A significant proportion of Harlequin revenues are booked in US $ and as a result their underlying revenue improvement of $0.7mm was offset by more than $3.8mm in unfavorable foreign exchange impact. Operating profit for publishing improved 13% to $16.3mm for the quarter. Underlying profit without the impact of foreign exchange was slightly better.
Harlequin management expect the division to continue the improvements they have seen this year; however, underlying results will continue to be adversely impacted by the weak US $. The company also noted that the fourth quarter North America Retail publishing schedule is not expected to be as strong as compared with 2006. Possibly of deeper worry to the company is how to improve results in their Overseas markets particularly the UK where the company owns Mills and Boone.
Harlequin’s publishing operations are composed of three divisions: North America Retail, North America Direct-To-Consumer and Overseas.
Book Publishing operating profits were up $2.5 million in the third quarter of 2007 excluding the impact of foreign exchange.
- North America Retail was up $2.6 million
- North America Direct-To-Consumer was up $0.5 million
- Overseas was down $0.6 million
Year to date, Book Publishing revenues were up $2.1 million excluding the impact of foreign exchange.
- North America Retail was up $4.9 million
- North America Direct-To-Consumer was down $4.9 million
- Overseas was up $2.1 million
Year to date, Book Publishing operating profits were up $8.0 million excluding the impact of foreign exchange.
- North America Retail was up $6.8 million
- North America Direct-To-Consumer was up $1.2 million
- Overseas was flat.
Year to date, EBITDA was up $6.3 million excluding the impact of foreign exchange.
North America Retail had a strong third quarter with price increases on selected series product lines, a strong publishing program and cost savings. The number of books sold was down slightly in the quarter. Cost savings included lower advertising and promotional costs and $0.5 million of lower depreciation and amortization.North America Direct-To-Consumer revenue was down in the third quarter of2007 primarily from declines in a children’s direct-to-home continuity program.
In the core Direct-To-Consumer business, revenue was flat in the quarter as the series price increase offset lower volumes. Lower advertising and promotion costs associated with the fall 2007 mailing provided the third quarter profit improvement.
The Overseas markets continued with mixed results during the third quarter.Year to date the Nordic group is up 30%, the U.K. is flat and Japan is down with challenges in the core series book market more than offsetting growth in single titles and digital products.