Torstar Corp. said more cost cutting and new acquisitions are likely for the media company after announcing last week it was selling its Harlequin romance novel division.
Torstar CEO David Holland (CP, 2010)
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“We have a very open mind around anything that would supplement effectively our existing newspaper business from a digital perspective,” David Holland, president and CEO of Torstar said during a conference call with analysts.
“We’re prepared to pursue things organically, we’s also be prepared to pursue things that are acquisitions,” he added, noting the company would “reflect hard” over the next few months about the value of additional deals.
The owner of the Toronto Star and other newspapers earned $7.1 million or nine cents per share in the quarter, compared with five cents per share and $4.2 million of net income in the first quarter of 2013.
But revenue was $310.5 million in the first quarter of 2014, down 6.6% year-over-year, as a result of a soft advertising market.
Adjusted earnings per share were 14 cents consistent with the same quarter last year and met analysts’ expectations.
In the media segment, profits were up $2.8 million on continued cost-reduction efforts, but revenues remained down $14.6 million to $211.3 million.
Print advertising revenues were also believed to be hit in part by reduced retailer advertising attributed to severe winter weather and the transition of advertising sales for the Toronto Star to Metro effective Feb.28.
Digital revenue in the media segment was down 2.7% because of lower revenues at websites WagJag and Workopolis, although those were offset by growth in other digital properties including eyeReturn Marketing, the Metroland community websites and Olive Media.
“Visibility on how advertising revenues will evolve over the balance of the year remains limited,” said Lorenzo DeMarchi, Torstar’s chief financial officer.
“The improvement in the print advertising trend we experienced toward the end of the fourth quarter did not continue through Q1. However, distribution revenues are expected to grow in the balance of the year.”
Reporters at the Toronto Star withdrew their bylines from their stories ahead of Wednesday’s earnings and annual meeting of shareholders to protest recent layoffs at the newspapers and plans to create a separate class of digital reporters, which would be paid less.
Cost reduction remains an important area of focus across Torstar, he added, noting that the media segment expects $17.1 million of savings for the balance of 2014 from restructuring moves done in the first quarter.
Torstar also recorded $3.6 million in restructuring and other charges in the first quarter after eliminating about 55 positions and other cost-cutting measures.
Harlequin’s results, meanwhile, were down $4.2 million to $13.9 million, while revenues in the book publishing division fell $3.3 million to $99.2 million after a strong first quarter.
Torstar announced the sale of Harlequin Enterprises Ltd. to global media company News Corp. for $455 million in cash last Friday, saying that deal will see Harlequin’s headquarters remand Toronto and run as a division of HarperCollins Publishers. The deal is subject to regulatory approval.
Torstar’s businesses include the Star Media Group led by the Toronto Star, as well as the Free Daily News Group Inc., which publishes the English-language Metro newspapers in several Canadian cities, Metroland Media Group, publisher of community and daily newspapers in Ontario and various digital properties.
During the quarter, the company acquired the remaining 10% interest in Free Daily News Group Inc. for $10.1 million.
