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Harlequin Profits Sag, Education Flat
Jim Milliot -- 3/13/00

After seven consecutive years of growth, operating profits fell at Harlequin in 1999, according to year-end results from parent company Torstar. Earnings fell 4% last year to C$90.4 million, despite a 4.5% sales gain to C$548.8 million. Torstar blamed the decline on lower profits in its Japanese and North American operations.

Earnings dropped by C$7 million in Japan last year due to poor economic conditions, a failed sales campaign and difficulties encountered under a new distribution agreement. Torstar said most of the problems in the country have been corrected and that it expects the unit to return to historic profit levels this year. The decline in profits in North America was largely the result of spending on the development of newsletters combined with a drop in profits from Harlequin's direct-mail efforts. A combination of higher prices and a 5% gain in unit sales resulted in a significant increase in profits in Harlequin's retail sector.

Results in Torstar's supplementary education segment were also mixed; the division reported a 14% increase in revenue to C$185.6 million, but operating profit inched up to C$18 million from C$17.9 million. Torstar termed 1999 a "building year," following the sale of Troll Communications in 1998. Highlights in the year included a 50% sales increase and a doubling of profits at Tom Snyder Productions, while revenues at Delta Education rose 9% and profits stayed at record levels. The company's direct-to-home business, Learning Adventures, had a 47% sales gain, but higher marketing costs resulted in a profit decline. Frank Schaffer Publications had a difficult year, with profits down due to a combination of increased competition in the puzzles and charts business as well as higher marketing expenses.

At the corporate level, Torstar recorded a loss of C$7 million in connection with the February 14 launch of eHarlequin.com. The site is closely linked with Women.com and offers specialized content and the capability to acquire most Harlequin titles.
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