February 29, 2012 / 12:37 PM / 6 years ago

UPDATE 2-Torstar profit beats, advertising doubts remain

* Q4 adj EPS C$0.70 vs est C$0.55

* Revenue rises 2 pct

* Continues to see tough times ahead for print advertising

* Stock jumps 4 pct (Adds analyst’s comment, executive’s quote, share move)

TORONTO, Feb 29 (Reuters) - Canadian publisher Torstar Corp’s beat expectations with its quarterly profit on Wednesday, lifting its shares, but it warned the revenue outlook for its media unit in 2012 remains clouded.

Torstar, publisher of the Toronto Star, Canada’s biggest daily newspaper, said print advertising continues to be challenged by economic uncertainty and shifts in spending by advertisers.

That warning didn’t prevent a 4 percent rise in the company’s shares on Wednesday morning as the market cheered Torstar’s ability to eke out profit despite slower revenue growth.

“Although there are many moving parts, better than expected margins largely reflect the impact of restructuring initiatives,” RBC Capital Markets analyst Drew McReynolds said in a note to clients.

The company has sought to trim its editorial workforce by offering voluntary buyouts, while journalists at the Star have said the company also plans to outsource layout and editing jobs.

Torstar - which owns daily and community newspapers, the Workopolis website and publishes romance novels under the Harlequin banner - is investing in digital initiatives as the outlook for the print advertising market darkens.

The company doesn’t expect the outlook to improve dramatically anytime soon, particularly for community publications.

“I still think it’s very fragile. We just need a sustained period of positivity, but that’s not happening,” Ian Oliver, the president of Torstar’s Metroland community newspaper division, said on a conference call with analysts.

Harlequin operating earnings rose by 6 percent in 2011, but Torstar said it is likely to be tough to achieve a similar increase this year, given the economic crisis in Europe and an increase in the royalty rates on digital sales.

However, Torstar said it expects digital revenue growth to continue this year, albeit at a slower pace as the transition to ebooks becomes more mature.

For the October-December quarter, net income attributable to shareholders rose to C$64.3 million, or 81 Canadian cents a share, from C$36.3 million, or 45 Canadian cents a share, a year ago.

On an adjusted basis, Torstar earned 70 Canadian cents a share, topping analysts’ average expectation of 55 Canadian cents a share.

Revenue rose 2 percent to C$425.3 million, below analysts’ average expectation of C$440.3 million, according to Thomson Reuters I/B/E/S.

Torstar shares were 4.3 percent higher at C$9.75 late on Wednesday morning on the Toronto Stock Exchange.

$1=$0.99 Canadian Reporting by Alastair Sharp in Toronto and Bhaswati Mukhopadhyay in Bangalore; Editing by Supriya Kurane, Saumyadeb Chakrabarty and Peter Galloway

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