Torstar Corp., owner of the Toronto Star and other Canadian newspapers, announced its fourth-quarter results on Wednesday, posting a $51.9 million net loss for the year as operating revenues slid nearly 12 per cent amid declines in print and digital advertising.
Revenue from subscriptions provided the lone major source of revenue growth during the year, up one per cent, as digital revenue in the category increased while print decreased.
For the fourth quarter, the Toronto-based company posted a $14.1 million profit, boosted by one-time gains from changes to its pension plan and the sale of properties in Ontario, but it made clear that it faces a challenging operating environment in which print advertising, still its largest source of revenue, is declining and “global technology giants” dominate the digital advertising sphere.
Looking forward, the company said that harnessing “data as a key asset” to grow digital subscriptions is central to its business strategy. In a nod to the significance of the challenges ahead, Torstar flagged a new risk, warning it is in danger of being delisted from the Toronto Stock Exchange (TSX) as a result of thin trading of its shares.
“The TSX has broad discretion regarding delisting,” the company said in its earnings release. “If the TSX determines that we no longer meet the applicable listing requirements, including with respect to the public distribution or liquidity of the Class B non-voting shares, there is a risk that the TSX may delist them.”
Torstar’s shares, which fell 6.8 per cent to close at 41 cents on Wednesday afternoon, have lost 58 per cent of their value over the past year and are down 94 per cent over the past five years.
The company has made numerous attempts to reverse its fortunes since announcing it was selling its Harlequin book publishing company to News Corp. for $455 million in 2014.
In 2015, it paid roughly $200 million for a 56 per cent stake in VerticalScope Holdings Inc., a digital media company with 600 consumer enthusiast forums and content sites. VerticalScope posted an operating loss of $3.6 million in its most recent quarter and Torstar said revenues there “continued to be impacted by the ongoing transition of user forums to a new technology platform.”
Torstar also invested tens of millions of dollars in Star Touch, a tablet-only app that was launched in 2015 and scrapped in 2017 after it failed to attract as many readers as management had hoped.
If the TSX determines we no longer meet the listing requirements, including with respect to the public distribution or liquidity of the Class B non-voting shares, the TSX may delist them
This past December, one year after a rebranding effort that doubled the number of journalists at its StarMetro commuter daily newspapers, the company stopped their print editions and also announced voluntary buyouts for other editorial employees.
That came a few months after the company suspended its 2.5-cent quarterly dividend in an effort “to preserve cash and strengthen our financial position,” after posting a $40.9 million quarterly loss in October.
Suspending the dividend saved millions of dollars per year, but also started the clock on a potential shift in the company’s governance structure: There are about 10 million class A shares with voting rights, mostly held by families of the original owners through the Torstar Voting Trust, which is chaired by the company’s board chairman, John Honderich.
There are also about 71.5 million class B shareholders without voting rights, that are freely traded.
If the dividend is not paid out for eight consecutive quarters, the class B shareholders would gain voting rights.
Bob Hepburn, director of communications at Torstar, said the company is sticking to its plan to review its dividend policy before the end of 2020.
Torstar said restructuring in 2019 reduced 640 positions, which will result in $41.3 million in annualized cost savings.
The efforts tie into other cost-savings measures: It also transferred eight pension plans to the College of Applied Arts and Technology Pension Plans, which reduced its exposure to defined benefit pension liabilities and resulted in a $24.6 million gain in the fourth quarter.
Earlier this month, it announced a $25.5 million sale of the land and building used by the Hamilton Spectator newspaper, which followed a decision last year to close its print and mailroom operations there.
Lorenzo DeMarchi, chief financial officer of Torstar, said during the earnings call Wednesday that sale is expected to close in the first quarter of 2020.
“We continued to face a challenging print advertising market in 2019 resulting from ongoing shifts in spending by advertisers,” DeMarchi said. “Similar trends have continued early into 2020 and it is difficult to predict if these trends will worsen, improve or continue.”
Print advertising still accounted for 32 per cent of revenue, followed by print and digital subscriptions at 25 per cent, flyer distribution at 22 per cent, and digital advertising at 13 per cent.
Looking at all of 2019 compared to the previous year, print advertising declined 21 per cent to $155 million, digital advertising declined 8.1 per cent to $60.3 million, and flyer distribution revenue declined 11 per cent to $103.5 million. Print and digital subscriptions increased one per cent to $119.7 million, but the company did not separate them out.
Overall, operating revenue in 2019 declined 11.8 per cent to 479 million.
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