TORONTO - Postmedia Network Canada Corp. earned its first quarterly profit in nearly two years, generating $7.9 million as journalism tax credits, lower expenses and higher digital advertising sales offset declining revenue at its newspaper operations.
The Toronto-based company, which owns the National Post, local dailies in Canada's largest cities and other publications, reported Thursday that it earned eight cents per share for the quarter ended Aug. 31.
That compared with a loss of $22.9 million or 24 cents per share in the same quarter last year.
Fourth quarter revenue was down 8.2 per cent because of dwindling print advertising and circulation but revenue from digital businesses continued to rise, mainly because of a 10.8 per cent increase in digital advertising.
The company's strategy is to grow its digital business while managing its legacy newspaper businesses through an industry wide decline in advertising revenue at conventional media businesses.
“I think we're doing a good job transforming our business. And that's evidenced by the fact we've had 11 straight quarters of digital advertising growth, at double-digit levels,” chief executive Andrew MacLeod said in an interview.
“I would say that we've had greater success at that than most but we need it to be growing more quickly.”
The fourth quarter included a number of items that helped produce Postmedia's first quarterly net profit since late in calendar 2017, when it had about $5.8 million in net earnings for the fiscal quarter ended Nov. 30.
Among other things, this year's fourth quarter included Postmedia's first payment from a new federal journalism tax credit that went into effect in January 2019.
That money helped reduce Postmedia's full-year compensation expenses by $7 million, all of it recorded in the fourth quarter. Including the tax credits and staff reductions, fourth-quarter compensation expenses fell $13 million from a year earlier to $49.5 million.
The quarter also included a recovery of $9.7 million related to the cessation of pension accruals as of July 1 and discontinued retiree benefits, as part of a pension agreement with certain unionized employees.
Revenue totalled $145.6 million for the quarter ended Aug. 31, including $31.2 million from digital. Its 2018 fourth-quarter revenue totalled $158.7 million, including $28.9 million from digital.
For the financial year ended Aug. 31, Postmedia lost $6.3 million or eight cents per share compared with a loss of $33.9 million or 36 cents per share in its 2018 financial year. Revenue for the year was $619.6 million, down 8.4 per cent from $676.3 million.
During the fourth quarter, Postmedia struck a refinancing deal with Ontario-based portfolio manager Canso Investment Counsel Ltd. that gives the publishing company more time to pay down debt and grow its digital business.
The agreement, which closed Sept. 9, means two sets of notes won't mature until July 2023 and January 2024, respectively. The deal also eliminated a requirement for Postmedia to hold quarterly calls for investors.
This report by The Canadian Press was first published Oct. 24, 2019.
Companies in this story: (TSX:PNC.A, TSX:PNC.B)
