Postmedia says automotive advertising major reason for drop in Q3 revenue

TORONTO - Postmedia Network Canada Corp. (TSX:PNC.B), which operates one of Canada's largest chains of newspapers, reported Thursday it lost $20.6 million in its latest quarter as revenue fell 11 per cent due to lower print advertising sales.

"This occurred across national, retail and classified categories, with the larger declines across national and classified," Postmedia chief financial officer Doug Lamb said in a conference call.

"We continue to experience advertising weakness in the early weeks of the fourth quarter."

The loss amounted to 51 cents per share for the quarter ended May 31 compared with a loss of $103.3 million or $2.57 per share a year ago when the company took a $93.9-million one-time non-cash charge.

Postmedia's total revenue was $170.99 million in the quarter, down from $191.78 million a year earlier.

Lamb said the biggest challenge was in automotive advertising, which was responsible for 41 per cent of the year-over-year decline in print advertising revenue experienced in the third quarter.

Print advertising at the company's newspapers, which include the National Post and dailies in Montreal, Ottawa, Calgary, Edmonton and Vancouver, fell by nearly $18.7 million to $94.7 million, a 16 per cent decline from $113.4 million in the third quarter of its 2013 financial year.

Print circulation revenue also declined by about $400,000 to just over $49 million while revenue from digital products decline by about $1 million to $23.07 million from $24.09 million a year earlier.

Digital products are seen as the future for Postmedia, which have seen readers increasingly turn to social media, websites and other electronic media for news and entertainment.

Postmedia launched a redesigned version of the Ottawa Citizen this year with a new look for the newspaper and website as well as new apps for smartphones and tablets.

The company expects to redesign most of its other newspapers, except the National Post and Vancouver Province, by next summer.

Postmedia, which was created in July 2010 under a court-supervised restructuring of the Canwest broadcasting and newspaper business, is about mid-way through a three-year turnaround plan that began in 2012.

President and chief executive Paul Godfrey said Thursday that "we had no idea" four years ago how big a challenge was ahead for Postmedia.

As of May 31, the company had $48.6 million cash and was in the process of selling some of its real estate and further reducing operating costs by an estimated $8 million per year.

On Wednesday, it arranged a new secured asset-backed line of credit for up to $20 million.

Godfrey said Postmedia is focused on "transforming legacy costs and re-imaging what our products will look like in the future."