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About FP Newspapers Inc. and its Business

Overview and Dividend Policy

FP Newspapers Inc. ("FPI") was incorporated under the Canada Business Corporations Act (CBCA) on March 17, 2010 to carry on the business previously held by FP Newspapers Income Fund. FP Newspapers Income Fund commenced operations on May 28, 2002 when it completed an Initial Public Offering and purchased an interest in FP Canadian Newspapers Limited Partnership (FPLP).

FPI was formed to assume the business of the Fund which was established to acquire and own interests in the Winnipeg Free Press and the Brandon Sun newspapers by the acquisition of Class A limited partner Units.

In November 2001, FPLP acquired the Winnipeg Free Press and the Brandon Sun from The Thomson Corporation. The Winnipeg Free Press is a major metropolitan daily newspaper serving the City of Winnipeg, its surrounding suburbs and the rest of the Province of Manitoba. The Brandon Sun is a daily newspaper serving the City of Brandon and surrounding regions. In 2004, FPLP completed the acquisition of the community newspaper and advertising distribution businesses from Transcontinental Media. The acquisition included five weekly newspapers in the Winnipeg area and advertising distribution businesses in Winnipeg and Brandon. In February 2011, FPLP acquired Derksen Printers, a commercial printing and publishing business located in Steinbach, Manitoba. Derksen Printers operates a commercial web and sheet-fed printing business and publishes a regional paid weekly newspaper, The Carillon.

As a CBCA corporation, FPI will have the power and capacity of a natural person, and its directors, acting in the best interest of FPI, will have the right and duty to manage or supervise the management of its business and affairs as they see fit. Although there is no current expectation that FPI’s focus will differ greatly from the Fund’s emphasis on distributions, circumstances and corporate philosophies may change. It is likely that FPI’s board will to a greater degree explore prospects for investment opportunities through, or possibly independently of, the Partnership, as well as ways to maximize the tax efficiency of FPI’s operations. In exploring such opportunities, FPI’s directors intend to act prudently in FPI’s long-term interests.

The amount of any dividends payable by FPI will be at the discretion of the board of directors of FPI and my vary depending on, among other things, FPI’s earnings, the Partnership’s capital and financing costs, financial requirements, growth opportunities, the satisfaction of solvency tests imposed by the CBCA for the declaration and payment of dividends, and other conditions existing from time to time.

BUSINESS STRATEGY

FPLP’s strategy for achieving growth in the business is based on achieving improvements in the cash flow of its businesses, principally through a combination of strong local management, revenue enhancement, cost management and, where appropriate, acquisition opportunities that may become available to FPLP from time to time. The approach of FPLP to improving profitability involves enhancing product quality, including the amount and type of editorial content available in its newspapers, increasing advertising sales and taking measures to reduce costs and improve efficiency.

STRONG LOCAL MANAGEMENT

Because newspapers are primarily a local medium, requiring a clear understanding of local issues, FPLP empowers local management to react to changes in the local environment. Accordingly, all key editorial, advertising, circulation and production decisions are made by local management with consultation and review by the General Partners. FPLP places an emphasis on attracting and retaining management who have a thorough awareness and understanding of local issues.

REVENUE ENHANCEMENT

FPLP intends to enhance advertising, circulation, digital, commercial printing, and other revenues by increasing its focus on the quality of the editorial content of newspapers and by adopting new approaches to circulation. FPLP expects that by increasing the quality of its print and on-line products, it can maximize both readership and advertising market share.

While content improvements are designed to minimize circulation erosion, FPLP strives to increase circulation revenues further through increased advertising and promotion of its products. The Winnipeg Free Press supplements its regular telemarketing programs with "sampling" programs that make the newspaper available to selected key geographic areas, without charge, for specific periods. The Winnipeg Free Press also intends to improve circulation by increasing the number of partnership arrangements with key advertisers and increasing the number of readership contests. Similar actions are being taken for the Brandon Sun, at a reduced level reflecting the smaller market. FPLP also has excess press capacity at its Winnipeg facility allowing it to increase its commercial printing operations in the region.

COST MANAGEMENT

Management has identified and implemented certain cost reduction measures at both the Winnipeg Free Press and the Brandon Sun, including control of wage and benefit levels through outsourcing, training and technological improvements. To reduce costs on an ongoing basis, FPLP will continue efforts to improve the efficiency and profitability of the newspapers. Having successfully reduced expenses by centralizing newsprint purchasing, FPLP will continue to centralize its purchasing in other areas. FPLP will continue to examine further opportunities for cost savings, principally in the areas of production and distribution.

GROWTH THROUGH ACQUISITIONS

Management believes that opportunities may exist to grow revenue, EBITDA and cash flows of FPLP by acquiring additional newspapers and other media (radio, television, magazines and internet) assets. FPLP will consider acquisitions that would provide FPLP with additional revenue opportunities and the ability to achieve additional economies of scale and possible synergies.