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Torstar’s Harlequin Shows Slight Gain In Second Quarter

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August 9 – August 16, 2007 Edition

Torstar’s Harlequin
Shows Slight Gain
In Second Quarter

TORONTO, ONTARIO/8/1/07–Torstar Corporation, which owns a leading women’s fiction publisher Harlequin Enterprises Limited, has announced its results for the second quarter ended June 30, 2007, showing Harlequin revenues up by 1.2% to C$116 million. Operating income for the book publisher gained 22% to C$12.5 million, partly as a result of last year’s restructuring.

During the first half of the year, the book publishing unit saved the company C$1.8 million by cutting 40 jobs and taking other cost-cutting measures. In that same period sales increased by 3.1% to C$240.4 million and profits were up from $25.3 million to C$31.6 million.

The Book Publishing Segment reports the results of Harlequin Enterprises Limited, a leading global publisher of women’s fiction. Harlequin publishes women’s fiction around the world, selling books through the retail channel and directly to the consumer by mail and the Internet. Harlequin’s women’s fiction publishing operations are comprised of three divisions: North America Retail, North America Direct-To-Consumer and Overseas.

In the second quarter of 2007, Book Publishing revenues were up $0.5 million excluding the impact of foreign exchange. North America Retail was up $0.3 million, North America Direct-To-Consumer was down $0.8 million and Overseas was up $1.0 million. Year to date, Book Publishing revenues were up $1.5 million excluding the impact of foreign exchange. North America Retail was up $4.1 million, North America Direct-To-Consumer was down $3.9 million and Overseas was up $1.3 million.

Book Publishing operating profits were up $2.3 million in the second quarter of 2007 excluding the impact of foreign exchange. North America Retail was up $0.9 million, North America Direct-To-Consumer was up $1.1 million and Overseas was up $0.3 million. Year to date, Book Publishing operating profits were up $5.5 million excluding the impact of foreign exchange. North America Retail was up $4.2 million, North America Direct-To-Consumer was up $0.7 million and Overseas was up $0.6 million. Cost savings from the restructuring undertaken in 2006 were $0.9 million in the second quarter and $1.8 million year to date.

North America Retail revenues were flat in the second quarter year over year. The number of series books sold was up in the quarter while the number of single title books sold was down. Operating profits were up in the quarter reflecting changes in product mix and cost savings including $0.5 million of lower depreciation and amortization.

North America Direct-To-Consumer revenue was down in the second quarter of 007 as the trend of fewer books sold in the traditional direct mail business continued. Operating profits were up in the second quarter from the nonrecurrence of the estimated $2.0 million reduction in earnings in the second quarter of 2006 that resulted from shipping disruptions associated with the bankruptcy of a key supplier.

Overseas operating profits were up $0.3 million in the second quarter of 2007 with mixed results in the underlying markets. The Nordic group continued to show year over year improvement through the second quarter and the U.K. benefited from higher retail series book sales.

Harlequin Outlook

The outlook for Harlequin remains stable for 2007 as the positive North America Retail year over year results are balanced by the Direct-to-Consumer trends and the mixed results in the Overseas operations. Harlequin will continue to be subject to the impact of changes in the value of the Canadian dollar relative to the U.S. dollar and other currencies. Torstar has reduced a portion of this exposure by entering into forward foreign exchange contracts to sell $27.5 million US dollars during 2007 at a rate of $1.14 and $14.0 million US dollars during 2008 at a rate of $1.12. If the Canadian dollar remains at its current level relative to the US dollar and overseas currencies through the rest of the year, there would be a negative year over year foreign exchange impact of approximately $1.5 million on Harlequin’s full-year 2007 reported results.

Harlequin is unique in the publishing industry. It has evolved from a predominantly series romance publisher to a diversified women’s fiction publisher offering a variety of women’s fiction genres in many different formats (mass-market paperback, trade paperback, hardcover) in multiple channels (retail, direct-to-consumer, e-commerce) in 94 international markets. While Harlequin’s highly profitable series romance business is the foundation of the company, Harlequin’s single-title business has grown significantly and now accounts for 47 percent of global retail sales.

Harlequin has its head office in Toronto, Ontario, Canada and operations in Australia, Brazil, France, Germany, Greece, Hungary, Italy, Japan, the Netherlands, Poland, Spain, Sweden, Switzerland, the United Kingdom and the United States. Harlequin publishes directly in overseas markets, either through wholly owned operating units (Australia, Japan, the Netherlands, Poland, Scandinavia, Spain and the United Kingdom) or joint ventures with local partners (Brazil, France, Germany, Greece, Hungary and Italy).

Torstar Corporation is a broadly based media company listed on the Toronto Stock Exchange (TS.B). In addition to Harlequin Enterprises, its businesses include the Star Media Group led by the Toronto Star, Canada’s largest daily newspaper and digital properties including thestar.com, toronto.com, LiveDeal.ca, Workopolis, and Olive Canada Network; Metroland Media Group, publishers of community and daily newspapers in Ontario.