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SPH Q3 gain falls 44% on lower investment income, media sales

Investment income down S$18m; operating level hit by higher expenses; property now accounts for 80% of group's profit


MEDIA and property group Singapore Press Holdings (SPH) posted a 44.1 per cent drop in third quarter net profit to S$26.2 million, despite a marginal decline in operating revenue.

Operating profit for the three months to May 31 slipped 36.6 per cent to S$29.2 million, partly due to lower media revenue as well as higher operating expenses.

Operating expenses were 5.5 per cent higher, in line with higher operational costs arising from the enlarged student accommodation portfolio and SPH Reit.

There were also increased financing costs and professional fees.

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Operating revenue fell 1.6 per cent to S$246.1 million as revenue from print advertisement and circulation fell 16.7 per cent and 7.3 per cent, respectively.

The absence of contribution from holdings following its divestment last November also contributed to the lower revenue.

Rental revenue of S$14.3 million from the purpose-built student accommodation portfolio and S$4.2 million from SPH Reit's retail asset, Figtree Grove shopping centre in Australia, helped cushion the lower topline.

"The media business continues to be challenged on various fronts including the ongoing trade tensions and the slowing of the Singapore economy, but we remain focused on our digital transformation strategy," said SPH chief executive Ng Yat Chung in the company's results statement on Friday.

"We see improved recurring income from the property segment which has expanded its portfolio following recent acquisitions," he said, adding that the group was well-placed to grab growth opportunities following its recent issue of S$150 million in perpetual securities.

Investment income fell S$18 million or 81.9 per cent to S$4 million as the treasury and investment portfolio was largely divested by end of the previous financial year.

Mr Ng noted that while SPH has less investment income now given that it had sold off most of its portfolio, the funds have been redeployed to other investments like student accommodation and will translate to more operating income eventually.

Earnings per share for the quarter slipped to two Singapore cents from three cents in the same period last year.

For the nine-month period, SPH's net profit fell 24.1 per cent to S$111.9 million on the back of a 2.5 per cent fall in operating revenue to S$723.7 million.

While revenue for the media business fell over the nine months by 11.6 per cent to S$439.7 million and pre-tax profit from this segment declined 32.2 per cent to S$52.1 million from a year ago, the digital side of the media business continued to enjoy an upswing. Newspaper digital ad revenue rose 11 per cent while daily average newspaper digital sales improved by nearly 13 per cent.

"The group continues to focus on digital innovations to address the challenges in the media business. On the back of a successful news tablet campaign to drive circulation, the campaign is being expanded to include The Straits Times, The Business Times, Berita Harian and Tamil Murasu in the coming months," said SPH.

Revenue in the property segment for the cumulative period grew significantly by 21.4 per cent to S$220.7 million, boosted by additions to the UK student accommodation portfolio while pre-tax profit from this division rose 15 per cent to S$133 million. The overall property segment's contribution to the group's profits has now grown to about 80 per cent.

Earnings per share for the nine months was lower at seven Singapore cents, compared to nine cents previously.

SPH shares closed unchanged at S$2.49 on Friday. The results were announced after market close.

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