Torstar revenue down 7% as Harlequin book unit suffers

Torstar Corp., owner of the Toronto Star and other newspapers and the Harlequin book publishing company, reports that its fourth-quarter profit was stable despite a decline in revenue

The Toronto-based media company had $20.6 million of net income in the three months ended Dec. 31, little changed from $21.1 million a year earlier. Net income per share was unchanged at 26 cents; adjusted earnings fell one cent to 48 cents per share.

David Holland, Torstar's president and CEO, said that the media division that includes the Toronto Star newspaper and the Metro papers, had a strong finish to 2013 but the Harlequin book unit faltered.

"At the Toronto Star, a combination of improved revenue performance relative to earlier quarters and efforts on costs yielded growth in earnings. Metro also had a strong fourth quarter growing both its revenue and earnings," Holland said.

"Lower revenues were the primary challenge at Harlequin as the operation continues to adjust to the more digital environment."

Operating profit down at Harlequin

The book division's revenue dropped to $95.02 million from $104.99 million in the fourth quarter of 2012, and its operating profit declined to $10.25 million from $14.81 million.

The media division's revenue was also down compared with the fourth quarter of 2012, falling to $271.45 million from $290.76 million, but its operating profit rose to $29.35 million from $23.21 million.

Holland also said that Torstar's pension situation improved significantly in 2013, an experienced by many other plans as a result of generally strong investment performance during the year.

Torstar's obligation to its defined benefit pension and post-retirement plans fell by $217 million during 2013. As of Dec. 31, the defined benefit plans had $31 million of net assets, compared with a net obligation of $181.4 million a year earlier.

"Funding into the plans will be lower in 2014 and we would anticipate further reduction in funding within the next few years," Holland said.

Pressure on print advertising

"Looking forward, Harlequin continues to make the adjustments necessary to succeed in the more digital environment. Including the year over year benefit of the depreciation of the Canadian dollar on foreign earnings, we anticipate Harlequin results to be relatively stable year over year," Holland said.

He said the media operations face continued pressure on print advertising revenues, although there was relative improvement in the trend in the fourth quarter.

"Ongoing restructuring efforts will help to mitigate the earnings impact of the anticipated advertising revenue pressure. As we resize the cost base, we remain disciplined and committed to ensuring that we continue to invest in those areas of greatest value to our customers as we adapt to the evolving media environment."

In November, Torstar announced it was reorganizing the advertising sales operations at the Toronto Star, Canada's largest newspaper, and moving them to an affiliated company.

The sales force reorganization followed a $70.8 million third-quarter loss, for the three months ended Sept. 30. That included an $85.4-million writedown taken on some of its media assets.

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