Torstar CEO says media companymaking progress inshift from print to digital

TORONTO – Torstar Corp. (TSX:TS.B) says the sale of its stake in CTV Inc. boosted the company’s second-quarter profit to $228.3 million while its Harlequin book division struggled and its media division stabilized after a difficult start to 2011.

Torstar, owner of the Toronto Star and other Canadian newspapers, various websites and the world’s largest producer of romance fiction, is focused on growing is revenue base, particularly from digital products, Torstar CEO David Holland told analysts Friday.

“In our media group, we committed to building from within when this year commenced and we are making progress in growing revenue despite the choppy printing environment,” Holland said in a conference call with analysts.

“In particular, we’re pleased with the 33 per cent growth in digital revenue.”

Torstar’s overall revenue during the quarter ended June 30 was $393.3 million, up $15.7 million from $377.6 million in the second quarter of 2010.

The media segment’s revenue was up $18.9 million, with growth in product sales, digital and distribution revenues offsetting declines in print advertising revenue. Book publishing revenue fell $7.3 million or 6.2 per cent due to a decline in print retail revenue.

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The company posted net income equivalent to $2.87 per share in the three month period, an increase from $23.7 million or 30 cents per share a year ago. That included a gain of $190.1 million from the sale of the assets formerly known as CTVglobemedia.

Excluding the impact of the CTV sale and a loss from associated businesses in 2010, Torstar’s net income would have been $38.2 million or 47 cents per share in 2011, up from $30.4 million or 39 cents per share a year earlier.

Quarterly earnings in its media division were flat year-over-year, and the company says that there is still “limited visibility” for print advertising, due to uncertainty about the economy.

“Results continue to be mixed in 2011,” Holland said. “On the Canadian media operations, earnings stabilized in the second quarter, an improvement relative to the decline experienced in the first quarter.”

Holland noted that the Harlequin book publishing division saw its EBITDA (earnings before interest, taxes, depreciation and amortization) fall by $4.7 million in the quarter.

But for the first six months of 2011, Harlequin’s EBITDA is down only $1.5 million, excluding the impact of foreign exchange, and Torstar expects results for the full year will at least match 2010 or grow slightly.

Donna Hayes, president and publisher of Harlequin Enterprises, said that the division’s lower revenue during the second quarter was a result of printed book sales falling faster than digital sales increased.

“With the benefit of hindsight, we printed too many books in Q2 and we’re expecting relatively high returns, which are already reflected in the results,” Hayes said.

During the quarter, Torstar acquired beauty website TheKit.ca and announced it will begin distributing print editions of satirical newspaper The Onion in the city, beginning in the fall.

The company has been struggling in the turbulent media market as readership declines and more people turn to the free digital format, where advertisers pay significantly less than they were in an already weak ad market.

Torstar has about 6,600 employees across its operations, which includes the Star Media Group led by the Star, Canada’s largest daily newspaper and digital properties including Thestar杭州龙凤, Toronto杭州龙凤, Travelalerts.ca, daily deal website WagJag杭州龙凤, Workopolis, Olive Media, and EyeReturn Marketing.

The company also owns the Metro free daily newspaper chain, Metroland Media Group, publishers of community and daily newspapers in Ontario, as well as Harlequin Books- the world’s biggest publisher of romance fiction.

“Looking forward, we continue as a company to be committed to making investment back into the business, whether in digital or in print where we see opportunity to add value,” Holland said Friday.

“Our opportunity is to achieve an optimal outcome across all our assets and we think we’ve got considerable assets to work with in our media businesses.”

Its shares dipped five cents to $11.76 in early trading on the Toronto Stock Exchange.