Bank of America Merrill Lynch
Leveraged Finance Conference
Forward-Looking Statements
This presentation may include certain information that is “forward-looking information” under applicable Canadian
securities laws and “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995.
By their nature, forward-looking information and statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the future. These risks and uncertainties
include, among others, competition from other newspapers and alternative forms of media; the effect of economic
conditions on advertising revenue; the ability of the Company to build out its digital media and online businesses
;
the failure to maintain
current print and online newspaper readership and circulation levels; the realization of
anticipated cost savings; possible damage to the reputation of the Company’s brands or trademarks; possible
labour disruptions; possible environmental liabilities, litigation and pension plan obligations; fluctuations in foreign
exchange rates and the prices of newsprint and other commodities. For a complete list of our risk factors please
refer to the section entitled “Risk Factors” contained in our annual management’s discussion & analysis for the year
ended August 31, 2012, which can be found
on the Company’s website at
www.postmedia.com
, on SEDAR at
www.sedar.com
or on the SEC’s website at
www.sec.gov
. Although the Company bases such information and
statements on assumptions believed to be reasonable when made, they are not guarantees of future performance
and actual results of operations, financial condition and liquidity, and developments in the industry in which the
Company operates may differ materially from any such information and statements in this presentation.
Given these risks and uncertainties, undue reliance should not be placed on any forward-looking information or
forward-looking statements, which speak only as of the date of such information or statements. Other than as
required by law, the Company does not undertake, and specifically declines, any obligation to update such
information or statements or to publicly announce the results of any revisions to any such information or
statements.
Our English-language
paid daily newspapers
have, in total, the
highest weekly print
readership when
compared to other
media organizations in
Canada, reaching 4.3
million Canadians each
week
(1)
Digital properties with
6.6 million average
monthly unique
visitors
(2)
, including
newspaper sites ranked
#1 in Canada that reach
32% of Canadian
newspaper site visitors
(2)
(1) Source: NADbank 2011
•
Multiple cost reduction initiatives successfully completed in 2010 and 2011
•
Three-year transformation program initiated in Q3 of F2012 with target of reducing 15% to 20% of
operating costs
•
As of August 31, 2012 initiatives implemented will result in $37million of annualized costs savings
•
Shifting cost structure for higher margin digital environment
•
#1 English news source in its key markets provides strong value proposition to advertisers for local,
regional, and national reach
•
Four platform strategy driving conversion from legacy printing business into a content engine offering
customized bundles to both readers and advertisers
•
Reinvesting in local news content within its markets and its already extensive portfolio of premium digital
media, online and mobile assets
•
Robust, enterprise-wide audience data analytics will drive sales approach
Company Highlights
•
Attractive margins and modest capital expenditures drive strong free cash flow
•
LTM free cash flow
(1)to total indebtedness above 25% per annum since 2010
•
Over $191 million of debt repaid from July 2010 to August 2012, excluding repayments made on
refinancing
•
First-lien debt reduced by $23.2 million from net proceeds of the Toronto Head Office in November
2012
(1) Free cash flow defined as Operating Income before Depreciation, Amortization and Restructuring less Capital Expenditures
Transformation into
leading multi-platform
content provider
Significant cost
savings opportunities
Strong free cash flow
with track record of
•
Management and Board of Directors have extensive industry experience
•
CEO Paul Godfrey is a respected figure in Canadian media with long-standing relationships with key
advertisers in major sectors such as auto and financial
Company Highlights
•
Canadian newspapers have outperformed U.S. newspapers in revenue growth (-10% vs. -30% from Q4’07
to Q4’10)
(1)•
Better newspaper industry penetration in Canada (73% vs. 53%)
(2)•
Newspaper readership in Canada continues to grow (top 19 markets have grown 3.4% since 2007)
(3)•
Significant tangible asset base of owned real estate
•
Currently
own approximately 1.4 million
sq. ft. total, including seven facilities in excess of 100,000 sq. ft.
•
Potential for additional asset sales to accelerate debt repayment
Substantial owned
real estate value
Canadian newspaper
fundamentals superior
to U.S.
Strong, well-respected
management team
(1) Company Filings. Canadian Newspapers consist of reported newspaper segments of Postmedia, Quebecor, FP Newspapers, Glacier Media and Torstar (Star and Metroland).
U.S. Newspapers consist of reported newspaper segments of Gannett, The New York Times, McClatchy, Lee Enterprises, The Washington Post and Media General.
(2) eMarketer,
Global Media Intelligence Report: 2012
Well-Established and Trusted Brands
#1
100% M.S.
(1)#2
(2)100% M.S.
(1)#1
100% M.S.
#1
100% M.S.
#1
82% M.S.
#1
69% M.S.
#1
77% M.S.
#3
(3)100% M.S.
#1
100% M.S.
Note: Market shares represent local market share of paid daily newspapers (1) Includes The Vancouver Sun and The Province
(2) Second to The Vancouver Sun which is also operated by the company
(3) Number one among English-language paid daily newspapers, number three overall among paid daily newspapers
•
Postmedia’s newspaper brands are woven into the fabric of the communities they serve, some for over a century
•
Each of the Corporation’s 9 daily metropolitan newspapers has the highest circulation and readership among
English-language newspapers in the market that it serves (except for The Province, which is second in its market
to another of Postmedia’s newspapers, The Vancouver Sun)
•
Brands include the Calgary Herald, Montreal Gazette and Vancouver Sun
–
100% market share of paid daily English language newspapers in 5 of 9 markets
•
The National Post, one of Canada’s two daily national newspapers
Portfolio of Premium Digital Assets
Postmedia Network Sites
6.6 million UVs
Ranks #6 in News & Information category
Infomart.ca
Approximately 1,000 subscribers
3
rd
Party Sites Managed &
Exclusive Ad Agreements
1.7 million UVs
(1)Newspaper sites
5.3 million monthly UVs
canada.com (site)
•
Electronic resource of Canadian news
and business information products
•
Same-day and archival access to
approximately 6,625 full-text
newspapers, magazines, newswires,
transcripts and blogs
(2)•
Postmedia owns and represents 28 destination websites and has exclusive advertising
representation agreements with high-profile third party sites
•
Postmedia Network sites audience of 6.6 million average monthly unique visitors (“UVs”) combined
with third party sites of 1.7 million UVs for a net total of 7.0 million UVs
canada.com classifieds
(1)
Source: comScore, MediaMetrix, Total Canada, All Locations, Fiscal Year 2012 ending August 31, 2012
(2)
Source: based on 1000 subscribers as of July 31, 2012
•
Ability to offer comprehensive suite of advertising solutions across network
Note: Numbers above represent Postmedia Network audiences
Unparalleled Reach
4.3m
Weekly Readers
(NADbank 2011)
6.6m
Monthly UVs
(comScore 12mth Avg.
ending Aug.31, 2012
3.7m
Monthly UVs
(Omniture 12mth Avg.
ending Aug.31,2012
•
Postmedia daily newspapers reach 4.3 million Canadian adults each week
Toronto Star Network
: Toronto Star, KW Record, Guelph Mercury and Hamilton Spectator
Sun Media
: Calgary Sun, Edmonton Sun, Winnipeg Sun, Toronto Sun and Ottawa Sun
Metro Network
: Metro - Vancouver, Calgary, Edmonton, Toronto, Ottawa and Halifax
24 Hours Network
: 24 Hours - Vancouver, Calgary, Edmonton, Toronto and Ottawa
Postmedia Network owned properties
: National Post, Vancouver Sun, The Province, Calgary Herald, Edmonton
Journal, Regina Leader Post, Saskatoon Star Phoenix, Windsor Star, Ottawa Citizen, Montreal Gazette
(1) Source: NADbank 2011; For comparative purposes, Networks based on English language readership. Weekly Readership = 6/7 day cumulative (cume) Postmedia, Sun Media, TorStar, Globe and Mail; 5-day cume Metro and 24 Hours Base:, Postmedia Network owned properties , Sun Media (5 markets + 15 markets for Toronto Sun), Torstar (19 markets), Globe and Mail (48 markets), Metro (6 markets), 24 Hours (5 markets).
(2) Source: Newspapers Canada 2011 Circulation Data Report; Postmedia includes disposed properties
Weekly Readership
(1)
– Adults 18+
The Postmedia Network Advantage
% Share of Total Paid Daily Circulation
(2)
Other
4.3 Million
3.0 Million
2.8 Million
2.6 Million
2.3 Million
1.8 Million
32% Reach
Source: comScore, MediaMetrix, Total Canada, All Locations, Fiscal Year 2012 ending August 31, 2012
.
Postmedia Newspapers
reach 32% of all Canadians
who visit newspaper
websites
Postmedia is #1 in the Newspaper Website Category
Newspaper Website Category
Unique Visitors (000) –F’12
Postmedia Digital Newspapers have more than
doubled in size since 2008
•
Audiences have grown consistently over time
•
Postmedia Newspaper sites have reached over 5.3 million average monthly
unique visitors in 2012
Source: comScore, MediaMetrix, Total Canada, All Locations, Postmedia Digital Newspapers, Unique Visitor Trends Fiscal 2008 to Fiscal 2012
+129% Since 2008
+32%
+32%
New Comprehensive Strategic Plan
• Four-platform product strategy
– Launch of targeted, differentiated products and services by platform, brand
– Rollout of ‘all access’ subscription strategy
• Audience-based sales strategy
– Shift of sales focus from traditional sale of “impressions” to selling audience
and results
– Development of deep audience database with full data analytics
– Aggressive digital growth through local client penetration, behavioral targeting
segments, real-time bidding, etc.
• Ongoing reduction of print-related infrastructure
– ‘One newsroom’ concept (centralize editorial and news production processes)
– Continued pursuit of operational efficiencies through outsourcing,
centralization, benchmarking and other process improvements
– Accelerates ability to monetize real estate portfolio
Focused Strategic Approach
Optimize near-term revenue while strategically repositioning
the Company for mid- and long-term revenue and operating income growth
Build a high performance organization with a winning culture, exceptional people, and systems
that demand excellence
Optimize print and
aggressively grow
digital revenues
Reduce costs by proactively managing print costs, redefining the organizational structure, and
continuing ongoing cost reductions
Create deep
data-based audience
intelligence
Create a highly
engaged user base
Grow
complementary
digital businesses
Be an “audience first” organization and deliver the most relevant news, information and
services across the four platforms of print, web, tablet and smartphone
Build a consultative, multi-platform sales approach in order to cost-effectively drive results for
our advertisers by reaching the most relevant audience at scale
ENABLERS:
STRATEGIC
IMPERATIVES:
Comprehensive Four Platform Strategy
•
Focused development of differentiated products targeted by platform, integrated
by brand
•
Permits shift to 'all access' bundled subscription strategy
•
Integration of robust data analytics to drive 'audience-based' sales approach
Boomers (48-66)
Gen Y (18-32)
Gen X (33-47)
Business Transformation Initiatives
$0
$200
$400
$600
$800
$1,000
$1,200
F2008
F2009
F2010
F2011
F2012
Op
e
rat
in
g
C
o
s
ts
Discontinued Operations
Continuing Operations
•
Successfully implemented over $50 million of operating cost reductions by fiscal-end 2011
•
Recently initiated the first phase of a three-year transformation program with target of
eliminating 15% to 20% of operating costs
•
As of August 31, 2012 we have implemented initiatives which will result in net annualized
operating cost savings of $37 million
Completed F’12
•
Cancellation of certain Sunday/Monday editions
•
Streamlining senior executive reporting structure
•
Centralization of marketing function
•
Monetization of B.C. Papers and related debt repayment
•
Elimination of breaking-news wire service and contracting with Canadian Press
for “commodity news”
•
Consolidation of editorial production functions in Hamilton
•
General staff reductions through voluntary and involuntary buyout programs
•
Elimination of unprofitable circulation outside of primary market zone
In Process
•
Streamlining of advertising flyer inserting operations
•
Introduction of common pages for international/national news and national
features
•
Outsourcing of business processes
•
Real estate efficiencies – sale/sublet of surplus real estate
Track Record of Cost Reduction
(1)
Initiative
(1) Financial information for periods prior to July 13, 2010 relate to Canwest Limited Partnership and for periods subsequent to July 13, 2010 relate to Postmedia Network Canada Corp. (“Postmedia” or the “Company”). Postmedia adopted IFRS on September 1, 2011. As a result, financial information for periods prior to F2011 have been prepared in accordance with Canadian GAAP - Part V and financial information for periods subsequent to F2010 have been prepared in accordance with IFRS. For a full discussion of the impact of the transition to IFRS see the audited consolidated financial statements and MD&A for the years ended August 31, 2012 and 2011.
(2) On November 30, 2011, the Company completed the sale of the Victoria Times Colonist, Vancouver Island Newspaper Group and certain community newspapers in British Columbia (the “Disposed Properties”) to affiliates of Glacier Media Inc. As a result of the sale, the Company has presented the results of the Disposed Properties as discontinued operations and as such the F2011 financial information has been revised to reflect this change in presentation. F2008, F2009, and F2010 results have not been revised to present the results of the Disposed Properties as discontinued operations.
Surrey, BC
Production
208,047 sq. ft.
Calgary, AB
Combined Facilities
383,000 sq. ft.
Edmonton, AB
Production
187,000 sq. ft.
Saskatoon, SK
Combined Facilities
110,000 sq. ft.
Regina, SK
Combined Facilities
103,946 sq. ft.
Ottawa, ON
Combined Facilities
190,000 sq. ft.
Montreal, QC
Production
165,000 sq. ft.
Owned Properties
(1)
City
Sq.ft.
1
Calgary, AB
383,000
2
Surrey, BC
208,047
3
Ottawa, ON
190,000
4
Edmonton, AB
187,000
5
Montreal, QC
165,000
6
Saskatoon, SK
110,000
7
Regina, SK
103,946
8
Windsor, ON
60,000
Total Owned
1,406,993
9
Edmonton, AB
(1)133,250
(1)Other Leased
417,535
Total
1,957,778
1
4
3
5
9
Edmonton, AB
Office
133,250 sq. ft.
2
7
6
Significant Value in Real Estate
(3)
Summary of Facilities
8
Windsor, ON
Production
60,000 sq. ft.
(1) Edmonton, Alberta office is subject to a sale leaseback agreement,
whereby Postmedia owns the land and space above and can repurchase the building in 2041.
LTM Operating Income before Depreciation,
Amortization and Restructuring
(1)
(C$ millions)
Revenue and Operating Income Performance
LTM Consolidated Revenue
(1)
(C$ millions)
(1)
Financial information for periods prior to July 13, 2010 relates to Canwest Limited Partnership and for periods subsequent to July 13, 2010 relates to Postmedia Network Canada
Corp. (“Postmedia” or the “Company”). Postmedia adopted IFRS on September 1, 2011. As a result, financial information for periods prior to Q1 F11 have been prepared in
accordance with Canadian GAAP - Part V and financial information for periods subsequent to Q4 F10 have been prepared in accordance with IFRS. For a full discussion of the
impact of the transition to IFRS see the consolidated financial statements and MD&A of Postmedia for the years ended August 31, 2012 and 2011.
(2)
Fiscal 2011 adjusted financial information is based on actual fiscal 2011 results adjusted to exclude the Disposed Properties (Times-Colonist, Vancouver Island Newspaper Group,
and BC community newspapers), but information for prior periods has not been adjusted.
(2)
$0
$200
$400
$600
$800
$1,000
$1,200
Q1
F10
Q2
F10
Q3
F10
Q4
F10
Q1
F11
Q2
F11
Q3
F11
Q4
F11
Q1
F12
Q2
F12
Q3
F12
Q4
F12
Continuing Operations
Discontinued Operations
$0
$50
$100
$150
$200
$250
$300
Q1
F10
Q2
F10
Q3
F10
Q4
F10
Q1
F11
Q2
F11
Q3
F11
Q4
F11
Q1
F12
Q2
F12
Q3
F12
Q4
F12
Continuing Operations
Discontinued Operations
$0
$200
$400
$600
$800
July
13,
2010
Q4
F10
Q1
F11
Q2
F11
Q3
F11
Q4
F11
Q1
F12
Q2
F12
Q3
F12
Q4
F12
Consolidated Debt (C$ millions)
Debt Repayment Record and FCF Generation
$0
$50
$100
$150
$200
Q1
F10
Q2
F10
Q3
F10
Q4
F10
Q1
F11
Q2
F11
Q3
F11
Q4
F11
Q1
F12
Q2
F12
Q3
F12
Q4
F12
Continuing Operations
Discontinued Operations
LTM Free Cash Flow
(1,4)
(C$ millions)
(1) Financial information for periods prior to July 13, 2010 relate to Canwest Limited Partnership and for periods subsequent to July 13, 2010 relate to Postmedia Network Canada Corp. (“Postmedia” or the “Company”). Postmedia adopted IFRS on September 1, 2011. As a result, financial information for periods prior to Q1 F11 have been prepared in accordance with Canadian GAAP - Part V and financial information for periods subsequent to Q4 F10 have been prepared in accordance with IFRS. For a full discussion of the impact of the transition to IFRS see the consolidated financial statements and MD&A for the years ended August 31, 2012 and 2011.
(2) Represents a non-IFRS financial measure. Postmedia believes this measure is beneficial from the perspective of assessing the Company’s financial performance. However, non-IFRS financial measures do not have any standard definition prescribed under IFRS and as such may not be comparable to similar measures used by other companies.
(3) On November 30, 2011, the Company completed the sale of the Victoria Times Colonist , Vancouver Island Newspaper Group and certain community newspapers in British Columbia (the “Disposed Properties”) to affiliates of Glacier Media Inc. As a result of the sale, the Company has presented the results of the Disposed Properties as discontinued operations and as such F11 LTM Free Cash Flow has been revised to reflect this change in presentation, but prior periods have not been revised.
(4) Free cash flow defined as LTM Operating Income before Depreciation, Amortization and Restructuring less Capital Expenditures. (5) Q4 F12 pro forma $23.2 million debt repayment from sale of head office, and $2.2 million additional lease-back expense.
(3)
•
Top priority for free cash flow
(2,4)
is debt reduction
•
Approximately $191 million paid from July 2010 to August 2012, excluding
repayments on refinancing
– $23.2 million repayment with net proceeds of head office sale in Q1 2013
•
$86.5 million of debt was repaid following the sale of BC newspaper assets in
November 2011
(5)
