Torstar CEO: Cost cutting has preserved cash needed for business transformation

TORONTO _ Torstar Corp.’s national and local print advertising continued to fall in the third quarter but cost-cutting efforts have been successful in maintaining the company’s cash balances and dividend at an acceptable level, executives said Wednesday.

But they also said cost reduction will remain a important area of focus with no end in sight for a years-long decline in print advertising revenue at Torstar’s flagship Toronto Star newspaper and its Metroland Media Group.

Torstar chief executive John Boynton told analysts on a conference call that he sees cost-cutting as essential to preserving cash flow that’s required to fuel a transformation of the company’s core business.

“In the balance of 2017, we expect to benefit from $3 million in cost-savings related to restructuring and outsourcing initiatives, already undertaken to date, and we expect these cost reductions to offset print ad revenue trends which we expect (will) continue to be challenging,” Boynton said.

However, Torstar’s unrestricted cash and cash equivalents was down to $51.4 million at Sept. 30, from $75.4 million at the end of December, leading analysts to ask whether Torstar’s dividend was under review.

“We’ll keep looking at the dividend and everything’s on the table, but we don’t have any changes so far that are required at this time,” Boynton said.

“We’re still comfortable with our cash position, the amount of cash we need to fuel our transformation.”

Chief financial officer Lorenz DeMarchi added that the drain on cash flow is expected to be lighter than in the first half of 2017, when severance and pension expenses were heavy.

As of Sept. 30, Torstar had cut about 220 positions. It expects $12.1 million of savings from the cuts in calendar 2017 and $5 million in 2018.

Executives also noted that Torstar (TSX:TS.B) has no bank debt and its unrestricted cash doesn’t include its share of cash at VerticalScope or $9.1 million of restricted cash pledged as collateral to standby letters of credit.

Torstar’s total segmented revenue, which includes its core Star and Metroland newspaper groups plus a share of revenues from joint ventures and its 56 per cent stake in VerticalScope, fell to $164.6 million compared with $181.7 million a year ago.

The quarter had a net loss of $6.6 million or eight cents per share, compared with a profit of $1.4 million or two cents per share a year ago when Torstar benefited from the sale of its printing plant in Vaughan, Ont., and the sale of a property in Guelph, Ont.

On an adjusted basis, Torstar says it lost eight cents per share for the quarter ended Sept. 30, the same as the third quarter of 2016.

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