Torstar Corp. is slashing its dividend for the second time this year after posting a steeper second-quarter loss driven by the costs of closing its printing plant in Vaughan, Ont. and last year's investment in digital publisher VerticalScope Holdings Inc.
The publisher of newspapers such as the Toronto Star and Hamilton Spectator cut its dividend to 10 cents annually from 26 cents, having already halved the payout from 52.5 cents in March. The move "was widely expected" given the company's financial struggles, according to RBC Dominion Securities Inc. analyst Drew McReynolds.
Faced with unrelenting declines in print advertising revenue, Torstar continues to try and transform itself into a digitally-focused publisher. But the company's senior ranks are also on the verge of a profound change, with president and chief executive officer David Holland set to retire in the fall after 30 years at the company, and his successor expected to assume the role of the Star's publisher, vacated when John Cruickshank left the job in May.
Print advertising revenue was hit especially hard, falling 16.9 per cent in the second quarter, as national advertising continued to decline and there was weaker demand for real estate listings. Subscriber revenue dropped 6.1 per cent.
A rare bright spot was a 35-per-cent increase in the company's total digital revenue, excluding the impact of the shuttered digital marketing firm Olive Media. The bump is attributable mostly to a $9.3-million increase in revenue from Torstar's 56-per-cent stake in VerticalScope, a publisher of some 600 online consumer forums for enthusiasts, and to new revenue from the Toronto Star Touch tablet edition.
Torstar spent some $25-million in 2015 to launch Star Touch, plus another $7.8-million in the first half of this year, in the hope that it could expand readership and command higher digital ad rates. Between 55,000 and 60,000 readers are opening the tablet edition weekly, according to Mr. Holland, with the average user reading it three to four times per week. That's a far cry from what the company projected, despite extensive marketing efforts, but readers do spend an encouraging 25 to 30 minutes using the app, on average, in any given day.
"Our challenge is to continue to build the audience," Mr. Holland said on a conference call with analysts Wednesday morning. "Look, it's not as quick off the mark as we would have liked, but we still believe that it could be an important part of our future."
The company aims to have Star Touch break even in 2017.
Net loss for Torstar's second quarter was $23.9-million, or 30 cents a share, compared with $1.1-million, or 1 cent a share, in the same quarter a year ago, including some discontinued operations.
Revenue was $196.5-million, including Torstar's share in several joint ventures, down 9.4 per cent from the same quarter a year earlier, and shy of analysts' expectations.
In what has become a familiar refrain, chief financial officer Lorenzo DeMarchi noted that "cost reduction remains an important area of focus for us." The company booked $6.9-million in restructuring charges in the second quarter after cutting 425 jobs across the company in recent quarters, which is expected to save Torstar $22.8-million annually.
And on July 3, printing of the Toronto Star shifted to an outsourced agreement with Transcontinental Inc., stopping the presses at Torstar's Vaughan printing plant after more than 25 years in operation. The company expected the closure to cost $22-million up front, but to save the company $10-million annually thereafter.
The property is now up for sale, and Mr. Holland said he is pleased with the level of interest so far. RBC has predicted it could fetch between $25-million and $50-million when sold.