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Postmedia reports bigger fourth-quarter loss as print advertising weakens


TORONTO - Weak print advertisement revenues weighed heavy on Postmedia's fourth quarter results Thursday, and the media company doesn't expect any improvement into next year as it works to turn around its operations.

The owner of several big city newspapers, including the National Post, Vancouver Sun and the Ottawa Citizen, said losses from continuing operations deepened to $35.8 million in the fourth quarter, or 89 cents per share.

That compares to a loss of $28.4 million, or 70 cents per share, in the same period a year earlier.

Postmedia (TSX:PNC.B) said revenues slid to $169.3 million from $190.1 million.

Much of the decline was driven by lower revenues for print ads, which fell 16.2 per cent in the three month period ended Aug. 31, with the weakness stretching across all of its major advertising categories.

National print advertising fell 20.3 per cent, while retail ads dropped 14 per cent, classifieds were down 16.7 per cent, and insert ads declined 7.3 per cent.

"We anticipate the print advertising market to remain challenging and expect current trends to continue into fiscal 2014," the company said in its financial documents.

Quarterly revenues from sales of its newspapers dropped 3.6 per cent, it said.

Postmedia has been cutting costs across its operations as part of a three-year program to transform its money-losing business.

For the year, the company says it has managed to reduce operating costs by about 12 per cent, or $82 million.

It has also reduced long-term debt to $474.3 million from $480.1 million at the end of 2012, partly by selling some of its buildings and outsourcing some jobs.

An internal memo from Postmedia CEO Paul Godfrey outlined some of the broader challenges he expects the company will face next year, including the weak advertising revenue.

"What this all means is that we must continue the radical transformation we began a few short years ago," he wrote to employees.

"All of these efforts are necessary, but none of them — either separately or combined — are enough, yet. We have said quite candidly, to our employees and our shareholders, that we will be a smaller more profitable company. The painful truth is that one must precede the other."

Postmedia rose from the ashes of bankrupt media company Canwest when Godfrey culled together a group of investors in 2010.

Since then, the company has been focused on reworking its operations to reduce costs and refocus its priority on its digital businesses, which include the National Post website.

Some of those changes have included layoffs and buyouts, though the company said those types of expenses were slightly lower in the quarter at $10.7 million, a decrease of $2.3 million.

Last month, the company announced it decided to close its Vancouver-area printing plant, a move that comes after it shuttered an in-house wire service last year and expanded its Hamilton operations to handle the editorial production of newspaper pages. Some of those changes included layoffs.

In July, Moody's Investors Service downgraded Postmedia's rating to negative from stable due to the media company's declining cash flow as it transitions to a digital business. Moody's said the company will face revenue pressure because print revenue is declining faster than digital revenue is increasing.

Shares of Postmedia closed five cents higher at $2.30 on the Toronto Stock Exchange.