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SPH growth strategy on track, even as Q2 profits slip

SPH

Singapore

MEDIA group Singapore Press Holdings (SPH) said its growth strategy remains on track - even as it turned in lower profits for its second quarter - with positive momentum seen across all its business segments of media, property, digital and aged care.

SPH chief executive Ng Yat Chung said at the group's first-half results briefing on Tuesday that its strategy of growing its non-media businesses, along with its digital revenues - to make up for a decline in its print revenues - remains "on track".

The group's net profit was down 25.7 per cent at S$29.7 million for the three months ended Feb 28, 2019. For the first half of FY2019, net profit fell 14.7 per cent to S$85.6 million.

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SPH said this was due mainly to the lack of investment gains, with its treasury and investment portfolio being divested the previous year - the proceeds of which are being recycled to its businesses to increase its recurring income over time.

SPH's operating revenue for the second quarter was down 4.4 per cent at S$223.3 million, with a drop in advertisement revenue somewhat cushioned by higher property revenue.

Its operating profit - which represents the recurring earnings of its media, property and other businesses - fell 8.9 per cent to S$46.5 million. This was due to lower revenue and higher premises costs and finance costs partly related to its United Kingdom student accommodation portfolio.

SPH's UK PBSA (purpose built student accommodation) portfolio is currently made up of 17 assets in eight cities, with over 3,800 beds. It acquired in September 2018 a portfolio of 14 purpose-built student accommodation buildings, which are located in established university towns and cities with large full-time student populations such as London, Birmingham, Bristol and Huddersfield.

Group's operating profit improved slightly on a first-half basis, thanks to a proportionately larger drop in operating expenses for the period. Its operating revenue slipped 3 per cent, or S$14.8 million, to S$477.6 million but its operating expenses decreased 5.6 per cent, or S$21.7 million, to S$365.3 million, due mainly to ongoing cost control and the absence of retrenchment costs seen in the previous period. This brought its operating profit for the six months to S$121.3 million, a 0.6 per cent increase.

For its core media business, Mr Ng noted that the decline in the group's print revenue has continued to slow, while its digital revenue is increasing "steadily".

Revenue for the media business for the first half of FY2019 fell 10.1 per cent to S$296.2 million, partly as a result of the shorter festive advertising window between Christmas and Chinese New Year. Profit was 3.8 per cent lower at S$42.1 million. Its newspaper digital ad revenue was up 15.1 per cent while total digital revenue - which includes revenue from other digital portals, circulation and online classifieds - rose 13.1 per cent.

Property revenue was 15.3 per cent higher at S$140.3 million for the first half year, through acquisitions by SPH Reit and its UK student accommodation portfolio. In fact, its property segment was responsible for two-thirds of the group's profits, which SPH said was delivering a steady income stream.

The group hopes to build its UK PBSA portfolio to a sizeable platform soon.

Other revenue - such as that from its aged care and digital businesses - remained stable, the group said.

Mr Ng said the group was looking forward to extracting synergies from telco M1, in collaboration with Keppel Corporation, once M1 has completed its delisting from the Singapore Exchange.

He said SPH's aged care business remains on the lookout for expansion opportunities, both domestically and overseas, as it seeks to build operational capabilities here and enhance the range of services on offer.

"We continue to make progress with our digital transformation strategy," Mr Ng said. "Although the media business continues to experience headwinds, revenue from the digital side of the business is showing growth. We also see improved recurring income from the property segment which has expanded its portfolio following recent acquisitions."

SPH's board declared an interim dividend of 5.5 Singapore cents per share for the period, down from six cents previously.

SPH shares closed unchanged at S$2.53. The results were announced after market close.