In their most recent financial report, TorStar Corp numbers show that the company’s operating profit fell significantly from $-72,000,000 in 2014 to $-169,000,000 in 2015 — meaning the overall value of the company’s assets is in fast decline.
Investors beware, it’s an uncertain and questionable time to have major shares in news corporations such as TorStarCorp; a time where the financial position of the company is up in the air due to falling revenue from print advertising, rising operating expenses and shrinking profit margins year-to-year.
With massive cuts and amalgamations by media organizations like PostMedia, Rogers and Bell media, it should be no surprise that the Toronto Star should follow suit. The operating profits at the corporation have fallen considerably within the last year alone — from $-72,000,000 to $-169,000,000, a 235% decrease.
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Toronto Star (Torstar Corp.) Stock by CodyMacKay on TradingView.com
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These figures not only depict a significant fall in the value of the company, but aid in the overall “firesale” of the Canadian news industry. The firesale being the mass liquidation of Canadian media organizations and deadliest factor in the information-gathering industry.
The concerning numbers should not be shocking to investors, when put in the context of what’s happening in the industry elsewhere in Canada, though they should start raising questions about the stability of one of Canada’s elite major news corporations.
Lorenzo DeMarchi, executive vice president and chief financial officer at TorStarCorp, understands the concern but is quick to contextualize the company’s fallen value to the Canada-wide market fall.
“It’s a decrease in the theoretical value or estimated value of your assets,” DeMarchi says. What he means is it’s not an actual dollar expense, it’s an invisible expense that means the company is worth much less than what it was last year. It’s a decrease in the value of the company in a time where costs of production are rising and revenues are noticeably smaller.
Source: TorStarCorp Management’s Discussion and Analysis (Third Quarter Report, 2015).
“The numbers display the pressures on the newspapers industry. The value of the assets in the newspaper industry are worth much less,” he said. “The readership is still quite strong, what really has been effected is digital advertising. We are trying to figure out the digital future.”
DeMarchi’s final point is one that echoes throughout the news industry, one heard all too well by other major organizations facing mass layoffs and significant cuts to media production due to the switch to digital mediums.
The move to digital, he admits, was the largest motivating factor behind the launch of their tablet app, Star Touch, as an attempt to stay relevant and adapt in recent times.
Ian Lee, market strategist and business professor at Carleton University, reinforces DeMarchi’s point. Lee says TorStarCorp’s questionable statistics are not unique to the company, but a reflection of the downturn of the news industry across the nation.
“It’s the emergence or shift from a print model or physical to the digitization of everything,” Lee said. This is a transformation, Lee says, that is obvious when looking at the significantly fallen operating profit margins for TorStarCorp.
Specifically, Lee says, this severe spiral affects post offices, deconstructs print media and all manner of business in the print industry, particularly advertising.
“These transformations are drivers of change. They aren’t necessarily inside the industry, but they are, in fact, forcing corporations to respond to these drivers of change outside the industry.”
Lee says the financial growing-pains that TorStarCorp and other organizations are going through are the same trends that have been dissolving the industry for the last five years, they’re just becoming much more obvious.
For TorStarCorp, and other media organizations in Canada, these fast-falling numbers point to one clear concept: adapt — and adapt quickly.