Torstar gets $18M boost from Ontario tax credit, reducing Q1 loss

TORON TO • Torstar Corp. had a smaller loss in the first quarter than a year ago as cost reductions and provincial tax credits partly offset weaker revenue from advertising and flyer distribution, the firm said Wednesday.

Its loss attributable to shareholders amounted to $7.4 million or nine cents per share. That compared with a loss of $14.5 million or 18 cents per share in the same quarter last year.

During the quarter, Torstar — publisher of the Toronto Star and other newspapers — had just under $116 million in revenue from all operating segments in three months ended March 31, down from nearly $129 million a year earlier.

CEO John Boynton told analysts Torstar had made “good progress” toward developing new revenue streams from digital media.

“We ended the quarter with over 15,000 digital-only subscribers to the Star, and announced a partnership with Apple which has the potential to ... generate additional subscription revenue from a broader national audience,” Boynton said.

“The results in the quarter, however, continue to reflect ongoing challenges in the print advertising market but were augmented by the benefit of an $18-million digital media tax credit.”

The Ontario digital media tax credit, which has been discontinued, was designed to offset the cost of salaries paid by qualified media companies. Torstar chief financial officer Lorenzo Demarchi told analysts the company has submitted claims for an additional $39.6 million of the tax credits, and is awaiting further approvals from the Canada Revenue Agency. CRA is expected to complete its reviews for half of that amount later in 2019 and the balance in 2020, he said.

As for a new federal refundable tax credit, covering 25 per cent of salaries and wages paid to eligible newsroom employees of qualified news organizations, DeMarchi said Torstar is still assessing the potential benefit.

“However, it’s too early at this stage to say with any certainty whether or not we will qualify and to what extent,” Demarchi said.

Similarly, Boynton said it’s too soon to quantify what benefit Torstar will receive from its new partnership with Apple Inc., announced in March a few days before the quarter ended.

“I think it will take multiple quarters to see what our share of the revenue is going to be,” Boynton said..

“We have early indications in terms of the amount of people that have subscribed to the Apple service and the unique visits and amount of time people are spending on the articles, but we don’t have visibility into the overall performance of the application and therefore we don’t know what our share of the revenue will be.”

Print advertising accounted for $41.2 million of revenue, or 31 per cent of the total, down from just under $52 million in the first quarter of 2018. Flyer distribution revenue dropped to $24.4 million from $26.1 million. Revenue from print and digital subscribers edged up to $29.6 million, or 23 per cent of total revenue, from $29.5 million.

Meanwhile revenue from digital advertising fell to $24.4 million from $28.4 million, due in part to the sale of its Workopolis business last year. Digital advertising as a share of total revenue held steady at 19 per cent.

On an adjusted basis, Torstar says it lost six cents per share in the first quarter of 2019 compared with an adjusted loss per share of 20 cents in the first quarter of last year.

Analysts on average had expected a loss of 15 cents per share for the quarter, according to Thomson Reuters Eikon.