Torstar reports flat profit, as Toronto Star readies tablet edition

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As print advertising revenue continues to shrink at Torstar Corp., the company is pinning its hopes on a tablet edition of the Toronto Star expected to attract new readers and advertisers.

Torstar reported flat profit for the fourth quarter of 2014 on Wednesday, but the ongoing plunge in revenue as advertisers move away from print newspapers remains a major drag on results. And the declines show no signs of slowing yet.

At the Toronto Star, the company's flagship newspaper, print ad revenue was down 26.9 per cent in the fourth quarter. A 2-per-cent year-over-year fall in revenue from print ads at Metroland Media Group, which owns local papers such as the Hamilton Spectator and Guelph Mercury, was a relative bright spot, marking the slowest decline in more than eight quarters.

"Early indications are that the trends experienced in 2014 at Star Media Group [which includes the Toronto Star and the free Metro dailies] have continued into 2015," Lorenzo DeMarchi, executive vice-president and chief financial officer for Torstar, said on a Wednesday conference call with investors.

Total digital revenue was down 2.9 per cent for the year. But it is expected to grow in 2015, as the company drives toward the expected fall launch of The Star's redesigned tablet edition, which is intended to capture a younger audience who will spend more time with the product. The app is being built in partnership with French-language daily La Presse, which claims some success with its tablet edition, La Presse Plus.

"They've managed to broaden their audience base and certainly increase engagement, and that's our goal," David Holland, Torstar's president and CEO, said on the call.

When The Star releases the tablet product, it plans to make its news free again, abandoning the website's metered paywall that has yielded disappointing revenue. But some analysts expressed skepticism that a free tablet app is the answer to snowballing print losses.

"With respect, a tablet edition of a newspaper in the fourth quarter of 2015 is hardly revolutionary, and the Star brand does not resonate with younger demographics," said Tim Casey, analyst at BMO Nesbitt Burns Inc. "How does the Star brand change because we can get it on a tablet?"

The Star's publisher, John Cruickshank, countered that the challenge is reaching a wider array of readers through the right platforms, and not a branding issue. The Star's mobile audience is "very broad," he said, and La Presse Plus is "very different from all the other tablet apps out there."

The newspaper publisher reported net income attributable to shareholders of $20.6-million, or 26 cents a share, effectively unchanged from a a year earlier.

Fourth-quarter operating revenue was $233-million, down 10 per cent from the same period in 2013.

For 2014, the company's net loss from continuing operations improved slightly to $49.6-million, or 62 cents a share, compared with $58-million, or 73 cents a share, in 2013.

Operating revenue for the year was $858-million, down 8.3 per cent from $935.8-million in 2013.

Last year's $455-million sale of book publisher Harlequin Enterprises Ltd. to News Corp. yielded a pre-tax gain of nearly $225-million for Torstar, leaving the company flush with cash. But Mr. Holland said he continues to preach discipline and patience, suggesting "it's likely going to take some time to get this capital employed."

In the meantime, investors are watching and waiting for clues on future spending and signs of hope from digital revenue.