SPH expects 'significantly lower' operating profit for FY20

MEDIA and property group Singapore Press Holdings (SPH) said in a corporate presentation on Monday that its operating profit for FY20 ending Aug 31 is expected to be "significantly lower" than the S$187 million recorded in the year-ago period on the back of the ongoing pandemic.

Against such a backdrop, it is also expecting a negative outcome for the revaluation of its investment properties as at Aug 31, 2020.

This comes as operating performance across the conglomerate's various business segments has been hit by the virus outbreak.

However, SPH, which publishes The Business Times, said that its "resilient" balance sheet and cash balances of S$810 million will "ensure sufficient liquidity across all business segments". It added that it has no term loans due till June 2021.

Across its business segments, the media business was hurt the most due to decline in print advertisements. While circulation was up, it would only partially offset the fall in print advertisements, said SPH. It added that the severe Covid-19 impact on advertising revenue, which accounts for most of media's revenue, is expected to persist.

Total print advertisement revenue fell 51 per cent y-o-y in the third quarter of FY20. Digital advertisement revenue also registered a decline of 3.7 per cent y-o-y for 9M FY2020 as a result of the circuit-breaker measures and weaker economic sentiment.

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Circulation, on the other hand, rose despite loss of sales to airlines and hotels. Overall circulation edged up 9.5 per cent with digital circulation levels closing the gap on print circulation. This is in part due to the News Tablet campaign - an e-paper subscription plan which comes with an app pre-installed on a Samsung tablet. This drove total digital revenue higher by 8.5 per cent in 9M FY20 than a year ago.

On the retail front, SPH's malls in Australia and Singapore recorded some improvement in footfall with the easing of lockdown measures, but it has yet to return to pre-pandemic levels. The group also faces lower rental income after schemes rolled out to help tenants cushion the impact of Covid-19.

Its portfolio of Purpose-Built Student Accommodation (PBSA) in the United Kingdom and Germany has been affected by rental rebates due to university closures and student departures. While there was a total reduction in revenue from rental refunds of £4.6 million (S$8.06 million) as at June 24, it fell within the lower range of the expected £4 to 8 million rental refunds, said SPH.

Out of the total refunds, 52 per cent will be refunded in cash; the remainder will be refunded in credits for academic year (AY) 20/21 or waived from outstanding payments. Meanwhile, universities in cities in which SPH has PBSA assets have confirmed opening with minimal or no delay. This has contributed to improvements in PBSA bookings in June. SPH thus achieved 75 per cent of target revenue for AY20/21 as at July 10, up from 69 per cent on May 19.

SPH also reported "stable" operating performance for its age-care business, Orange Valley, with improved bed occupancy ratio. It also noted that the four Covid-19 cases at Orange Valley have since been discharged and the staff at the home have tested negative. Its aged-care business in Japan has not been affected and it is on track to complete the acquisition of two assets in Hokkaido and Japan. This is part of the company's strategy to invest in "cash-yielding, defensive asset classes to generate recurring income".

On the other hand, as part of a consortium led by Perennial Real Estate, SPH has divested a 5.29 per cent stake in AXA Tower to Chinese e-commerce giant Alibaba Group's Singapore subsidiary for S$33.2 million. Its original investment was S$19.3 million. SPH said that the move is part of disciplined capital management and capital recycling strategy.

Separately, it has entered a joint venture with Keppel Corporation to develop and operate data-centre facilities at SPH's Genting Lane property.

Shares of SPH on Monday closed two Singapore cents or 1.6 per cent lower at S$1.26.