TORSTAR CORP. $6.77 - Toronto symbol TS.B

>TORSTAR CORP. $6.77 (Toronto symbol TS.B; Conservative Growth and Income Portfolios, Consumer sector; Shares outstanding: 80.3 million; Market cap: $543.6 million; Price-to-sales ratio: 0.8; Dividend yield: 7.8%; TSINetwork Rating: Average; www.torstar.com) publishes The Toronto Star, Canada’s largest daily newspaper by circulation. It also publishes three other dailies and over 100 weeklies. Torstar lost $49.6 million, or $0.62 a share, in 2014. That’s better than the 2013 loss of $58.0 million, or $0.73 a share.

These figures include costs related to job cuts and other measures Torstar took in response to falling advertising revenue at its newspapers. Since 2012, these moves have cut the company’s annual expenses by $60.4 million. Torstar expects savings to reach $77.1 million a year by 2017.

If you disregard unusual items, per-share earnings fell only 6.5%, to $0.58 from $0.62.

Revenue declined 8.3%, to $858.1 million from $935.8 million. Revenue at its Metroland Media Group (54% of the total), which includes Torstar’s free weekly newspapers and flyer-distribution operations, fell 5.0% on weaker ad revenue.

The remaining 46% of Torstar’s revenue comes from its Star Media Group, which includes The Toronto Star and its other daily papers. This division’s revenue declined 11.3%, mainly due to a drop in print ad revenue at The Toronto Star and the sale of some smaller papers.

At the end of 2014, Torstar was debt-free and held cash of $290.2 million, or $3.62 a share. It continues to pay a quarterly dividend of $0.13125 a share, for an 8.0% annualized yield.

This year, the company plans to spend $13 million to $15 million to develop a new digital version of The Toronto Star for tablet computers.

That should help it attract younger readers and spur online ad sales. Torstar plans to launch the new tablet version in the fourth quarter of 2015. The stock trades at 11.3 times Torstar’s likely 2015 earnings of $0.60 a share.

Torstar is a buy.

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