May 15-31, 2005 Edition

Torstar Reports

Profit Dip, Vows

to Bolster Harlequin

CHICAGO, IL/05/05/05—Torstar Corporation, owner of Harlequin Enterprises and publisher of The Toronto Star, has experienced an 8% drop in profits during the first quarter of 2005. The company attributes the decline to weak retail advertising and to a 6% decline in revenues for its Harlequin romance novels.

Torstar Chief Executive Officer Robert Prichard has vowed to turn Harlequin around in the next year or so. Prichard said at the company’s annual meeting May 4 that Harlequin should generate “stable” earnings in 2005, and be on an upward trend by next year.

Harlequin profits were battered both by foreign exchange fluctuations and a steep decline in demand for mass-market paperbacks in North America.

During the annual meeting, Harlequin CEO Donna Hayes said the company is taking a number of new initiatives to generate more revenue. It is launching a new series of books which it will heavily promote. The unit is also kicking off a new line of non-romance fiction in the new taller mass market format being tried by several major publishers. Hayes also said Harlequin is moving into new markets, such as its recent joint venture in Brazil. It is exploring publishing partnerships in China, Taiwan and South Korea. The company also plans to expand its audio book and electronic book units.

Torstar said its overall first-quarter profit dipped to C$21.1 million (about U.S. $16.9 million) from C$23 million (U.S. $18.4 million) from the comparative period a year ago. First-quarter sales also dipped to C$361.1 million (U.S. $288.8 million) from $361.7 million (U.S. $289 million). The newspaper group’s overall revenue increased 3%, led by the Metroland community papers. Revenues of the flagship Star were down 11% in retail advertising and more than 16% in the classified unit.

At Torstar’s newspaper group revenue was $231.9-million in the quarter, an increase of 3 per cent from $224.6-million in the previous comparative period.

Torstar’s Metroland group of community newspapers performed well in sales, but operating profit was down due to recent investments.

Metroland recently acquired a new group of papers which includes the Bracebridge Examiner and other related publications in the Muskoka region of Ontario. With its purchases, Metroland now also holds a 50% interest in the Muskoka Advance, Bracebridge Weekender, Gravenhurst Weekender, and the Huntsville Weekender.