Mayor Rob Ford not the only reason for stable Q4 profit: Toronto Star publisher

TORONTO – The Toronto Star’s coverage of scandal-plagued Mayor Rob Ford helped stabilize profits at parent company Torstar Corp. (TSX:TS.B) in the fourth quarter, but it wasn’t the sole reason for the improved results, company executives said Wednesday.

“If that were the case, the results would be even bigger,” laughed John Cruickshank, the newspaper’s publisher and president of the Star Media Group, when asked in a conference call what role the controversial Toronto mayor played in the company’s latest earnings.

“This really was our revenue sources across all of the spectrum getting closer to historical levels. I think the fact that our newsroom has really dominated that local story has meant that we do have a singular relevance for people in this community. I’m sure advertisers are very much aware of that.”

Ford has dominated headlines since he was stripped of a large portion of his mayoral powers late year, following an admission that he smoked crack cocaine. The mayor has continued to draw criticism, most recently for making profane remarks on live television and being shown on a video in an incoherent and rambling rant in a Jamaican accent.

The Toronto-based media company reported net income of $20.6 million in the three months ended Dec. 31, little changed from $21.1 million a year earlier. Net income per share was unchanged at 26 cents; adjusted earnings fell one cent to 48 cents per share.

Total revenue from Torstar’s newspaper and book divisions, including the Harlequin romance novel franchise, was $366.5 million, down seven per cent from $395.7 million a year earlier, although the media division’s revenue was up from the third quarter.

Its shares soared 63 cents, or 12.5 per cent, to close at $5.67 Wednesday on the Toronto Stock Exchange.

The company said the media division that includes the Toronto Star newspaper and the Metro papers had a strong finish to 2013 despite absorbing a “hit” in its online audience figures when the Star put up its digital paywall in August.

“It’s fairly consistent with some other metropolitan dailies,” said Cruickshank. “It’s higher than we anticipated although we’ve done quite well on the revenue side. The net result of that is that we’re continuing to think through what the model for the future should be.”

For the new year, Torstar said it will continue to focus on its multi-platform approach of finding a balance between providing news through digital and print sources.

Some of this will involve luring readers to both platforms, but also understanding that a newspaper subscriber might not be interested in the digital site and an avid digital reader may not want a print subscription.

“We need the ‘multi’ in multi-platform. It’s not just digital and it’s not just print. It’s actually working quite hard to develop audiences across platforms,” said David Holland, Torstar’s president and CEO.

“We’re prepared to make investments on both sides of that fence to push forward.”

The media division’s revenue was down compared with the fourth quarter of 2012, falling to $271.45 million from $290.76 million, but its operating profit rose to $29.35 million from $23.21 million.

He said the media operations face continued pressure on print advertising revenues, although there was relative improvement in the trend in the fourth quarter.

In November, Torstar announced it was reorganizing the advertising sales operations at the Toronto Star, Canada’s largest newspaper, and moving them to an affiliated company.

The reorganization followed a $70.8-million third-quarter loss, for the three months ended Sept. 30. That included an $85.4-million writedown taken on some of its media assets.

Meanwhile, revenue at the company’s book division dropped to $95.02 million from $104.99 million in the fourth quarter of 2012, and its operating profit declined to $10.25 million from $14.81 million.

Torstar attributed this to sales of Harlequin books over the holiday period that were sold at a deep discount by electronic retailers.

“So we lost a little bit of share over the Christmas period. (It’s) hard to say how long that will continue,” said Craig Swinwood, Harlequin’s newly-installed president.

“I think we’ve seen it certainly leak into the first quarter thus far, but really hard to speculate on how deep or how long that sort of discounting would keep going.”

The company foresees Harlequin sales stabalizing over the year, as the company continues to make adjustments to succeed more in a digital environment.

Torstar’s pension situation improved significantly in 2013, something enjoyed by many other plans as a result of generally strong investment performance over the year.

As of Dec. 31, the defined benefit plans had $31 million of net assets or surplus, an increase of $212.4 million from a net obligation of $181.4 million at the same point the previous year.

Torstar holds an investment in The Canadian Press as part of a joint agreement with the parent companies of the Globe and Mail and Montreal La Presse.

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