Christine Dobby Wednesday, Jul. 31, 2013
Torstar revenue, profit drop in Q2
Torstar Corp. reported a sharp decline in profit in the second quarter as its media division continued to struggle with plunging print advertising revenues and even its book publishing business hit an unexpected lull.
Torstar, which publishes the Toronto Star and the Metro chain of free daily newspapers, said Wednesday that net income for the quarter was $18-million or $0.23 per share, down 44% from $0.41 per share in the same period last year.
Its romance novel publishing division Harlequin posted a surprising drop, said David Holland, president and chief executive of the Toronto-based company.
“We had anticipated lower earnings at Harlequin but not to this extent,” Mr. Holland said during a conference call with analysts. “Lower volumes, including a deterioration in overseas volumes, which we were concerned about in the last quarter, were responsible for the shortfall to expectations.”
The company said digital sales in North America slowed during the quarter but it saw a positive stabilization in print sales. Harlequin’s EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was $11.5-million, down 40% from $19.1-million this time last year.
On the media side, Mr. Holland noted, “The effects of a declining print ad market were only partially offset by a considerable effort on costs.”
Print ad revenue at the Toronto Star was down 13.7% at the Toronto Star although the company said local digital advertising continues to be a bright spot.
Torstar management said that the rollout of a digital paywall at the newspaper’s website is still planned for sometime “this summer.”
Postmedia Network Canada Corp. – which owns the National Post along with nine other English dailies – implemented a paywall across all its newspaper websites in May while the Globe and Mail and Quebecor Inc.-owned Sun Media Corp. publications began charging for online content last year.
John Cruickshank, publisher of the Toronto Star and president of Star Media Group, said during the call that while he has high expectations for the potential performance of the paywall, he does not project it will be a major contributor to revenues this year as the company spends to promote and implement the initiative.
Torstar’s media business, which includes the Toronto Star and Metro as well as the Metroland chain of community newspapers, posted EBITDA of $37.5-million, down 13.4% from $43.3-million in the second quarter of 2012.
The company cut $8.3-million in costs at the media division during the quarter as it continued with voluntary buyouts and the outsourcing of page layout at the Toronto Star and saved on labour costs at Metroland.
Mr. Holland said cost-reduction initiatives would continue, but the company “remain[s] disciplined in continuing to be invested in those areas of highest value to our customers.”
Haran Posner, an analyst with RBC Dominion Securities, said while media results “remain soft” they were largely in line with expectations. Results at Harlequin, on the other hand, were the “main source of disappointment” in the quarter, he said.
Torstar had total sales for the quarter of $354.9-million, down $29.0-million or 7.5% from $383.9-million in the second quarter of last year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $45.1-million, down 22.6% from $58.3-million in the same period in 2012.
