Digital revenues, where the newspaper company has vested much of its hope for future growth, also took a slight dip.
Shares of the company fell as much as 22.3 per cent to $1.29 in morning trading, before paring some of the losses. It was down 8.4 per cent at midday.
The loss, which covers the three months ended March 31, is an improvement over the same period last year when Torstar fell $53.5 million short.
Revenue at the publisher, which owns the Toronto Star, the Hamilton Spectator and Metro commuter papers among others, fell $18.1 million or 10 per cent year-over-year to $156.7 million in the quarter.
That decline was impacted in particular by print advertising revenue, which fell 19 per cent, and subscriber revenue, which fell 9.5 per cent.
Torstar’s struggles to maintain print advertising and subscriber revenues are neither new nor surprising, as newspaper publishers in Canada and throughout the world have seen spending migrate rapidly to online competitors in the ad market, including tech giants like Facebook and Google, prompting job cuts and cost restructuring year after year. (Australia’s Fairfax Media, one of the largest publishers in that country and the owner of the Sydney Morning Herald and the Melbourne Age, announced Wednesday it will cut 125 staff, or a quarter of its newsrooms, in an effort to save AU$30 million.)
Torstar said the 110 positions that were eliminated related to “Metroland (Media)’s closing of a small printing plant and to the closing of a small mail room,” and said they will result in $5.3 million in annualized savings.
Meanwhile, the company’s digital revenues fell four per cent in the first quarter after marginal gains throughout 2016: It attributed that decline to weak performance at websites Workopolis, WagJag and Save.ca, while online forum operator VerticalScope, which Torstar holds a 56 per cent stake in, saw revenue grow $1.5 million or 18 per cent. Management said it expects print advertising declines to continue, but believes digital revenues will stabilize through 2017, including further growth at VerticalScope.
Torstar continued to wind down investment in its most ambitious project in recent years, the once promising tablet app Toronto Star Touch, noting that it made a $3.7 million lower net investment in the app during the first quarter.
Launched in the fall of 2015, Star Touch repeatedly failed to meet readership expectations: the company once trumpeted hopes of 200,000 weekly users, instead hitting a ceiling of 60,000.
Torstar’s new CEO John Boynton, who took over from David Holland in March, made a candid admission when asked on an investor’s call about continued take-up of the app, conceding that “the volume doesn’t look like it’s progressing at all.”
“Part of why I’m here is I’m excited by the assets,” added Boynton, who said one of his short term goals will be to assess consumer segments and best align Torstar’s properties with them. “I think the asset collection itself is exciting if we can put it together in a different way… We’re not looking at rounding the edges, we’re looking to do something significant.”
Boynton also noted that Torstar ended the first quarter with no bank indebtedness (the company reported $59.4 million in cash and equivalents and $9.1 million of restricted cash), adding it is “not normal in North America for this industry.” Torstar’s largest Canadian competitor, Postmedia Network Inc., remains heavily indebted after completing a restructuring deal of its debt last year.
In an investment note, RBC Capital Markets analyst Drew McReynolds said Torstar’s results were “weaker than expected.” RBC estimated Torstar’s segmented revenues and earnings before interest, tax, depreciation and amortization would come in at $160 million and $9 million respectively, versus the $156.7 million and $2 million reported Wednesday.
McReynolds said the difference between EBITDA estimates and results was due to weak performance at the company’s Star Media Group, which operates the Toronto Star and Metro commuter papers, and Metroland Media, which operates weekly and community newspapers throughout Ontario. According to RBC, the “relentless newspaper pressure” overshadowed growth at VerticalScope, but the online forum operator’s steady growth and stable advertising rates made for a silver lining on shares.
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