Growing digital revenues not enough to offset Q2 losses at Postmedia

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Postmedia Network Canada Corp. lost nearly $5.1 million in its second quarter as revenue dropped 7.5 per cent compared with last year as a result of shifting advertising and circulation patterns.

The owner of the National Post and other newspapers reported Thursday that it had $145.7 million in total revenue for the quarter, including $28.2 million from its digital businesses and $110.8 million from print advertising and circulation.

A year earlier, Postmedia's total revenue amounted to $157.6 million, including $26.4 million from its digital businesses and $123.7 million from print advertising and circulation.

This year's second-quarter loss amounted to five cents per share, compared with one cent per share last year.

Postmedia chief executive Andrew MacLeod said the company has made progress in slowing the decline in traditional revenue and reducing its long-term debt while growing its digital business.

"Our success in extending the legacy runway is providing us the time to allow our digital transformation to continue, demonstrating traction with its ninth consecutive quarter of double digit digital advertising growth," MacLeod said.

However, digital revenue was up only $1.8 million from last year, as digital advertising rose 10.2 per cent.

MacLeod said competition with Google and Facebook is an "enormous challenge for our industry."

"That is why we welcome the recent announcement, by the federal government, of its support of Canadian journalism."

The Trudeau government 2019 budget in March provided some details about how it plans to distribute $595 million to support Canadian media, but MacLeod said it's too soon to estimate its impact on Postmedia.

"I just think it's early days and as more information becomes available and as the bill is passed into law, I think we'll have a much greater insight as well as the industry as a whole," MacLeod said.

However, he said the budget plan will undoubtedly save journalism jobs because the employers must prove they've paid the salaries in order to qualify for a tax credit.

Critics of the tax credit argue it's too favourable to newspapers because credits would exclude entities "carrying on a broadcasting undertaking" and magazine publishers that already receive aid through the Canadian Periodical Fund.

Postmedia has previously benefited from the Ontario interactive digital media tax credit, including $17 million recorded in last year's second quarter, helping reduce its loss to $1.25 million as of Feb. 28, 2018.

As of Feb. 28, Postmedia's long-term debt was $238.3 million, down from $264 million a year earlier.

MacLeod, who took over as CEO from Paul Godfrey earlier this year, has since been appointed to Postmedia's board of directors.

He announced Thursday that Mary Anne Lavallee has been appointed Postmedia's chief operating officer, with a primary focus on digital growth.

"Since joining the company in 2014, Mary Anne has been instrumental in driving our transformational strategy," MacLeod said.

MacLeod also joined Postmedia in 2014 as chief commercial officer. He became chief operating officer in 2016 and added the role of president in 2017. He became CEO in January as Godfrey became executive chairman.