Torstar earns $57.4 million profit in Q4, turning around a year-ago loss

TORONTO - Torstar Corp. (TSX:TS.B) produced a solid $57.4-million profit in the fourth quarter, reversing a year-earlier loss, as the big media company weathered a turbulent economy and benefited from earlier cost-cutting.

TORONTO - Torstar Corp. (TSX:TS.B) produced a solid $57.4-million profit in the fourth quarter, reversing a year-earlier loss, as the big media company weathered a turbulent economy and benefited from earlier cost-cutting.

The Toronto-based newspaper, book and Internet publisher said Wednesday its profit equalled 73 cents per share. While Torstar generated lower revenues, that was offset in part by reduced labour costs as nearly 600 jobs were cut from the workforce year-over-year.

The results are a turnaround from the $213.9-million loss, or $2.71 per share, the company reported a year earlier when it recorded $236.2 million in asset and investment writedowns on its books.

Investors welcomed the reversal, pushing Torstar shares more than seven per cent higher on the Toronto Stock Exchange, gaining 52 cents to $7.77.

In its financial report, Torstar said it earned $59.7 million, or 76 cents per share, when making adjustments to exclude $2.3 million of impairment losses and investment writedowns.

Besides its daily and community newspapers, including the flagship Toronto Star and other southern Ontario dailies, Torstar publishes books through its Harlequin romance division. It also owns websites, community newspapers and other media assets.

Torstar's revenue in the fourth quarter fell by 4.3 per cent from a year ago to $394.8 million. About one-third of the decrease - $6.6 million - was attributed to the impact of a strengthening Canadian dollar on book publishing revenue.

"While our revenue was affected by the economic cycle, we were disciplined on capital employment and cost while maintaining our commitment to numerous strategic initiatives," said chief executive David Holland in a conference call.

"Torstar, again in 2009, benefited from the diversity of its operations," he added.

The results contrasted to the same quarter in 2008, when the company booked a $95.7-million writedown of its investment in CTVglobemedia to $200 million, and made job cuts at its southern Ontario newspapers.

Torstar holds about 20 per cent of CTVglobemedia, which owns the Globe and Mail newspaper and CTV, Canada's largest private broadcaster, and has been squeezed by the slump in advertising during the recession.

CTVglobemedia's other investors include the Thomson family holding company, which owns 40 per cent, and Ontario Teachers' Pension Plan, with 25 per cent. BCE Inc. (TSX:BCE) holds the remaining 15 per cent.

Torstar, like other media companies that depend heavily on advertising revenue, was hit hard by the recession when advertisers reined in spending.

The media giant responded by slashing parts of its operations and laying off staff which resulted in $13 million of labour cost savings during the fourth quarter.

The initiative started in the fourth quarter of 2008, when it cut 64 jobs at three southern Ontario newspapers, and continued throughout 2009 when about 166 Toronto Star employees accepted voluntary buyouts, amongst other changes.

Torstar now has about 6,590 employees across all of its operations, down from 7,175 people a year ago.

In its newspapers and digital division, the company saved $8.2 million in labour costs, and the Metroland division booked its own labour savings of $5.2 million.

The newspaper and digital division posted $52 million EBITDA from $49.5 million a year earlier. Revenues were $272.6 million, down $13.5 million or 4.7 per cent.

Book publishing reported $21.7 million EBITDA from $15.6 million with revenues at $122.2 million, down $4 million - primarily due to the impact of a stronger Canadian dollar.

Holland said despite the latest results, the company remains cautious in the face of an uncertain economy, and its impact on the revenue at Torstar's newspapers.

In the fourth quarter, the company booked a $13-million restructuring charge, which included $12.3 million in the newspaper and digital division, while the other $700,000 was tied to an impairment loss on community newspapers.

For the year, Torstar reported profits of $35.6 million from a loss of $181.5 million in 2008. Revenue was $1.45 billion versus $1.53 billion.

The company's newspapers have been particularly affected by high unemployment as Ontario's manufacturing sector - especially the automotive industry - was hammered by a drop in exports and difficulty getting credit.

Consumers were also worried at the end of 2008 about the value of their homes, as real-estate demand dropped due to lack of confidence and a more difficult borrowing environment.

Canada's real-estate market has largely recovered, particularly in Toronto and other major centres, and the auto sector is reviving, but Holland said he's keeping a cautious stance.

He said the company continues to monitor the economic recovery and its impact on the revenue of the newspaper and digital division, but added that acquisitions aren't necessarily out of the question.

"I think we're prepared to make acquisitions in a digital space," he said.

"If we had other opportunities we'd certainly look at it, but we're going to be pretty cautious."

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