04/14/2015 08:13 EDT | Updated 06/22/2015 03:59 EDT

Shaw profits slide in second quarter as company recognizes layoff costs

CALGARY - Shaw Communications Inc. (TSX:SJR.B) says a round of layoffs at its call centres, and other costs linked to improving its customer care operations left a dent in profits in the second quarter.

The Calgary-based telecom and media company said Tuesday it recorded $38 million of expenses from severance packages and other costs tied to the departure of about 1,600 employees.

Shaw announced in February that it would close or shrink some call centres and expand others as part of a reorganization.

Its profit for the quarter ended Feb. 28 dropped 24 per cent to $168 million from $222 million a year ago when it benefited from the sale of specialty TV channels.

On a per-share basis, Shaw's profit was 34 cents for this year's second quarter, five cents below analyst estimates.

The company is in the midst of a customer-service reorganization announced in September, but has also had to deal with a pullback in Alberta's economy as local oil companies were dealt a blow from the declining price of crude oil, causing them to lay off workers and tighten spending.

"I think a lot of us were caught off guard by the dramatic shift in pricing of oil, but you know, I'm certainly confident that the Canadian energy sector will weather the storm and get through this current period of volatility," chief executive Brad Shaw said in a conference call with analysts.

Shaw said he believes cable subscribers will still find reasons to keep their services when they review their budgets.

"The TV entertainment bundle becomes more valuable in this as you look at shows, movies and going out to dinner. That whole comparison is relative and puts us in somewhat stronger shape."

Shaw's operating income grew 5.5 per cent to $557 million before the restructuring costs and amortization, although the growth was mostly due to a U.S. acquisition last year.

The company's media segment, which includes specialty TV channels and the Global Television network, reported a 4.9-million drop in operating income to $58 million as it was affected by a "general market softness" for advertising and the impact of selling its stake in French-language cable channels Historia and Series+ to Corus Entertainment a year earlier.

The consumer telecom segment that includes cable and Internet services increased operating income slightly to $409 million before restructuring and amortization, up from $408 million.

Shaw also said a rule change by the CRTC, which makes it easier for customers to cancel their TV, Internet or wireless contracts, affected the number of subscribers who went elsewhere. The company booked a one-time loss of about 35,000 paid subscribers that it believes were linked to the new rules which do away with a 30-day cancellation notice to service providers.

Desjardins telecom analyst Maher Yaghi noted that, despite the impact of the rule changes, Shaw is still being pressured by Canadians cancelling their cable packages and looking elsewhere for wireless service.

"Even after accounting for this, the company still missed our (revenue generating subscriber) count by about 12,000," wrote in a report.

However, Shaw executives say they haven't witnessed escalation in the number of people cancelling services despite the slowdown in the Alberta economy.

"We haven't seen any evidence of increased cord cutting," said chief operating officer Jay Mehr.

"When we've had downturns in the past we've done very well, but it's fair to say consumers had fewer choices than they have today and so we're certainly staying very close to that."

Shaw's overall revenue rose five per cent to $1.34 billion, while revenue from the media segment was flat, dipping to $238 million from $239 million in the second quarter of 2014.