Torstar Corp. says a slightly improved operating profit at its Harlequin book-publishing division in the second quarter partially offset a decline at its media division, which has been coping with a tough advertising market.
However, the Toronto-based media company missed analyst estimates both in terms of revenue and adjusted earnings during the three months ended June 30 and it warned that Harlequin faces additional challenges going forward.
Torstar earned $35.7 million or 45 cents per share for the quarter. Operating profits at the media division, including restructuring charges, fell to $34.6 million from $42.7 million a year ago while book publishing operating profits improved to nearly $18 million from $16.3 million.
A year earlier, the company earned $112.7 million or $1.42 per share, although that included $74.6 million or 94 cents per share from the sale of Torstar’s investment in CTV Inc.
Exclude the CTV deal and other one-time items, Torstar earned 51 cents per share in the second quarter of 2011.
The average estimate compiled by Thomson Reuters before Torstar’s announcement was for a profit of 48 cents per share and $402.5 million of revenue.
The Toronto-based publishing company says its overall revenue for the quarter ended June 30 slipped by 2.4% from a year ago to $383.9 million.
The media division accounted for $276.8 million of the revenue during the quarter, down from $283 million a year ago, and book publishing contributed $107 million, down from $110.3 million.
“Our media results were not immune from the soft advertising environment that affected many media operations in the past quarter,” David Holland, Torstar’s president and CEO, said in a statement.
“Looking forward, visibility remains limited for the Canadian media operation. After a slow start in April, trending compared to prior year did improve throughout the second quarter and that has continued into July.
“At Harlequin, we anticipate a decline in second half results attributable to a few factors including higher author royalty rates for digital sales and a comparison to a particularly strong financial performance in the second half of 2011.”
Harlequin was named as defendant in a July 19, 2012, class action complaint pertaining to ebook author royalties.
Harlequin believes that the authors have been paid fairly and the publisher will be defending itself vigorously, Torstar said.
