Torstar reports quarterly loss, hopes cost-cutting will pay off
Despite second-quarter drop, CEO optimistic about 2017 and gains from $10M saved
Torstar Corp., parent company of the Toronto Star, reported a secondquarter loss Wednesday, but said it believes cost-cutting measures and investments in digital platforms will start to pay off this year and into 2017.
“In the back half of 2016, we expect to benefit from $10 million in cost savings related to restructuring and outsourcing initiatives already taken to date, including the transition of the printing of the Star,” said CEO David Holland on the Torstar’s second-quarter earnings call Wednesday.
The company started printing the paper with Transcontinental Printing on July 3, a move that is expected to save some $10 million annually, though those savings won’t be fully realized until 2017.
Torstar expects the bottom line to benefit from reduced investment in the Toronto Star Touch tablet app, launched September 2015. The company expects it to break even in 2017. The tablet app’s weekly readership ranges from 55,000 to 60,000, and readers are coming to it three to four times a week.
“The good news on this for us — and it’s actually quite good — is the en- gagement we’re getting on a daily basis is between 25 to 30 minutes,” which enables innovative advertising approaches, Holland said.
The challenge now is to build the audience for what the company thinks is an important element of its multiplatform approach, while balancing the imperative to be financially responsible so that it breaks even next year, Holland added.
Amid continued print market challenges, Torstar has been focused on the transition to a digital-first operation, investing in technology while cost-cutting on the print side.
The company reported a secondquarter loss of $23.9 million, or 30 cents per share, compared to a loss of $1.1 million, or one cent per share, during the same quarter last year. It also announced plans to lower the dividend to 10 cents per share annually beginning in the third quarter.
On an adjusted basis — excluding the impact of unusual and one-time items and discontinued operations — the second-quarter loss amounted to 13 cents per share, down from an adjusted profit of 14 cents per share in the same quarter of 2015.
The 2016 quarter included a 40cent-per-share impact of amortization and depreciation.
The quarter included $31 million in unusual non-cash amortization charges associated with closure of the Vaughan printing press and the acquisition of a majority stake in Ver- ticalScope, the owner of more than 600 online forums and premium content sites.
The company said the printing-related amortization charge will not repeat going forward and the VerticalScope expense will drop significantly in the next quarter.
Adjusted earnings per share before interest, taxes, depreciation and amortization was $15.6 million. That was down $5.3 million from the second quarter of 2015, partially due to the loss of $1.4 million in commercial printing from the Vaughan presses and partially due to the $1.5-million incremental investment in the Star’s tablet app.
Revenue was $196.5 million, down 9 per cent, or $20.4 million, from the second quarter of 2015, mainly due to losses at the company’s two major newspaper divisions, Metroland Media Group and Star Media Group.
Meanwhile, Torstar is seeing growth on the digital side, with revenue from that segment increasing by 35 per cent.