President and CEO of Torstar David Holland (CP, 2014)

Torstar reports higher Q2 profits

But revenues fall on lower ad sales

Torstar Corp., publisher of the country’s largest newspaper, the Toronto Star, reported a slightly higher profit in its latest quarter as it continued to feel pressure from falling print advertising revenues.

The media company said Wednesday it had a profit of $19.7 million, up from $18.1 million a year ago, but revenue was lower due to a drop in print ads.

The profit amounted to 25 cents per share in the three-month period ended June 30, compared with 23 cents per share in the second quarter of 2013.

Consolidated operating revenue fell seven per cent to $225.6 million from $243.6 million a year earlier.

John Cruickshank, publisher of the Toronto Star and president of Star Media Group, said the company expects ad sales to continue to fall for the rest of the year due to reduced advertising by the auto sector.

“The auto revenues has been softening probably for the last 12 months or so,” he told analysts during a conference call following the release of the results.

Cruickshank said it’s not fair to compare the impact the weak auto sector with the financial sector, which has also generally been pulling back print ads for the last few quarters.

“Every one of these categories are distinct and of course they’re very much influenced by how they’re doing… and how they’re introducing new products. I don’t want to say that this is a trend like the other,” he said.

In May, Torstar announced it was selling Harlequin, a publisher of romance books, for $455 million in cash to a division of HarperCollins Publishers. The deal is expected to close by the end of the week.

Excluding Harlequin, the company reported a profit from continuing operations of $18.1 million, or 23 cents per share, up from $12.6 million, or 16 cents per share, in the second quarter of 2013.

The company said it plans to use a portion of the sale proceeds to pay down its debt, and will likely invest the remainder to help boost Torstar’s outlook.

“I think we’re going to step back and take our time. I don’t think there’s anything (obvious investments) that’s right in front of us,” said Lorenzo DeMarchi, executive vice-president and chief financial officer at Torstar.

“We’re going to take some time to reflect on what should the Torstar of the future look like… We want to be thoughtful on how we move forward. And that it fits within our broader game plan.”

DeMarchi said the money will likely not be used to increase dividend for shareholders.

“My bias is to see us employ the capital back into the business,” he said.

Torstar said it had restructuring and other charges of $4.4 million in the quarter related to the reduction of about 125 jobs.

Excluding, impairment, restructuring and other one-time gains and charges, the company said it earned an adjusted profit of 20 cents per share in the quarter, down from 21 cents, in the same quarter last year.

Along with the Toronto Star, Torstar publishes the Hamilton Spectator, Waterloo Region Record and the Guelph Mercury and more than 100 community newspapers in Ontario.

In addition, Torstar owns Free Daily News Group Inc. (Metro English Canada), which publishes the English language Metro newspapers in several Canadian cities. Torstar also operates digital businesses such as WagJag.com, eyeReturn Marketing Inc., goldbook.ca, Save.ca, toronto.com and workopolis.com.

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