Torstar’s strong Q4 cash flow to help investments

Company looking to transform its business

TORONTO — Torstar Corp. will be able to invest in transforming its business thanks to a solid cash position, reduced operating costs and synergies from the acquisition of several Postmedia newspapers, CEO John Boynton said Wednesday.

Boynton, who joined Torstar last March after holding senior positions at Aimia Inc. and Rogers Communications Inc., said the company ended with $71.4 million in unrestricted cash and no bank debt at the end of 2017.

The total included $23.6 million generated during the last three months of last year, as a reduction of operating costs at Torstar’s print divisions offset a 10-per-cent decline in fourthquarter revenue.

“All things considered, we were very pleased with the results of the quarter,” Boynton told analysts in a conference call Wednesday.

“With the benefit of cost reductions undertaken to date, as well as synergies related to the transaction with Postmedia, and a strong cash position going into 2018 ... we are well-positioned to execute and invest in our transformation.”

Torstar and Postmedia announced on Nov. 27 that they had exchanged a total of 41 publications and would stop publishing the majority of them, resulting in 291 job losses.

The Peterborough Examiner, Niagara Falls Review, St. Catharines Standard and Welland Tribune have been retained and added to Torstar’s new Daily Brands division, which includes papers in Toronto, the Hamilton Spectator and the Waterloo Region Record.

Boynton reiterated on Wednesday that the deal would allow for more operational efficiencies and improve annualized operating earnings by between $5 million and $7 million.

He said the swap — which the two companies said was a noncash exchange of assets — would reduce Torstar’s revenue going forward, but increase its profit.

Boynton declined say whether Torstar might return to using paywalls — which restrict access to websites in order to generate revenue — a possibility discussed by Torstar chair John Honderich in an interview with The Globe and Mail.

He did say that Vertical-Scope — the key growth property within Torstar’s digital ventures division — would be ramping up its acquisition strategy.

Torstar said Wednesday that 2018 capital spending is estimated at $15 million, including $5 million to be spent on technology platforms related to its transformation activities.

While Torstar has no bank debt, it does have a major financial obligation to its defined benefit pension plan, which is in a solvency deficit position.

Chief financial officer Lorenzo DeMarchi said regulatory changes proposed by the Ontario government may give Torstar a new way to deal with its pension obligations.

Under the provincial proposal there may be a possibility for single-employer pensions like Torstar’s to be merged with a multi-employer pension system.

Torstar is investigating a merger of its pension plan assets with a multi-employer plan called CAAT, which would take over the obligation for paying past accrued benefits and future pension benefits of Torstar employees.

“Obviously the pension file is very important for Torstar. We’re very aware of our commitment and responsibility for our pension promise.

“At the same time, it’s a pretty big part of the financial obligations of this business,” DeMarchi told analysts.

Earlier Wednesday, Torstar reported that it had $8.65 million of net income attributable to its shareholders in the fourth quarter, or 11 cents per share. That was up from $1.26 million or a penny per share in the fourth quarter of 2016, when Torstar recorded non-cash asset writedowns at its Workopolis joint venture and its Metroland Media division, which has been reorganized.

The company said its adjusted earnings amounted to 32 cents per share, up from 16 cents per share a year earlier.

Operating revenue for the Toronto-based publishing company was $169.34 million in the three months ended Dec. 31, down from $188.4 million in the fourth quarter of 2016.

Besides the Toronto Star newspaper and its affiliated website, Torstar owns daily and community newspapers throughout Ontario, a 56.4-per-cent interest in Vertical-Scope and minority interests in a number of other companies.

Torstar also holds an investment in The Canadian Press as part of a joint agreement with a subsidiary of the Globe and Mail and the parent company of Montreal’s La Presse.