-operating.

Under the agreement announced by the two companies in November, 41 newspapers changed hands and 36 were closed, mainly in Ontario regions served by multiple publications. Nearly 300 jobs were cut as a result.

In documents used by the bureau to obtain warrants to search several offices of the two companies, the watchdog alleged they conspired to divide up sales, territories, customers and/or markets for advertising or flyer distribution in certain regions.

The bureau also said the companies had lists of which Torstar and which Postmedia employees would be terminated and agreed to a transitional services agreement.

Postmedia said Wednesday that it had incurred $3.5 million of severance costs over the six months ended Feb. 28, mostly in its first quarter ended Nov. 30. Over the two quarters, it also recorded about $1.7 million in provisions for onerous leases and contracts and $500,000 in acquisition costs related to the Torstar transaction.