Revenue Down, Profits up at Harlequin in Second Quarter, Digital Royalties to Rise

Harlequin, the book publishing unit of Canada’s Torstar, buoyed the company in the second quarter with higher profits. But the company expects the second half to be softer for the publisher due in part to higher royalties paid to authors on digital books. (See the bolded sections of the press release below.)

Related: Press Release Says Harlequin Sued Over Royalties | Harlequin Responds, Claims No Complaint Has Yet Been Served

TORONTO, ONTARIO – (Marketwire – August 1, 2012)  – Torstar Corporation (TSX:TS.B) today reported financial results for the second quarter ended June 30, 2012.
Highlights for the quarter:
• Revenue was $383.9 million in the second quarter of 2012, down $9.4 million (2.4%) from $393.3 million in the second quarter of 2011.
• EBITDA (see “non-IFRS measures”) was $59.8 million in the second quarter of 2012, down $5.9 million from $65.7 million in the second quarter of 2011.
• Net income attributable to equity shareholders was  $35.7 million ($0.45 per share) in the second quarter down $77.0 million ($0.97 per share) from $112.7 million ($1.42 per share) last year.  The second quarter of 2011 included a gain of $74.6 million ($0.94 per share) from the sale of Torstar’s investment in CTV Inc.
• Adjusted earnings per share (excluding restructuring and other charges and non-cash foreign exchange in both years, other income and gain on sale of assets in 2012, swap settlement charges and gain on sale of CTV Inc. in 2011) was $0.44 in the second quarter of 2012, down $0.07 from $0.51 in the second quarter of 2011.
• Net debt was $157.2 million at June 30, 2012, up $1.9 million from $155.3 million at March 31, 2012.

“Our media results were not immune from the soft advertising environment that affected many media operations in the past quarter,” said David Holland, President  and CEO of Torstar Corporation. “EBITDA was down $5.9 million to $59.8 million as a decline in results from the Media Segment was offset in part by improved Harlequin results.”

“In the Media Segment, EBITDA was $44.8 million, down $8.1 million from the prior year.  In addition to the soft advertising environment, results were also affected by increased spending on investment initiatives in the quarter.  We remain committed to building on the diversity of our media assets through investment in organic initiatives which we believe will yield value to shareholders in the longer term.  At Harlequin, EBITDA was up $1.8 million to $19.0 million.  We continue to adjust to the evolving book publishing landscape.  The shift from print to digital moderated in the second quarter compared to our quarterly experience over the past two years.”

“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.”


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