Torstar Corp. is slashing costs, but the head of the Toronto-based newspaper and book publisher said Tuesday the company will not slice into its dividend despite pressure on its operations.
The efforts to assure jittery Torstar investors came on the heels of a management shakeup at the Toronto Star this week, which saw two top executives replaced as the company restructured its newspaper business.
Shareholder discontent is said to be behind the changes as the controlling families at the newspaper company grow increasingly unhappy with its deteriorating financial performance.
Torstar will report its third-quarter earnings in two weeks. In August, the company reported a 29-per-cent drop in profit.
Chief executive officer Rob Prichard said the company is trying to reduce costs at a time when Torstar shares have hit their lowest point in nearly five years.
“Torstar continues to take every available step to improve the performance of the business,” Mr. Prichard said. “We are acting like all other companies in our industry that make changes in response to industry conditions.”
The company's debt was downgraded by Moody's Investors Service Inc. Tuesday to low investment-grade status, and the bond rating agency said it was dropping coverage of Torstar.
That development came several weeks after a similar downgrade from Dominion Bond Rating Service Ltd., which said it is concerned by the amount of debt Torstar has added to its books by buying a 20-per-cent stake in Bell Globemedia Inc.
The purchase more than doubled Torstar's debt to $733-million.
Bell Globemedia also owns the CTV network and The Globe and Mail.
In the meantime, Torstar shares have lost a third of their value since early 2004 as newspaper advertising markets have shrunk.
The shares were little changed by the management shakeup, closing at $19.33 on the Toronto Stock Exchange Tuesday, a loss of 4 cents.
“Torstar remains fully committed to its dividend,” Mr. Prichard said in an interview.
Amid speculation that Torstar could be positioning itself for a possible income trust conversion, the company has been paring its operations.
Torstar has denied in recent months, however, that it is considering the trust format.
“It appears the way Torstar is approaching this is that they are doing small, incremental cost cutting. And this appears to be one of several steps that have already been announced, and perhaps more [are] to come,” said Martin Stevenson, an analyst with Dominion.
The cost cuts and management changes have become common in recent months.
Torstar restructured its Harlequin book publishing division two weeks ago, cutting 4 per cent of its employees, or 48 jobs, in a series of moves expected to save $3-million a year.
In September, Torstar reorganized its newspaper operations outside Toronto, combining CityMedia titles with its Metroland operations.
The consolidation led to the departure of CityMedia president Pat Collins.
And this summer, Torstar eliminated 70 jobs at its call centre operations, resulting in a $1.5-million reduction in annual costs.
This week, Torstar replaced Toronto Star publisher Michael Goldbloom and editor-in-chief Giles Gherson and combined several of its newspaper operations into Star Media, which the company said will trim management costs. The Star is Canada's biggest newspaper.
A day after the management shakeup, newly appointed Star publisher Jagoda Pike told employees that no major cuts were being contemplated. Nor is the company looking to kill Star P.M., a downloadable paper launched last month.
However, the union representing Star employees said its members are worried about further cuts as the Star faces slumping earnings.
“Jagoda Pike assured people that her appointment was not about cutbacks, it was about growth and that she felt she was selected because of her track record of implementing change,” said Brad Honywill, president of the Southern Ontario Newsmedia Guild.
“But the union continues to feel concerned.”
With files from reporter Boyd Erman
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