Memo: Quarterly Update from Paul Godfrey
Postmedia targeting another $30 million in “cost savings” by the end of fiscal 2017.
The following memo was sent to Postmedia staff Jan. 13 by Paul Godfrey, President and Chief Executive Officer at Postmedia.
Today we announced our Company’s financial results for the first quarter of the 2016 fiscal year – September 2015 to November 2015. You can view the full details of the quarterly results at Postmedia Link or www.postmedia.com.
Revenue for the quarter was $251.1 million as compared to $169.5 million in the prior year, an increase of $81.6 million. Excluding the impact of the Sun Acquisition, revenue for the quarter was $147.4 million, a decrease of $22.2 million (13.1%) relative to the same period in the prior year. The revenue decline, which excludes the impact of the Sun Acquisition, was primarily due to decreases in print advertising revenue of $16.4 million (17.6%), print circulation revenue of $3.2 million (6.7%) and digital revenue of $1.4 million (5.7%).
Total operating expenses excluding depreciation, amortization and restructuring increased $84.7 million for the quarter, relative to the same period in the prior year. The increase primarily relates to the impact of the properties acquired in the Sun Acquisition, increases in production expenses as a result of the outsourcing of production of The Vancouver Sun and The Province in February 2015 and the recovery of $13.8 million relating to the Ontario Interactive Digital Media Tax Credit in the three months ended November 30, 2014. Partially offsetting these increases were decreases in operating expenses excluding depreciation, amortization and restructuring related to ongoing cost reduction initiatives.
In July we announced a new cost reduction program targeted to deliver $50 million in operating cost savings by the end of fiscal 2017. During our first quarter we implemented initiatives which are expected to result in approximately $17.0 million in net annualized cost savings. In total, we have implemented net annualized cost savings of approximately $32 million, since the program was launched.
Today we updated our target to complete the implementation of the $50 million in cost savings by the end of the third quarter this fiscal year, 2016, and targeted an additional $30 million in cost savings to be implemented by the end of fiscal 2017.
We know that people are working harder than ever in order to face our challenges head on and to find ways to win in a very tough environment. Across every function and region we have had to make difficult decisions about how we allocate resources and where we focus our energies. All of our efforts must be squarely aimed at areas that will bring us returns.
Where we can remove duplication – we must. Where we can nurture and grow new products and solutions – we will. And where we need to make the tough choices that give us our best chances for the future – we’ll do that too.
And what all this means, is that our transformation continues. The newspaper industry is changing. We know that. And we know that traditional advertising revenue continues to decline while the revenues of foreign-based digital giants keep growing.
But we also know that our product innovations continue to engage audiences across our platforms. The new National Post section now in six of our newspapers – Calgary Herald, Edmonton Journal, Regina Leader-Post, Saskatoon StarPhoenix, Windsor Star, and Montreal Gazette – has been very well received by readers and provides the best national news package right inside the local newspaper.
We have seen impressive growth from our digital platforms this past quarter, especially mobile. In fact, our digital audiences reached an all-time high with 13.8 million unique visitors in October, 2015. And in November 2015, for the first time ever, the majority of Postmedia’s audience visited our sites via mobile devices compared to desktop.
Going forward we can leverage what we know best – creating compelling content and engaging growing audiences in new and innovative ways. And we have done that with the launch of Digital Marketing Services and Postmedia Content Works. These new focus areas for Postmedia leverage our existing expertise.
Where we see opportunities to grow into areas beyond our core, we’ll partner where it makes sense to do so in order to leverage our assets and combine forces with complementary businesses to uncover new revenue opportunities.
We’ll continue to evolve our products, across our platforms, as we did last year with the launch of four new reimagined markets. And we’ll continue to welcome our growing audiences.
I want to take this opportunity to thank all of you. Everyone is working really hard to not only transform our company, but at the same time, the very industry in which we operate. On behalf of your senior management team and our board of directors you have our sincere thanks.