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Despite challenging landscape, media business is core, says SPH
SINGAPORE Press Holdings' media business, which is facing a slide in print advertisement and circulation revenue, took centre stage at Friday's shareholders' meeting, as investors probed its chief executive on whether these trends should prompt a strategic rethink of its core activity.
The response from the company at SPH's annual general meeting was crystal clear.
The company's chief executive Ng Yat Chung said: "The media business is core to us. Of course it is being challenged and we have to maintain a disciplined cost structure during this time. We will pursue innovation and strengthen the management bench in advertising and sales and also the journalistic core."
The annual general meeting ran over two hours and was attended by some 400 shareholders.
While many shareholders wondered aloud if SPH should cut back its investments in the media business and focus instead on its more promising income-generating sources, such as property, one shareholder pressed the point, arguing that if SPH was in the media space out of "national service", then it should do so while keeping cost to a minimum.
But another shareholder remarked that the company should invest "heavily" to produce better content and "hire great reporters and editors" so that the company's core media assets can attract young Singaporeans back to newspapers, be it print or digital.
Mr Ng said: "Are we investing in journalism? Yes, ... it's in our heart."
SPH chairman Lee Boon Yang, picking up on the suggestion that SPH invest resources in making its newspapers more attractive to millennials, said: "Let me assure all shareholders that the board is always watching this matter. We see media as a core business and will certainly continue to invest the appropriate resources to ensure that we continue to produce high-quality products that appeal to a broad range of readers - millenials or not-so-young readers.
"(But) It's not going to be easy."
In the financial year that ended in August, the company's revenue from the media segment fell 12 per cent to S$577 million; revenue from total print advertisement dropped by 15 per cent from a year ago, and circulation, by 7 per cent.
For the year, SPH's net profit fell 23 per cent to S$213 million on the back of a 2.4 per cent drop in operating revenue to S$959 million from a year ago.
Mr Ng, who acknowledged the unhappiness voiced by shareholders over the weakness in the media business, assured investors that the group has a plan in place to "fix" the decline in that segment. Meanwhile, the use of news tablets has led to a healthy uptick in the digital side of the business, even as costs are being kept under control. (The media business remains profitable and made a pre-tax profit of S$55 million in FY19, though this is down 45 per cent from a year ago.)
He added, however, that the outlook is still uncertain, given that the advertising market was a "big wild card" amid a weak macro-economic environment.
For this reason, he said, the group is "spending a lot of time to grow the non-media" business. The upside of this is that SPH's property income in FY19 hit a record high, more than offsetting the decline in media. The property division, SPH's largest profit segment, posted a 39 per cent jump in pre-tax profit to S$263 million in FY19.
Under this segment, SPH grew its "cash-yielding" purpose-built student accommodation (PBSA) portfolio from scratch in September 2018 to 5,059 beds across 20 assets in 10 cities in the United Kingdom. It is now looking to build its capabilities to operate all the assets on its own for better yields, said Mr Ng.
Last week, it disclosed a purchase of a new PBSA asset in Germany for S$23 million, which will expand the total number of beds in that portfolio to 5,343.
Aged care is another area the group is keen to grow, said Mr Ng, although he pointed out that as it stands now, it is small. The company owns Orange Valley, one of Singapore's largest private nursing home operators; it also recently set up a joint-venture fund to invest in such assets in Japan, where there is rising demand for elderly-care facilities.
"Aged care and student accommodation are defensive sectors. Demand (in these sectors) is strong even in a challenging macro environment as now. We will continue to look for opportunities," Mr Ng said.
Dr Lee said: "We want to assure shareholders that in trying to develop new growth areas, we are not taking an adventurous and speculative approach, but are taking a cautious, prudent approach, whether its retail assets or PBSA.
"We have had many, many offers, but we are highly selective on which ones to accept".