Lower costs helped to boost third quarter operating profit at Harlequin, with earnings up 22.5%, to C$22.9 million ($21.6 million and current exchange rates); profits had a C$2 million benefit from foreign exchange. Revenue increased 3.7%, to C$122.5 million ($115.4 million). Sales in the North America retail market fell slightly in the quarter, while sales in the direct-to-consumer business rose modestly.
Overseas, revenue was up C$1.2 million in the third quarter and C$5.5 million for the first nine months of the year. Operating profit was down C$1.1 million in the quarter and up C$2.0 million year to date. According to parent company Torstar, the most significant source of overseas revenue and operating profit growth for Harlequin in 2009 has been the digital revenues in Japan from the agreement with SoftBank Creative Corp. to distribute digital manga content on cell phones and Internet distribution sites. The agreement began in the second quarter of 2008 resulting in a lower year over year impact in the third quarter of 2009 than in previous quarters. Year to date, the Japanese digital growth more than offset declines in the Japanese print book business and challenges in the U.K. direct mail and retail series businesses, however, it was not sufficient to do so in the third quarter. Several of the other overseas markets reported modest growth in the quarter and year to date, Torstar reported.
Looking at the rest of the year, Torstar expects Harlequin to have a “stable” fourth quarter, although the gain on digital sales from Japan will be lower than in last year’s final period. For the first nine months of the year, Harlequin's profits were up 18.9%, to C$63.1 million, and sales rose 7.2%, to C$ 371.1 million. Torstar noted that Harlequin continues to face risk from the global and, in particular, the U.S. economic situation including potential disruptions to the U.S. retail distribution system and potential further reductions in consumer spending. And despite the recent strengthening of the Canadian dollar, Harlequin’s 2009 results will benefit from a year over year weaker Canadian dollar relative to the U.S. dollar.