TORONTO – Former media baron Conrad Black expressed his dissatisfaction Thursday with Postmedia’s turnaround effort as Canada’s largest newspaper chain reported another punishing quarter that left it swimming in deeper losses.
Black made an unexpected appearance on the Postmedia’s financial results conference call to tell CEO Paul Godfrey that he felt standards at some of the company’s papers have slipped.
“Please build the quality, otherwise you’re going to retreat right into your own end zone, if you’ll pardon the sports metaphor,” Black said.
“I care very much about these assets. I have nothing but high regard for you and your colleagues, but I’m very concerned we’ve got our feet stuck in cement here,” he added later.
Godfrey responded to Black with a metaphor of his own.
“You’ve never been a shrinking flower your whole life and I wouldn’t expect you’d be one now,” Godfrey said. “You and I are aligned on the end goal here.”
Black, who founded the National Post and was involved with many of the newspapers now owned by Postmedia, has been outspoken about the direction of the company in the past.
In May, the Post published an opinion piece where Black criticized “endless and rather undiscriminating cost-cutting” in the media industry as publishers responded to advertisers spending less on newspapers.
Postmedia’s latest results showed it still has a lengthy battle ahead in its plan to return to profitability.
The company, which owns the National Post and numerous other major city dailies, found a sliver of optimism from the inclusion of the Sun Media assets in its overall financial results following the acquisition earlier this year.
Still, Postmedia couldn’t overcome the shadow cast by its legacy assets over the entire operation, particularly when it came to advertising revenue.
Postmedia says it lost $140.8 million, or 84 cents per share, in the three months ended May 31, a plunge from a loss of $20.6 million, or 51 cents per share, in the same period a year earlier.
Much of the decline was linked to a charge of $151.2 million booked for Postmedia’s annual reassessment of “intangible assets” — which include the cash value it ties to parts of the business like the names of its newspapers and the domain names of websites.
Postmedia acquired Sun Media’s English-language newspapers and digital properties on April 13 and this marks the first time Sun assets were included in its financial results, though it was only for about a month and a half of the quarter.
Overall, the combined operations benefited from the presence of the Sun brand.
Revenue jumped nearly 20 per cent to $205 million when adding Sun to the mix. Print advertising revenues for all of Postmedia grew 18.5 per cent to $112.2 million, while print circulation revenue increased 20.4 per cent to $59 million. Digital revenues were up 11.7 per cent to $25.7 million.
But excluding the Sun papers, the outlook was more disconcerting as revenue from Postmedia’s legacy operations dropped 13.5 per cent to $23.1 million.
Postmedia said print advertising revenues dropped 20.2 per cent to $75.6 million as “all major advertising categories” saw more money leave newspapers for social media sites and search engines.
Print circulation revenues were also down 6.5 per cent to $45.8 million, while digital advertising revenue — considered by Postmedia to be a crucial part of its future business — declined four per cent to $22.2 million.
“This shift is expected to continue and appears to be permanent,” the company said in its financial statement.
Postmedia said it (TSX:PNC.B, TSX:PNC.A) plans to look for more ways to reduce its overall expenses in the face of declining advertising revenues. Most recently it struck an agreement to sell the Edmonton Journal production facility for $9.4 million.
Chief financial officer Doug Lamb told investors that other real estate assets will be sold to generate more cash. The company still owns a building in Calgary while other properties will “free up in the Sun Media chain,” he added without further explanation.
The company says the Sun papers provide new options to help reduce another $50 million in operating costs by the end of fiscal 2017, through “acquisition synergies and further streamlining” between its various media operations.
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