Bank of America Merrill Lynch Leveraged Finance Conference

Transcription

1 Bank of America Merrill Lynch Leveraged Finance Conference December 5, 2012

2 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 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 on SEDAR at or on the SEC s website at 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. Unless otherwise noted, all references to $ are to Canadian dollars. 2

3 Company Highlights

4 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 (2) Source: comscore, MediaMetrix, Total Canada, All Locations, Fiscal Year 2012 ending August 31,

5 Company Highlights Transformation into leading multi-platform content provider #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 Significant cost savings opportunities 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 Strong free cash flow with track record of debt repayment 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 5

6 Company Highlights Substantial owned real estate value 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 Canadian newspaper fundamentals superior to U.S. 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) Strong, well-respected management team 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 (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 (3) NADbank 6

7 Well-Established and Trusted Brands #1 69% M.S. #1 100% M.S. (1) #2 (2) 100% M.S. (1) #1 82% M.S. #1 100% M.S. #1 100% M.S. #3 (3) 100% M.S. #1 100% M.S. #1 77% M.S. 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 5 community newspapers, serving areas in Southwestern Ontario 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 7

8 Portfolio of Premium Digital Assets 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 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) 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,

9 Unparalleled Reach Ability to offer comprehensive suite of advertising solutions across network 4.3m Weekly Readers (NADbank 2011) 6.6m Monthly UVs (comscore 12mth Avg. ending Aug.31, m Monthly UVs (Omniture 12mth Avg. ending Aug.31,2012 Note: Numbers above represent Postmedia Network audiences 9

10 The Postmedia Network Advantage Postmedia daily newspapers reach 4.3 million Canadian adults each week Weekly Readership (1) Adults 18+ % Share of Total Paid Daily Circulation (2) 4.3 Million Other 3.0 Million 2.8 Million 2.6 Million 2.3 Million 1.8 Million 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 10

11 Postmedia is #1 in the Newspaper Website Category Newspaper Website Category Unique Visitors (000) F 12 32% Reach Postmedia Newspapers reach 32% of all Canadians who visit newspaper websites Source: comscore, MediaMetrix, Total Canada, All Locations, Fiscal Year 2012 ending August 31,

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 % Since % +8% +32% +32% Source: comscore, MediaMetrix, Total Canada, All Locations, Postmedia Digital Newspapers, Unique Visitor Trends Fiscal 2008 to Fiscal

13 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 13

14 Focused Strategic Approach Optimize near-term revenue while strategically repositioning the Company for mid- and long-term revenue and operating income growth 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 STRATEGIC IMPERATIVES: Optimize print and aggressively grow digital revenues Create deep databased audience intelligence Create a highly engaged user base Grow complementary digital businesses ENABLERS: Build a high performance organization with a winning culture, exceptional people, and systems that demand excellence Reduce costs by proactively managing print costs, redefining the organizational structure, and continuing ongoing cost reductions 14

15 Comprehensive Four Platform Strategy Digital Hub (all) Gen X (33-47) Gen Y (18-32) Boomers (48-66) 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 15

16 Business Transformation Initiatives 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 Initiative Track Record of Cost Reduction (1) 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 Operating Costs $1,200 $1,000 $800 $600 $400 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 $200 $0 F2008 F2009 F2010 F2011 F2012 Discontinued Operations (2) Continuing Operations (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, 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 (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. 16

17 Significant Value in Real Estate Owned Properties (1) Summary of Facilities City Sq.ft. 1 Calgary, AB 383,000 Edmonton, AB Production 187,000 sq. ft. Saskatoon, SK Combined Facilities Edmonton, AB 110,000 sq. ft. Office (3) 133,250 sq. ft. Surrey, BC Production 208,047 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. 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) Calgary, AB Combined Facilities 383,000 sq. ft. Windsor, ON Production 60,000 sq. ft Other Leased 417,535 Total 1,957,778 (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

18 Financial Highlights

19 Revenue and Operating Income Performance LTM Consolidated Revenue (1) (C$ millions) $1,200 $1,000 $800 $600 $400 $200 $300 $250 $200 $150 $100 LTM Operating Income before Depreciation, Amortization and Restructuring (1) (C$ millions) $50 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 F10 F10 F10 F10 $0 Q1 F10 Q2 F10 Q3 F10 Q4 F10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Continuing Operations Discontinued Operations (2) Continuing Operations Discontinued Operations (2) (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, As a result, financial information for periods prior to Q1 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 (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. 19

20 Debt Repayment Record and FCF Generation 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 Q $86.5 million of debt was repaid following the sale of BC newspaper assets in November 2011 LTM Free Cash Flow (1,4) (C$ millions) Consolidated Debt (C$ millions) $200 $800 $150 $600 $100 $400 $50 $200 $0 Q1 F10 Q2 F10 Q3 F10 Q4 F10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (5) $0 July 13, 2010 Q4 F10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (5) Q4 Continuing Operations Discontinued Operations (3) (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, As a result, financial information for periods prior to Q1 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 (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 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 pro forma $23.2 million debt repayment from sale of head office, and $2.2 million additional lease-back expense. 20

21 Low Capital Expenditures Requirements Priorities for capital investments include: Updated sales productivity technology(crm) Development of new digital products to support 4-platform strategy (print/web/tablet/smartphone) $8 $7 $6 $5 $4 Capital Expenditures (C$ millions) Development of integrated audience database analysis and targeting capabilities $3 $2 Technology infrastructure to support centralization efforts Continued reduction of capex related to legacy print business $1 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 21

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