UPDATE 2-Sales drop at Toronto Star publisher; staff decry cost cuts

Wed May 7, 2014 10:40am EDT
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(Adds details from conference call, analyst and union comment, share reaction)

By Alastair Sharp

TORONTO May 7 (Reuters) - A grim newspaper advertising market continued to hit revenue at Torstar Corp, publisher of Canada's largest-circulation daily paper, in the first quarter, the company said on Wednesday as its journalists mounted a protest against cost-cutting measures.

In its quest for cash, Torstar said last week it would sell its Harlequin romance-novel publishing business to News Corp for C$455 million ($418 million). The sale helped reassure investors who have worried that the company's dividend payout is unsustainable, but it leaves Torstar more reliant on a turnaround in its media business.

The softer revenue number for the media business - which publishes the Toronto Star and a string of regional and commuter newspapers and is Torstar's largest unit - was offset by cost cuts that improved margins, RBC Capital Markets analysts Haran Posner and Drew McReynolds wrote in a note.

But reflecting the challenges management faces as it cuts costs, journalists at the Star withheld their bylines in both the print and online editions of the newspaper on Wednesday to protest what their union said was management's attempt to create 17 digital-first positions at 60 percent of current wages.

"We can't stand for a backdoor approach to rewriting our contract and savagely reducing salaries in the future," said Dan Smith, a Toronto Star editor and union representative. About 225 staff in the Toronto Star newsroom are represented by Unifor, Canada's largest private sector union.

On a conference call with analysts, Torstar executives said cost reductions have been wide-reaching but that the biggest savings had come from contracting out page layout and other work deemed peripheral to the creative and news-gathering processes.

The company said net income attributable to shareholders was C$7.1 million ($6.52 million), or 9 Canadian cents a share, in the three months to the end of March, compared with C$4.2 million, or 5 cents a share, a year earlier.   Continued...