Postmedia Network Canada Corp., owner of the National Post newspaper and other media properties, reported Thursday a weakened first-quarter profit of $5.6 million as the company worked to cut costs.
And Postmedia chief executive Paul Godfrey warned that the company could face difficulty ahead as advertising revenue weakened at the end of the quarter.
“This recent softness underscores the importance of our continued focus on cost management, tight control of capital expenditures and the use of free cash flow for debt repayment,” Godfrey told a conference call with analysts.
“I think it is too early to make any conclusive decisions based on that, but the fact is we have to be cautious of what we have seen in the last five or six weeks.”
The former Canwest print and online operations have been working to reduce costs since being spun off as part of a court-supervised creditor restructuring.
The company has cut about 500 full-time jobs, or roughly 9% of its workforce, as part of the restructuring.
The changes it is making are expected to save Postmedia $30 million to $35 million per year, of which $25 million to $30 million is expected to be realized in the current fiscal year ending Aug. 31.
“Although we are pleased with the progress we have made to date, we remain focused on the identification of additional cost-reduction opportunities going forward,” Godfrey said.
The results for the quarter ended Nov. 30 compared with a profit of $61.8 million a year ago, while revenue was $287.1 million, up from $286.4 million.
The earnings included a $23.2-million charge for restructuring, mostly related to severance costs and to preliminary expenses related to its aim of taking the company public.
The results also included a gain of $10.2 million related to foreign exchange for the quarter compared with a gain of $34.7 million a year ago.
Though a privately held company, Postmedia releases its financial results under requirements of its senior secured notes.
During the quarter, print advertising revenue grew 1.6% in the quarter compared with a year ago, while circulation revenue fell 3.1%.
The company also saw a $2.2-million drop due to the loss of a contract to print The Globe and Mail newspaper in Vancouver.
Digital revenue was up 4.6% to $23.6 million.
Postmedia is expected file for an initial public offering later this year.
Godfrey said he started making presentations to potential investor groups in December.
“These were informational sessions and they will continue to take place as we head toward an eventual listing later in the fiscal year,” he said.
“When the timing is right and the details are in place, we’ll have more to say on that.”
