Postmedia revenue decline continues but Q4 shows a profit helped by wage subsidies

TORONTO — The owner of Canada's largest group of newspapers, including the National Post, had a $13.5-million profit in its fourth quarter which included assistance from government wage subsidies provided to help companies get through the impact of the COVID-19 pandemic.

But Postmedia Network Canada Corp. still ended its 2020 financial year with a bigger annual deficit despite numerous initiatives designed to offset a years-long decline in advertising revenue. The deficit rose to $16.2 million as of Aug. 31, compared with $6.3 million in fiscal 2019.

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"We are now six months into a global pandemic and its effects on our people, our clients and our communities," said Postmedia chief executive Andrew MacLeod said in a statement.

In April, shortly after Canada began ordering business and school closures to reduce the pandemic's spread, Postmedia announced temporary layoffs for about 50 employees and permanent layoffs for 30 others employed by 15 community newspapers that were closed.

Those who remained saw temporary salary reductions of between five to 30 per cent, with higher-paid employees, including MacLeod, taking the bigger cuts.

In May, Postmedia implemented 40 additional permanent layoffs and since May it has sold a facility in Barrie, Ont., and another in Calgary, with net proceeds allocated to reduce outstanding debt in the financial year that began Sept. 1.

Postmedia's revenue, mostly from advertising, print circulation and digital services, dropped $111.2 million or nearly 18 per cent for the full year to $508.4 million.

That included a $40.4 million, or 27 per cent, year-over-year decline in the fourth quarter, which had $105.2 million in total revenue.

Despite the revenue loss, Postmedia's net income for the fourth quarter was equal to 14 cents per share, up from $7.9 million or eight cents per share a year earlier, despite

Among the factors offsetting the revenue decline was money from a federal wage subsidy program that helps employers affected by a loss of business due to the COVID-19 pandemic.

Postmedia says it recognized a $21 million recovery for the quarter from the Canada Emergency Wage Subsidy, a general COVID-relief program, which partially reduced what it can recover from federal and Quebec programs for subsidizing the labour cost of journalists.

For the full 2020 financial year, the company is claiming $4.5 million in federal journalism tax credits, down from $7.0 million in fiscal 2019.

For the full year, Postmedia's compensation expenses fell 32.5 per cent or $72.8 million to $151.2 million for the year ended Aug. 31.

Excluding the impact of the federal COVID wage subsidies and journalism tax credits, Postmedia's compensation expenses decreased $35.0 million, or 15.2 per cent from last year.

Following the end of the financial year, employees in the National Post's Toronto newsroom voted this month to join a new bargaining unit of Unifor, one of Canada's two largest media unions. Workers at several other Postmedia papers are already represented by Unifor or CWA Canada.

Besides the National Post, Postmedia publishes the Toronto Sun and other papers bought from Quebecor, daily newspapers in Montreal, Ottawa and Vancouver, a number of newspapers in smaller communities and online versions of its publications.

This report by The Canadian Press was first published Oct. 16, 2020

Companies in this story: (TSX:PNC.A, TSX:PNC.B)

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