TORSTAR CORP. $9.95 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 79.5 million; Market cap: $791.0 million; Price-to-sales ratio: 0.5; Dividend yield: 5.3%; TSINetwork Rating: Above Average; www.torstar.com) publishes The Toronto Star, Canada’s largest daily newspaper by circulation. It also publishes three other daily newspapers and over 110 weeklies, mainly in Southern Ontario. Torstar’s newspapers and related websites provide about 70% of its revenue and 60% of its earnings.
The company’s other main business is wholly owned Harlequin Enterprises Ltd., the world’s leading romance novel publisher. Harlequin publishes over 110 titles a month in 34 languages in 114 countries. It gets 95% of its revenue from outside of Canada.
Torstar continues to expand its websites. That’s helping it offset weaker advertising revenue at its newspapers.
At the same time, the company is cutting its costs, including laying off workers and closing unneeded facilities.
As well, it recently agreed to merge the distribution networks of its Ontario newspapers with those of its rival The Globe and Mail. That will lower its delivery expenses, particularly in light of rising fuel prices. The company expects this deal to save it $3 million to $5 million by the middle of 2013.
Torstar also recently sold some land and buildings in Toronto, for a $3.7-million gain.
Torstar expects its latest restructuring plan will ultimately cut its annual costs by $2.3 million, including $2.1 million in 2012.
These savings helped push up its earnings by 89.0% in the three months ended March 31, 2012, to $29.3 million from $15.5 million a year earlier. Earnings per share rose 85.0%, to $0.37 from $0.20, on more shares outstanding. If you exclude all unusual items, earnings per share would have risen 9.1%, to $0.24 from $0.22.
Revenue fell 0.2%, to $350.8 million from $351.4 million. The media division’s revenue rose 3.4%, mainly on contributions from recent acquisitions. Revenue from its websites was flat. Book publishing revenue fell 7.6%, as lower sales of printed books offset strong demand for e-books.
Torstar’s cost cuts have also freed up cash for dividend increases. It recently raised its quarterly payout by 5.0%, to $0.13125 a share from $0.125. The new annual rate of $0.525 yields 5.3%.
The company should earn $1.74 a share in 2012. The stock trades at 5.7 times that estimate.
Torstar is a buy.
