SPH reports S$92.9m net profit for FY21, reversing previous loss; declares final dividend

SINGAPORE Press Holdings (SPH) has swung into the black, with a net profit of S$92.9 million for the financial year ended Aug 31, 2021 (FY21), amid a slight increase in total revenue from continuing operations, and fair value gains on investment properties.

It reverses the net loss of S$83.7 million in the previous financial year, which had included S$232 million in fair value losses on investment properties.

A final dividend of three Singapore cents per share was proposed. If approved, SPH would pay a total dividend of six cents per share in FY21, up from 2.5 cent in FY20.

In a bourse filing on Tuesday, SPH said total revenue from continuing operations for FY21 rose to S$475.1 million, up 2.4 per cent from the S$464.2 million a year ago.

The group's media operations were reported under discontinued operations. Last month, SPH shareholders voted in favour of a proposed restructuring, which would see the group's media business being transferred to a company limited by guarantee (CLG).

The media business restructuring - part of a strategic review by SPH to consider options for its various businesses - is expected to be completed by early December.

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Operating profit from continuing operations grew 69.8 per cent to S$206.7 million. SPH said: "The improved performance was across all segments, including retail & commercial and purpose-built student accommodation (PBSA), despite the ongoing disruption from Covid-19, especially in the earlier part of the financial year".

The property and media group, which publishes The Business Times, also recorded S$66.6 million in fair value gains on investment properties during the financial year. The gains were led by the PBSA portfolio of S$34.7 million, retail malls of S$21.9 million and bungalows of S$9.5million.

The retail & commercial segment recorded profit before tax of S$206.9 million in FY21, a reversal of a loss of the S$56.2 million the previous year.

SPH said higher rental revenue and lower tenant rental relief as sales gradually recovered alongside the market, were among the factors for the improvement. FY21 was also the first full year's contribution from Westfield Marion, the largest mall in South Australia.

The retail & commercial segment had also recorded a fair value loss of S$196.5 million in FY20.

The PBSA segment also recorded higher pre-tax profit of S$71.8 million in FY21. It reverses the loss of S$24 million in FY20, when it had also recorded S$31.9 million in fair value losses.

The segment saw higher rental revenue during the year, with full-year contribution from the Student Castle portfolio which was acquired in December 2019, and contribution from properties in Oxford and Brighton which opened in the second half of 2020.

SPH noted that it is on track to be a leading player in the UK PBSA market. The company said: "With a full suite of fund management and in-house property management capabilities, SPH will leverage the defensive nature of the asset class and strong market fundamentals to expand."

The group's aged care business broke even for FY21, and SPH noted that nursing home operator, Orange Valley, recorded improved performance due to higher bed occupancy rates and the absence of impairment charges.

Its digital business saw pre-tax profit rise 123 per cent to S$28.1 million, with better operational performance from car site sgCarMart, divestment gain from the online classifieds businesses, and fair value gains from media fund investments.

External revenue for the media business, under discontinued operation, fell 17.5 per cent during the year to S$404.7 million, dragged by lower advertisement revenue and circulation revenue. For FY21, operating loss for the media segment after the job support scheme was slightly higher at S$13 million, compared to the S$12 million loss a year earlier.

Overall losses from discontinued operations surged to S$128.3 million, more than ten times the S$12 million loss a year earlier. This included a loss on media restructuring of S$115.3 million, which relates to the net asset value of the media business, which will be transferred to the CLG for a nominal consideration.

SPH chief executive Ng Yat Chung noted this does not include the contribution of S$80 million in cash, and SPH Reit units and SPH shares which would be given to the CLG. This would only be accounted for next year when the deal is completed.

"We estimate that would incur additional costs to SPH at that time," he added. An additional loss of S$115.5 million will be recognised then, taking the total media restructuring costs to S$243.3 million, including S$12.5 million of transaction costs.

"We took the difficult decision earlier to restructure the media business. That will enable SPH to avoid future losses and funding needs from the media business and we will focus on expanding the portfolio of the non-media business," Mr Ng said. "The next step is for shareholders to consider the privatisation offer from Keppel."

Keppel has made a S$2.2 billion bid to privatise SPH's non-media business. The deal, which values SPH at S$3.4 billion, will take place through a scheme of arrangement, subject to completion of the media restructuring.

The proposed privatisation is subject to approval from both Keppel and SPH shareholders.

As at Aug 31, SPH had cash balance of S$744 million, while its pro-forma net asset value - assuming the media business restructuring had been completed - stood at S$2.18 per share, up from S$2.08 as at Feb 28 this year.

On Monday, SPH Reit announced distribution per unit (DPU) of 1.58 Singapore cents for the fourth quarter ended August, bringing DPU for the second half of FY2021 to 2.96 cents, up from 1.04 cents in H2 last year. The Reit saw its gross revenue jump 27 per cent year-on-year during the six-month period to S$137.2 million, while net property income was up 24.6 per cent to S$97.8 million.

SPH shares closed at S$1.98 on Tuesday, up 0.5 per cent or S$0.01 before the results announcement.