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

Torstar gets $18 million boost from Ontario tax credit in Q1, reducing loss
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TORONTO — Torstar Corp.’s future depends on it successfully becoming a “journalism and data company” with content that attracts paying subscribers and advertisers, chief executive John Boynton told its annual shareholder meeting Wednesday.

“Data is the resource that should differentiate Torstar and should build a more sustainable business model into the future,” Boynton said at Torstar headquarters, which is also home to its flagship publication, the Toronto Star.

He acknowledged that Torstar has a long way to go completely transform from a legacy business funded by print advertising and subscriptions, but said it has now put in place many of the necessary systems and practices.

“So having that great data infrastructure allows our people in all of our news rooms, the people who create great journalism content, to get very precise about which stories matter the most.”

In addition to the Toronto Star, the company owns daily, community and commuter newspapers in numerous communities and a 56 per cent interest in VerticalScope, a Toronto-based digital media company.

One of Torstar’s new tools is a metered paywall at the Toronto Star that provides limited free access to content and more access to paying subscribers. As of March 31, it had about 15,000 digital-only subscribers.

“Critically, we haven’t even started to scratch the surface when it comes to digital subscriptions,” Boynton said.

Earlier, Boynton told analysts in a conference call before the meeting that Torstar had made “good progress” towards developing new revenue streams from digital media.

However, he said it’s too soon to quantify what benefit Torstar will receive from its new paid-subscription 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.

At the end of the annual meeting, Torstar executives were asked why the board keeps paying a dividend to shareholders rather than use the money to transform the company more quickly.

Torstar chairman John Honderich, who is also a major voting shareholder, said the company has kept its costs in line with revenue and reported stable cash levels at the end of the first quarter in both 2019 and 2018.

“There’s no question that the declining revenue base has put pressure on our earnings and our cash flow. And this is something we are very attuned to and review all the time.” Honderich said.

“The dividend has been decreased several times in the past and it is still the feeling in this situation that we should reward our shareholders who have stuck with our company for a long period of time with the payment of a dividend.”

Earlier Wednesday, Torstar announced it 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.

Revenue was just under $116 million from all operating segments in three months ended March 31, down from nearly $129 million a year earlier.

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.

A major reason for the improved bottom line was an $18-million Ontario digital media tax credit for previously incurred salary and benefit costs. Excluding the tax credit, salaries and benefit costs were down $5.7 million or eight per cent.

Torstar chief financial officer Lorenzo DeMarchi told analysts that 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.

As for a new tax credit from the federal government, which will cover 25 per cent of salaries and wages for 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.

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.

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

Companies in this story: (TSX:TS.B)

David Paddon, The Canadian Press


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